4A0-C04 action - Nokia NRS II Composite Updated: 2023

Hong Kong CNN  — 

Nokia will slash up to 14,000 jobs in a major cost-cutting drive to address a “weaker” market environment, it said in a statement on Thursday.

The Finnish telecom giant, a major provider of 5G equipment that employs 86,000 people, announced the move as part of a wider restructuring that will lower its headcount to between 72,000 and 77,000.

The move will help the company reduce staffing expenses by 10% to 15%, and save at least €400 million ($421.4 million) in 2024 alone, the company projected.

Overall, it said the reductions are expected to trim Nokia’s costs by up to €1.2 billion (nearly $1.3 billion) cumulatively by the end of 2026. Nokia (NOK) said it would “act quickly” to make changes.

“The most difficult business decisions to make are the ones that impact our people,” CEO Pekka Lundmark said in the statement. “We have immensely talented employees at Nokia and we will support everyone that is affected by this process.”

The announcement came on the same day that Nokia reported worse-than-expected results. It said sales in the third quarter had fallen 15% compared to the same period a year ago, as “macroeconomic uncertainty and higher interest rates continue to pressure operator spending.”

Mobile network sales fell 19% in the third quarter compared to the previous year, the company added, due to a slowdown in the pace of 5G deployment in markets such as India.

This week, Swedish rival Ericsson also warned that sales in the second half of 2023 would likely come in lower than usual, echoing Nokia’s remarks of a “challenging environment and macroeconomic uncertainty.”

But Nokia has maintained its outlook for 2023, forecasting between €23.2 billion and €24.6 billion ($24.4 billion and $25.9 billion) in sales for the full year.

“We continue to believe in the mid to long term attractiveness of our markets,” Lundmark said.

Nokia – the Finnish telecom equipment maker is suing Amazon and HP over the unauthorized use of a mix of video streaming-related essential patents. Nokia filed a lawsuit in a Delaware federal court and has also filed similar lawsuits across Germany, India, the UK and the European Unified Patent Court.

Nokia clarifies that Amazon Prime and Twitch platforms are using Nokia-patented technology for video compression, content delivery and content recommendation amongst others. HP devices were also found to violate Nokia’s patented video streaming tech.

Nokia claims it offered Amazon and HP fair terms for negotiating licenses for its patented tech but both companies declined the offers. Nokia is a leading R&D player with over €140 billion in investments in the last 20 years with ownership of over 20,000 patent families across various countries.

Source

Nokia Corporation
Inside Information
19 October 2023 at 8:00 EEST

Inside Information: Nokia accelerates strategy execution, streamlines operational model and takes action to protect profitability

• Empowers its business groups to operate with more autonomy and agility, in order to speed up execution of its strategy
• Embeds sales teams into business groups to better seize growth opportunities and more closely align customer needs to decision-making
• Announces new program designed to lower cost base by EUR 800–1 200 million on a gross basis over a three year period
• Reiterates its long-term comparable operating margin target of at least 14% to be delivered by 2026, as announced with Q3 results today

Espoo, Finland – Nokia today announces strategic and operational changes to its business and a program to reset its cost base. These actions will better position the company for longer-term growth and enable it to navigate the current market uncertainty.

Nokia’s President and CEO Pekka Lundmark said: “We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, while the timing of the market recovery is uncertain, we are not standing still but taking decisive action on three levels: strategic, operational and cost. First, we are accelerating our strategy execution by giving business groups more operational autonomy. Second, we are streamlining our operating model by embedding sales teams into the business groups and third, we are resetting our cost-base to protect profitability. I believe these actions will make us stronger and deliver significant value for our shareholders.”

Accelerating strategy execution through operational autonomy

Nokia is accelerating its strategy execution through providing its four business groups with increased operational autonomy and agility. This will enable the business groups to better address opportunities in their distinctive markets with our existing and new customers. They will be empowered to faster diversify, build new ecosystem partnerships, implement new business models and invest for technology leadership.

Streamlining operating model to create dedicated sales teams

In 2021 Nokia created four P&L responsible business groups structured around unique customer offerings supported by a shared sales organization. The next evolution on this journey is to embed the sales and other go-to-market teams into each of the business groups.

Dedicated sales teams with a strong product and customer connection will enable business groups to better seize growth opportunities with our existing and new customers and diversify into enterprise, webscale and government sectors. This change will bring highly empowered teams in front of customers that are able to make quicker decisions based on their needs. Sales teams will collaborate across Nokia to ensure customers continue to benefit from the breadth of all Nokia offers.

Nokia will also move to a leaner corporate center that will provide strategic oversight and guidelines for instance for financial performance, portfolio development, and compliance. The company will continue its strong commitment to long-term research through Nokia Bell Labs.

Resetting cost-base to protect profitability         

To address the market environment Nokia will reduce its cost base and increase operational efficiency while protecting its R&D capacity and commitment to technology leadership.

Nokia targets to lower its cost base on a gross basis (i.e. before inflation) by between EUR 800 million and EUR 1 200 million by the end of 2026 compared to 2023, assuming on-target variable pay in both periods. This represents a 10–15% reduction in personnel expenses. Nokia expects to act quickly on the program with at least EUR 400 million of in-year savings in 2024 and a further EUR 300 million in 2025. The program is expected to lead to a 72 000 – 77 000 employee organization compared to the 86 000 employees Nokia has today.

The exact scale of the program will depend on the evolution of end market demand. The program is expected to deliver savings on a net basis but the magnitude will depend on inflation. The cost savings are expected to primarily be achieved in Mobile Networks, Cloud and Network Services and Nokia’s corporate functions. One-time restructuring charges and cash outflows of the program are expected to be similar to the annual cost savings achieved.

