Nokia (NOKIA.HE) has announced a significant workforce reduction of up to 14,000 jobs in a cost-cutting move. This decision comes in the wake of a 20% decline in third-quarter sales due to weakened demand for 5G equipment, and the company does not anticipate a swift market recovery. As a result of this announcement, Nokia’s shares, a Finnish company specializing in telecom network equipment, fell 2% at 0900 GMT.
The United States, which hosts major carriers like Verizon (VZ.N) and AT&T (T.N), traditionally one of the more lucrative markets for Nokia and Ericsson (ERICb.ST), has recently seen a slowdown. This has compelled these companies to seek growth opportunities in other regions, such as India. However, even India is now expected to stabilize after a remarkable 2022.
“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,” said Chief Executive Pekka Lundmark.
Nokia aims to achieve savings ranging from 800 million euros ($842 million) to 1.2 billion euros by 2026. To reach these targets, it plans to reduce its employee count from 86,000 to between 72,000 and 77,000, representing approximately 16% job cuts at the high end. Lundmark noted that the company would consult with employee representatives before providing more specific details but emphasized a commitment to preserving research and development.
Nokia anticipates at least 400 million euros of savings in 2024, with an additional 300 million euros in 2025. Meanwhile, Ericsson, which has also executed substantial layoffs this year, recently stated that the uncertainty affecting its business will persist into 2024. Unlike Ericsson, Nokia expects a more normal seasonal uptick in its network businesses in the fourth quarter and has not revised its full-year outlook.
Lundmark expressed optimism in the mid-to-long-term market while acknowledging the need for the industry to invest in faster mid-band equipment to handle the growth in data traffic. “Only 25% of 5G base stations in the world outside of China currently have mid-band,” he noted.
While there are sporadic signs of a demand resurgence, it is too early to declare a widespread trend, Lundmark concluded. In the third quarter, quarterly comparable net sales dropped to 4.98 billion euros from 6.24 billion last year, missing the LSEG poll’s estimate of 5.67 billion euros.
