Nokia, the former telecom equipment and phone manufacturing company based in Finland, and famous for its former telephone models, has been walking through difficult and challenging times during the last few years. Insiders report that Nokia is to shed around 2,000 employees in Greater China while axing another 350 posts among its European operations. But what is such high turnover, and what is the future of this company?
Nokia Announces Layoffs
The latest premise for layoffs – Nokia has just announced this approach – is designed to ease that burden. It disclosed last year it planned to reduce up to 14,000 employees to reduce costs from 800 million to 1.2 billion euros by 2026. These new layoffs are just the first move in the direction of that goal.
Nokia currently has about 78500 employees but this needs to be reduced to between 72000 and 77000 in the next two years only. Laying off people is never enjoyable, but Nokia wants everyone to know that they intent on maintaining their research and development (R&D) operations. CEO Pekka Lundmark even said they are already doing this and are even running ahead of time in terms of cost cutting.
Don’t think that China remains Nokia’s best friend anymore as they sell what they developed on their own instead of relying on Nokia.
China used to be the number two market for Nokia, bringing in a respectable-for-2019 27 % of overall sales. But things have changed. Since 2019 when western countries started denying Chinese tech giant Huawei business, China courteously offered to cut down deals for Nokia and its Swedish rival Ericsson. Currently, China accounts for under 6% of Nokia’s sales market.
Nokia has offices across Greater China in Beijing, Shanghai, Hong Kong and Taiwan and as at December 2023 the firm had a workforce of 10,400 employees. Currently Nokia is axing about a fifth of the entire number of employees it recruited through its subsidiaries. These changes have been prompted by the changing strategies of Nokia in its other core markets and efforts to reduce operating expenses.
Europe Feels the Pinch Too
The job cutting isn’t unique to China: Nokia is also discussing the elimination of 350 positions across Europe. Currently, the company has a total staff of 37,400 in the continent. In fact, Europe remains Nokia’s largest employing region and as much as the company can afford to provide the best for its employees, some form of wage containment is inevitable to ensure the business turns a profit.
Where There’s Good News, Also a Not So Good News
In the midst of these changes, Nokia reported some good news: a 9% increase in third quarter operating profits. Wait a minute—perhaps their total sales did not reflect corresponding market demand; that is; the figure that would have ensured a rise in Nokia’s shares to 4% percent. They will not get that little ‘Eureka’ moment where they have won big when they see their stocks do well just enough to not get that best grade they always wanted.
Anyway, it must be noted that the company has delivered 500 million euros of cost savings plans, which means that their cost reduction strategies are beginning to show some fruits.
What’s Next for Nokia?
Layoffs are never easy, but Nokia is attempting to trim the bills without halting the rate of invention. Lundmark admitted that his company has no intention of slashing its R&D projects, which are relevant to its competition in the digital market. Nokia has high hopes that all these changes will enable them to float through the storm, that is a competitive market and emerge stronger from it by 2026.
Final Thoughts
Just as a marathon runner has to drop weight to move faster, Nokia is drawing these painful conclusions to remain ahead in the race. Unfortunately, they continue shaving off jobs and re-strategizing and the world waits to see whether these moves can steady them again.
