After sluggish demand for next-generation 5G equipment reduced third-quarter sales by a fifth, Finnish telecom equipment company Nokia (NOKIA.HE) announced on Thursday that it will eliminate up to 14,000 positions to save costs. It also said it did not see a quick recovery in the market.
In early trading, the company’s shares were down 5%. Increased sales to India, a low-margin market, have been an attempt by Nokia and competitor Ericsson (ERICb.ST), as demand has slowed in places like the United States, to compensate for some of the loss.
In an interview with Reuters, Chief Executive Pekka Lundmark said, “The market situation is really challenging and it is witnessed by the fact that in our most important market, which is the North American market, our net sales are down 40% in Q3.”
By 2026, when it must present an operating margin plan with a long-term comparable operating margin of at least 14%, Nokia aims to save between 800 million euros ($842 million) and 1.2 billion euros.
The corporation anticipates cutting between 72,000 and 77,000 jobs, or approximately 16% at the high end, from its current employment base 86,000.
Lundmark declined further information, stating that the business must first confer with employee representatives. He said he intended to safeguard research and development, nevertheless.
Nokia anticipates making savings of at least 400 million euros in 2024 and another 300 million euros in 2025.
On Tuesday, Ericsson, which has also made hundreds of layoffs this year, predicted that the uncertainty afflicting its industry will last until 2024.
However, Nokia, which mirrored Ericsson’s remarks on uncertainties, predicted that its network businesses would have a more typical seasonal improvement in the fourth quarter.
The business kept its full-year forecast unchanged. “We continue to believe in the mid-to-long-term market, but we are not going to sit and wait and pray that the market will recover anytime soon,” Lundmark stated. “We simply don’t know when it will recover.”
To deal with the increase in data traffic, Lundmark advised the industry to invest in faster mid-band equipment to support market recovery. “Only 25% of 5G base stations outside of China currently have mid-band,” he stated.
While low-band equipment is more affordable but provides slower 5G speeds, several telecom operators started their 5G deployment using it.
Comparable net sales for the third quarter decreased to 4.98 billion euros from 6.24 billion last year, falling short of the LSEG poll’s prediction of 5.67 billion euros.
Nokia said it will relocate to a more efficient corporate center to increase strategic focus, safeguard investment in R&D, and give business divisions more operational autonomy. “There are signs here and there that demand would start to pick up again, but it’s too early to call it a broad-based trend,” Lundmark stated.
Comment Template