Nokia plans to slash staff and close factories in a last-ditch attempt to return its troubled devices division to profitability.
The Finnish vendor plans to shed 10,000 staff by end-2013, by closing R&D facilities in Ulm (Germany) and Burnaby (Canada), and ending manufacturing at its Salo plant in Finland. It is also mulling the sale of non-core assets, as part of sweeping changes to its strategy and management team designed to return the device business to the black. Nokia also plans to invest heavily in its Lumia smartphone range, throw more money into its location services, and boost the competitiveness of its feature phone business.
“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” chief executive Stephen Elop says, adding. “However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions.”
The vendor predicts it will take a hit of €1 billion ($) by end-2013 on the back of the latest restructuring plan. That is in addition to charges of €900 million recognized in the firm’s 1Q12 results relating to current restructuring efforts, which have seen almost 10,000 staff laid off so far.
However, the latest changes will do little to lift Nokia’s results in the short term. The vendor now predicts the device businesses’ operating margin for 2Q12 will be below the -3% predicted at end 1Q12.
The vendor's fresh focus on cost cutting may have staved off a potential takeover by Facebook in the near term, Informa Telecoms & Media research analyst Julian Jest claims.
He believes the cutbacks may buy the firm time to execute a turnaround in its devices and services business. Ironically, though, the vendor’s strong heritage of producing solid devices means Nokia remains a prime target for acquisition, Jest argues.
“Facebook, for example, have plenty of cash to invest as a result of their recent IPO. In regards to its business in the mobile space, Facebook has not had much success, and may be considering new strategies, including developing their own phone.”