Equipment vendor Nokia has announced plans to shrink its workforce from approximately 90,000 currently to between 80,000 and 85,000 over a period of eighteen to 24 months. This should cut the group cost base by about EUR 600 million by the end of 2023, offsetting more spending on R&D, new capabilities and salary inflation. Nokia predicts restructuring and associated charges of some EUR 600 million to EUR 700 million by 2023, on top of EUR 500 million in cash outflows related to its previous restructuring programme.
The downsizing follows October’s announcement of a new operating model to align Nokia with changing markets and with customer needs. There are now four divisions, namely Mobile Networks, IP and Fixed Networks, Cloud and Network Services and Nokia Technologies. It said this model improves accountability and transparency, simplicity and cost-efficiency.
Half of restructuring charges due in 2021
Nokia said it aims to streamline its portfolio and reduce site fragmentation. Around half of the total restructuring and associated charges of approximately EUR 600 million to EUR 700 million are expected to be taken in 2021, about 15 percent in 2022, and circa 35 percent in 2023. Nokia expects another EUR 500 million of cash outflows related to its previous restructuring programme. Nokia maintains its 2021 outlook. It will declare more details of its strategies and financial outlook at a capital markets day on 18 March.
The exact number of staff who will lose their jobs depends on market developments over the next two years, said Nokia. The changes are subject to local consultation requirements with worker representatives and Nokia’s social partners where applicable.
Mobile Networks division targets leadership
The company said its Mobile Networks division aims to be "the indisputable top" in wireless mobility networks and associated services by "strengthening technology leadership", investing in 5G R&D and digitising the value chain. It will streamline its portfolio and cut spending on mature or declining parts, reduce site fragmentation and overlapping activities, and make cost efficiencies.
Cloud and Network division focuses on as-a-service provision
The Cloud and Network Services division will adapt the tendency for customers to shift away from owning products to "consuming outcomes", delivered as-a-service from the cloud. It will streamline operations and support functions, and boost productivity via less site fragmentation.
Little change at Network Infrastructure and Nokia Technologies
The Network Infrastructure will remain largely unchanged, although it will increase its R&D investments and plan for new capabilities. The cost efficiencies of Nokia's new operating model should streamline its SG&A costs as a percentage of sales.
Nokia Technologies, too, will remain largely unchanged. It will "carefully" manage costs to enable it to invest in future technologies and maintain high levels of profitability.
