Nokia fires 14 thousand employees. 5G is also a flop
Telecoms giant Nokia has announced that as many as 14,000 employees, or around 16% of its workforce, will be laid off, warning that "the timing of market recovery is uncertain" and that demand for 5G network equipment remains subdued. .
Bloomberg data shows that Nokia employs 86,000 people. The telco said a “reset” was needed “to reduce its cost base and increase operational efficiency, while protecting its R&D capability and commitment to technology leadership.” By the end of 2026 it expects to reduce costs by between €800 million and €1.2 billion, adding: “This represents a 10-15% reduction in personnel expenses.”
The massive headcount reduction comes after Nokia reported that third-quarter net sales slumped 20% year-on-year to 4.98 billion euros. From July to September, profits fell by 69% on an annual basis, to 133 million euros. Not an easy situation to resolve.
“ In the face of a challenging market environment, we will reduce our cost base to protect our profitability ,” Nokia Chief Executive Pekka Lundmark said in a video statement. The protection of profitability, in these initial phases of crisis management, occurs through painful cuts.
Lundmark said it was "impossible to say" how long the downturn in network-building product markets would last, adding that, in the long term, investments in 5G would be "necessary" to handle the surge in data traffic driven by intelligence. artificial and cloud computing.
He did not rule out the possibility of “structural moves” beyond cost-cutting measures. He stressed that, even considering the substantial headcount reductions, Nokia's primary objective remains to safeguard its ability to maintain strong research and development output.
The CEO acknowledged that the macroeconomic environment will play a significant role in 2024. However, he said it was too early to provide specific guidance and cautioned against assuming the company will receive support from the market.
On regional insights, the CEO observed a notable slowdown in India in the second half of the year, suggesting a trend towards normalization compared to the first half of the year.
After the earnings, Lundmark told Bloomberg: “Operators have found it difficult to monetize their investments in 5G.”
The growth of the Indian market “can no longer fully compensate for what we are losing in North America,” Lundmark said. “But what goes down will come up again and we don't know what the time will be. That's why we're taking action."
Nokia shares in Europe fell 3.5%, nearing lows not seen since the early days of Covid. A disaster
Nokia is not the only Western telecommunications company to reduce its workforce: Sweden's Ericsson announced plans to reduce its headcount by 8,500 earlier this year. The global economic slowdown and high inflation have put pressure on telecommunications.
Ericsson CEO Borje Ekholm warned on Wednesday: “Underlying uncertainty will impact” its mobile networks lasting until 2024, causing doubts about the recovery of telecoms equipment makers.
The fact is however simple: outside of some Far Eastern countries the development of %G networks is too slow to support producers, despite some countries having banned materials produced in China for fear of spy infiltration into the network. despite this there is no demand, not even from Europe, where the penetration of %G will be very slow
The EU once again reveals itself to be the technological Cinderella among the advanced areas, and this does not allow the survival of its companies in the sector. Austerity always wins.
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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/nokia-licenzia-14-mila-dipendenti-alche-il-5g-fa-flop/ on Sun, 22 Oct 2023 08:00:54 +0000.