Nokia cuts costs with loss of 10,000 staff

Nokia will sack a tenth of its workforce, shut down factories in Finland and close research laboratories in Germany and Canada as the once-dominant mobile phone maker struggles to keep up with the smartphone market.

While Nokia’s simple and easy-touse mobile handsets were in high demand for many years – in the 1990s Nokia sold 20 million of its iconic 2100 series when it expected to sell 40,000 – it has been caught short by Apple’s iPhone and the rapid consumer take-up of smartphones.

Last week it announced that 10,000 staff would go, leaving it with about 100,000 employees worldwide. It plans to cut 1.6 billion from operating costs by 2014. Nokia shares have slumped from a high of 27.64 in late 2007 to 1.82.

However, analysts are confident the company can survive, and say it will focus on selling the new Lumia smartphone. ‘‘Nokia got caught in a product transition,’’ said Shiv Putcha, principal analyst with Ovum’s emerging market division.

‘‘They were the largest manufacturer of mobile phones on a massive global scale. But the whole nature of the business has changed very rapidly and they were late in recog- nising that change in the market. The iPhone fundamentally changed users’ interaction with a phone and what they came to expect.’’

Nokia also failed to see the emergence of handset-parts makers in China that now flood the market with cheap phones and have helped Nokia’s competitors keep down manufacturing costs.

Putcha said Nokia was going through a necessary and painful transition, but three to four years late. Nokia this week sold its Vertu business – a range of gold and diamond-encrusted luxury phones – to a group of private investors and flagged it might sell more parts of the company.

However, it will invest in the flagship Lumia smartphone to differentiate it from other smartphones.

Nokia started as a paper mill on the banks of Finland’s Nokianvirta river in 1871. It made rubber boots, cables and small electronic devices before introducing cheap reliable mobile handsets to the world.

But it missed the explosion in apps that came when Apple introduced smartphones in 2008.

Nokia still leads the market in basic telephones, but the profit margin there is much lower than for smartphones.