As announced with Q3 results today, Nokia reiterates its long-term comparable operating margin target of at least 14% to be delivered by 2026.

“The most difficult business decisions to make are the ones that impact our people. We have immensely talented employees at Nokia and we will support everyone that is affected by this process. Resetting the cost-base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness. We remain confident about opportunities ahead of us,” said President and CEO Pekka Lundmark.

Nokia will hold an investor and analyst progress update event on 12 December 2023 at its headquarters in Espoo, Finland. At the event Nokia will go into more detail on the evolution of its operating model along with an update on the progress of Mobile Networks and Cloud and Network Services.

These proposed changes are subject to local consultation requirements with employee representatives and Nokia’s social partners where applicable.

About Nokia
At Nokia, we create technology that helps the world act together.

As a B2B technology innovation leader, we are pioneering networks that sense, think and act by leveraging our work across mobile, fixed and cloud networks. In addition, we create value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs.

Service providers, enterprises and partners worldwide trust Nokia to deliver secure, reliable and sustainable networks today – and work with us to create the digital services and applications of the future.

Inquiries:

Nokia Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
Kaisa Antikainen, Communications Manager

Nokia
Investor Relations
Phone: +358 40 803 4080
Email: investor.relations@nokia.com

Forward-looking statements
Certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans, benefits or outlook related to our strategies, product launches, growth management, licenses, sustainability and other ESG targets, operational key performance indicators and decisions on market exits; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of potential global pandemics and the general or regional macroeconomic conditions on our businesses, our supply chain and our customers’ businesses) and any future dividends and other distributions of profit; C) expectations and targets regarding financial performance and results of operations, including market share, prices, net sales, income, margins, cash flows, the timing of receivables, operating expenses, provisions, impairments, taxes, currency exchange rates, hedging, investment funds, inflation, product cost reductions, competitiveness, revenue generation in any specific region, and licensing income and payments; D) ability to execute, expectations, plans or benefits related to changes in organizational structure and operating model; E) impact on revenue with respect to litigation/renewal discussions; and F) any statements preceded by or including "continue", “believe”, “commit”, “estimate”, “expect”, “aim”, “influence”, "will”, “target”, “likely”, “intend”, “may”, “could”, “would” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences, include those risks and uncertainties specified in our 2022 annual report on Form 20-F published on 2 March 2023 under Operating and financial review and prospects – Risk factors.

Nokia has announced plans to cut up to 14,000 jobs over the next three years as it slashes costs after a worse-than-expected slump in demand for its mobile network equipment.

The Finnish technology company said the plans to cut 16% of its 86,000-strong global workforce were part of efforts to cut costs by €1.2bn by the end of 2026. The cuts were announced as the company revealed a 70% drop in third-quarter profits, which fell to €133m (£116m) compared with €428m a year earlier.

The Nokia chief executive, Pekka Lundmark, said: “The most difficult business decisions to make are the ones that impact our people. We have immensely talented employees at Nokia and we will support everyone that is affected by this process.

“Resetting the cost base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness. We remain confident about opportunities ahead of us.”

Nokia, which is headquartered in Espoo, Finland, did not detail where the job cuts would fall. It currently employs about 37,700 people in Europe, including in the UK, where it has offices in Bristol, Cambridge and Reading. Job cuts are also likely to affect its operations in the US, where it has about 10,500 staff in offices including in Chicago and Dallas.

Nokia said the exact scale of the cost-cutting programme would depend on demand for its products. However, it “expects to act quickly” in order to save as much as €400m next year and another €300m in 2025.

The company said that demand across the wider mobile networks market was likely to drop 9% overall this year. That is compared with previous expectations for a 2% decline.

That reflected a drop in sales in countries including India, where Nokia said the pace of the country’s 5G rollout had “moderated” and was “no longer enough to offset the slowdown in North America”.

• Nokia said on Thursday it is planning to cut up to 14,000 jobs — or around 16% of its workforce.
• The company is planning to lower costs by up to 1.2 billion euros by 2026.
• In a separate statement, the company said sales declined by 15% in the third quarter.

Finland-based mobile company Nokia is planning to cut between 9,000 to 14,000 jobs amid a sales slump and reduced demand for 5G equipment, it said on Thursday. The higher end of these cuts is likely to impact around 16% of the company's current global workforce of 86,000.

The layoffs are part of cost-cutting measures to reduce expenses by 400 million euros, or $421 million, in 2024 and a further 300 million euros in 2025. 

The company wants to reduce total costs by 1.2 billion euros by 2026.

In a separate statement, Pekka Lundmark, the CEO of Espoo-based Nokia, said that the company's third-quarter sales of 4.9 billion euros had declined by 15% compared to the previous year due to macroeconomic challenges and higher interest rates. 

The company reported operating profits of 424 million euros in the third quarter, a 36% drop from the same period last year.

"Resetting the cost base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness," Lundmark said.

Nokia — which sold its mobile phone business to Microsoft in 2014 — expects to meet the lower end of its sales targets in the third quarter, which were set in the range of 23.2 billion to 24.6 billion euros.

Nokia also slashed its outlook for the overall mobile networks market in 2023 and is now expecting a 9% reduction, compared to a previous forecast of a 2% drop. The company's slowing 5G growth in India could no longer compensate for the similar slowdown in North America, said Lundmark.

A Nokia spokesperson directed Insider to the company statement in response to a request for comment.