Helsinki Nokia Oyj cut its earnings forecast for this quarter and said it will eliminate as many as 10,000 jobs and shut production and research sites in three countries in chief executive officer Stephen Elop’s biggest overhaul.
Nokia shares fell to the lowest since 1996 after the company said handset losses will widen. As part of the changes, sites in Finland, Germany and Canada will be closed and executives Niklas Savander, Mary McDowell and Jerri DeVard will leave, Finland-based Nokia said on Thursday.
Elop, who took over as CEO in 2010, is reorganising Nokia after market-share gains by Apple’s iPhone and Samsung devices led to a slump in sales and four straight quarterly losses. Nokia’s handset shipments declined 24 per cent in the first quarter, allowing Samsung to overtake the company as the world’s biggest mobile-phone maker.
“We don’t have Nokia returning to profitability devices in the foreseeable future, not this year and not next,” said Alexander Peterc, an analyst at Exane BNP Paribas in London with an underperform rating on the stock. “They can’t continue like this.”
Nokia said second-quarter adjusted operating margins at the devices unit will be worse than a loss equivalent to 3 per cent of revenue in the first quarter. Nokia had projected margins to be “similar to or below” the first-quarter level.
Nokia fell as much as 10 per cent to €2 (Dh9.23) and traded at €2.10 at 10.38am in Helsinki. It had declined 49 per cent in the past 12 months until Wednesday.
Apple challenge
The job cuts amount to almost a fifth of the total excluding a joint venture with Siemens AG. Elop has already announced more than 10,000 job cuts across the company. He said in April that Nokia would speed up its cost-cutting programme and take further actions if needed.
“We must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions,” Elop said in Thursday’s statement.
Nokia has lost more than €70 billion in market value since Apple introduced the iPhone in 2007, taking the lead in smartphone innovation. To challenge Apple and handset makers using Google’s Android software, Elop adopted Microsoft’s Windows Phone, abandoning Nokia’s homegrown Symbian operating system.
Nokia shipped more than 2 million Lumia smartphones running Windows Phone in the first quarter, while Apple sold 35.1 million iPhones. Nokia’s operating margin for mobile phones plunged to 3.7 per cent last year from more than 20 per cent before Apple introduced the iPhone in 2007.
Savings target
The cuts are aimed at accelerating Nokia’s cost-reduction efforts. The company now targets additional savings of about €1.6 billion, aiming to bring annual expenses at its devices business to about €3 billion. That’s down from €5.35 billion in 2010.
The company will close a manufacturing plant in Salo, Finland, and facilities in Ulm, Germany, and Burnaby, Canada. The cuts and closures will result in new expenses of about €1 billion, Nokia said.
The company also agreed to sell its Vertu luxury-phone unit to Swedish private-equity firm EQT Partners AB, without disclosing terms. The companies were discussing for a deal at about €200 million, people with knowledge of the matter said.
Nokia had 53,553 workers at the end of March, excluding the network-gear joint venture with Siemens. Including Nokia Siemens Networks, the company employed 122,148 people, down 6.7 per cent from a year earlier.
Nokia Siemens, which also is struggling to return to profit, is cutting 17,000 jobs worldwide to save €1 billion in annual operating expenses and production costs by 2013.