Nokia: All Set for a Comeback

In line with its restructuring, Nokia cuts 10,000 jobs and replaces top executives

Nokia is leaving no stone unturned to regain its leadership and profits. It has now put in place a defined strategy, in line with its restructuring process. And is striving hard to improve its operating model and bring back the company on profitable growth. As part of its strategy, it plans to reduce up to 10,000 jobs globally by the end of 2013.

Nokia is set for improving its operating model through a 3-pronged strategy—it has identified crucial investment areas, cost-cutting strategies, and restructuring of its leadership team.

The company reported a weak second quarter in 2012 which affected devices and services business immensely. “Nokia expects competitive industry dynamics to continue to negatively impact devices and services in the third quarter 2012. Nokia now expects its non-IFRS devices and services operating margin in the second quarter 2012 to be below that of the first quarter 2012 level of -3%,” said a statement.

Cost-Cutting Strategies

Nokia will reduce its headcount by 10,000 jobs globally by the end of 2013. It plans to consolidate its manufacturing operations and thus will shut down its manufacturing operations in Ulm (Germany), Burnaby (Canada), and in Salo (Finland). But the research and development efforts in Salo would continue, said the statement.

“These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” added Elop. “We do not make plans that may impact our employees lightly, and as a company we will work tirelessly to ensure that those at risk are offered the support, options, and necessary advice to find new opportunities.”

As part of these planned changes, Nokia will closely assess the future of certain non-core assets. In line with this, Nokia announced plans to divest Vertu.

“Nokia is significantly increasing its cost reduction target for devices and services in support of the streamlined strategy announced today,” said Timo Ihamuotila, executive vice president and CFO. He added, “With these planned actions, we believe our devices and services business has a clear path to profitability. Nokia intends to maintain its strong financial position while proceeding aggressively with actions aimed at creating shareholder value.”

Focus

The company is betting big on location based services, smartphones, key feature phone technologies, and imaging assets.

Nokia plans to acquire assets from Sweden based Scalado and this will strengthen its imaging assets. The company will invest on location based services including navigation and visual search application to differentiate its Lumia smartphone series. It aims to further develop its Series 40 and Series 30 devices, and invest in key feature phone technologies like the Nokia browser. It plans to focus on marketing and sales activities.

Leadership Overhaul

Nokia has appointed Juha Putkiranta as executive vice president of operations, Timo Toikkanen as executive vice president of mobile phones, Chris Weber as executive vice president of sales and marketing, Tuula Rytila as senior vice president of marketing and chief marketing officer; and Susan Sheehan as senior vice president of communications. Putkiranta, Toikkanen, and Weber will join the Nokia leadership team effective from July 1, 2012.

Jerri DeVard steps down as chief marketing officer, Mary McDowell steps down as executive vice president of mobile phones, and Niklas Savander steps down as executive vice president of markets. DeVard, McDowell and Savander will all continue in advisory roles through the transition of their roles, however, they step down from the Nokia leadership team effective June 30, 2012.