The Finnish vendor hopes to lower the group’s cost base by €600 million by 2023 and expects to accrue €600-700 million in restructuring and associated costs by 2023.
Nokia has announced plans to reduce its cost base to offset greater investment in R&D, new capabilities and costs related to salary inflation. The company said its current workforce of 90,000 will be cut by 5,000 to 10,000 over the next 18 months to two years.
The vendor stressed it maintains its 2021 outlook but expects to clock up €600–700 million in restructuring and associated charges by 2023.
New broom
Last October Nokia announced a new operating model designed to better position the company for changing markets and to align with customers’ needs. The firm says this new model is better optimised for accountability and transparency, increased simplicity and improved cost-efficiency.
Pekka Lundmark, President and CEO, is the driving force behind the changes, having become CEO last August. He said, “Nokia now has four fully accountable business groups. Each of them has identified a clear path to sustainable, profitable growth and they are resetting their cost bases to invest in their future”.
“Each business group will aim for technology leadership. In those areas where we choose to compete, we will play to win. We are therefore enhancing product quality and cost competitiveness, and investing in the right skills and capabilities.”
“Decisions that may have a potential impact on our employees are never taken lightly. Ensuring we have the right setup and capabilities is a necessary step to deliver sustainable long-term performance. My priority is to ensure that everyone impacted is supported through this process”.
Nokia’s business groups have outlined the following:
• Mobile Networks will focus on strengthening technology leadership and invest further in R&D for 5G. It will also: accelerate efforts to digitalise processes and tools across the value chain; streamline its portfolio and reduce investment levels in mature or declining parts of it; reduce ‘site fragmentation’ overlapping activities; and cut more costs.
• Cloud and Network Services’ customers are shifting away from owning products to using as-a-service via the cloud, so the business group’s priorities must align with this shift by: streamlining its portfolio and service models; refocus R&D resources to emerging growth opportunities; streamline operations and increase productivity through closing down some sites.
• Network Infrastructure will remain largely unchanged but will increase its R&D investments and plan new capabilities to meet customers’ demands and support innovation. Additionally, by cutting cost, it anticipates selling and general administrative costs will be a smaller percentage of sales.
Nokia Technologies will remain largely unchanged. It will continue to carefully manage costs to enable it to invest in future technologies and maintain high levels of profitability.
Nokia’s business groups will provide detailed updates on their future strategies and financial outlook assumptions on Capital Markets Day on 18 March.
The changes are subject to local consultation requirements with employee representatives and Nokia’s social partners where applicable.