Nokia’s sales have dropped 20%, primarily due to a reduced demand for 5G infrastructure; Nokia has announced a bold move to cut up to 14,000 jobs. The decision, a crucial part of the company’s cost-reduction strategy, also follows a concerning 2% dip in the company’s shares as of 0900 GMT on the announcement day.
The U.S., a crucial market for Nokia, significantly influenced this decision due to its slowed momentum. The company, struggling alongside competitors like Ericsson, initially turned to markets like India to compensate for these losses. However, despite global market challenges persisting, these areas offer limited respite.
Challenges and Strategy in Nokia’s Horizon
Pekka Lundmark, Nokia’s Chief Executive, candidly addressed the tough market conditions, emphasizing a 40% nosedive in net sales in North America during the third quarter. Nokia’s strategic response involves ambitious cost savings of 800 million euros to 1.2 billion euros by 2026, necessitating a workforce reduction of approximately 16% from the current 86,000 employees. Despite the cuts, Lundmark assures a continued focus on research and development, safeguarding Nokia’s future innovation potential.
The company predicts significant savings by 2025, with its competitors also facing similar market pressures, indicating industry-wide impacts extending into 2024.
The Road Ahead Amidst 5G Slowdown
Despite the market turbulence, Nokia hasn’t adjusted its full-year outlook, holding onto optimism for mid-to-long-term industry growth. Lundmark, however, underscores the unpredictable recovery timeline, pushing for accelerated investment in mid-band equipment to manage increasing data traffic needs. This emphasis comes as only a fraction of global 5G stations are outfitted with this advanced technology.
The slower-than-anticipated adoption of 5G, once regarded as the dawn of automation and even driverless cars, has compelled telecom giants into defensive stances, leading to substantial job cuts industry-wide. Analyst Kester Mann reflects on this paradox, where an industry, theoretically thriving on the back of high demand, is grappling with existential questions and uncertainties.
Nokia’s substantial downsizing underscores its strategy to weather current market storms, driven by waning 5G equipment demand and unclear recovery timelines. The company braces itself to meet ongoing and future challenges head-on through these cost-saving tactics.