STOCKHOLM (Reuters) – Nokia on Tuesday plans to cut 10,000 jobs within two years to reduce costs and invest more in research capacity, as the Finnish telecommunications group wants to increase its challenge to Sweden’s Ericsson and China’s Huawei.
After taking over the leading position last year, CEO Pekka Lundmark made changes to repair faulty product products under the previous management of the company that harmed its 5G ambitions and dragged its shares.
He announced a new strategy in October, including which Nokia would have four business groups, saying the company would “do whatever it takes” to take the lead in 5G, as it would also capture Huawei’s share.
Lundmark is expected to present its long-term strategy on Thursday, discuss action plans and set financial targets.
The company said in a statement that by 2023 it expects about 600 million euros ($ 715 million) to 700 million euros in restructuring and associated costs.
“Decisions that could have a potential impact on our employees are never taken lightly,” Lundmark said in a statement. “My priority is to ensure that everyone affected is supported by this process.”
Nokia currently has 90,000 employees and has cut thousands of jobs since acquiring Alcatel-Lucent in 2016.
The current restructuring is expected to reduce its cost base by around 20 million euros by the end of 2023. It is expected that half of the savings will be realized in 2021.
“These plans are global and are likely to affect most countries,” said a Nokia representative. “In Europe, our local business councils have just as well let us know and expect the consultation processes to start soon, where applicable.”
France, where Nokia cut more than a thousand jobs last year, has been excluded from the current restructuring.
The savings program is bigger than expected, but what is interesting is that it will not bring lower costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting its focus from general costs to research and development, which is expected to grow in the future and result in better margins,” he said.
Nokia plans to increase investment in research and development and future capabilities, including 5G, cloud and digital infrastructure.
Under Lundmark’s predecessor, Nokia narrowed its profit outlook and halted dividend payouts, after the product’s flaws cut more than a fifth of its market value.
In February, Nokia predicted that 2021 revenue would drop to between 20.6-21.8 billion euros ($ 25-26 billion) from 21.9 billion euros by 2020.
While both Nokia and Ericsson gained more customers as more telecommunications operators began rolling out 5G networks, the Swedish company gained an advantage, in part due to the acquisition of 5G radio contracts in China.
Nokia did not win a 5G radio contract in China and also lost Samsung Electronics on part of a contract to supply 5G equipment to Verizon.
Nokia shares fell slightly in the morning trading.
($ 1 = 0.8389 euros)
Reporting by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edited by Niklas Pollard and David Evans