HELSINKI, Finland (UPDATE) (AFP) – Finland’s Nokia, one of the world’s biggest mobile phone makers, announced Thursday, June 14, that it planned to cut up to 10,000 jobs by the end of next year due to massive additional cost-savings measures.
“These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” company chief executive Stephen Elop said in a statement.
Following the news, Nokia, which only recently lost the world number one ranking maker spot it had held for 14 years, saw its shares plunge more than 6.0 percent on the Helsinki stock exchange, which was down nearly 1.0 percent.
The company, which has been undergoing a major restructuring for more than a year, said it would implement an additional 1.6 billion euros ($2.0 billion) in cost reductions by the end of 2013.
“To support this period of transition, Nokia intends to improve its operating model by significantly reducing its Device & Services operating expenses, substantially reducing its headcount and reducing its factory footprint,” it said.
The changes would result in the closure of Nokia’s facilities in Ulm, Germany, Burnaby, Canada, and its manufacturing plant in Salo, Finland, although its research and development operations in Salo would continue.
It also said it would “streamline” its IT, corporate and support functions and would reduce and possibly divest non-core assets.
“As a result of the planned changes announced today, Nokia plans to reduce up to 10,000 positions globally by the end of 2013,” the company said, adding that it had begun discussions with unions and other employee representatives.
Analysts were caught off guard by the announcement.
“These cuts were bigger than anyone expected. We knew that something would happen but this was well beyond our expectations,” Sami Sarkamies, a Nordea Bank analyst, told AFP.
Nokia also announced a massive management reshuffle.
“We must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions,” Elop said.
The company said that by the end of the first quarter this year it had spent some 450 million euros on its restructuring efforts and expected to spend another 650 million euros over the balance of the year.
In 2013, restructuring costs should stand at 600 million euros.
Nokia said it would continue to “closely assess the future of certain non-core assets” and confirmed reports that it would sell its luxury mobile phone business Vertu to private equity firm EQT VI.
Vertu was established in 1998, on a concept of haute-couture mobile telephony. Its phones, which are typically adorned with diamonds and other gems, run on the Symbian operating system with prices starting at around 4,000 euros for the Constellation model.
Nokia has since early 2011 been restructuring and phasing out its Symbian smartphones in favor of a partnership with Microsoft. That alliance has produced a first line of Lumia smartphones.
Nokia is counting on the new phones to help it survive in a rapidly changing landscape with RiM’s Blackberry, Apple’s iPhone and handsets running Google’s Android platform take growing bites out of its market share.
“We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services,” Elop said Thursday.
As part of its strategy to focus more heavily on its Lumia line and new technologies, Nokia also announced “the planned acquisition of assets from Sweden-based Scalado, which currently has imaging technology on more than one billion devices.” – Agence France-Presse