Nokia CEO Pekka Lundmark

Nokia is slashing up to 14,000 jobs as part of a corporate restructuring that the Finland-based telecommunications equipment vendor said is necessary to counter near-term headwinds impacting its operations. The move also comes at the tail-end of what was a previous three-year turnaround program.

Nokia is positioning the job cuts as a “resetting” of its “cost base to protect profitability.” That reset will reduce its headcount from around 86,000 employees today to between 72,000 and 77,000 employees.

The cuts are targeted at saving up to $1.3 billion in operational costs by 2026, which Nokia stated would be a 10% to 15% drop in personnel expenses. The job cuts are set to impact Nokia’s Mobile Networks, Cloud and Network Services and corporate functions.

Nokia CEO Pekka Lundmark told investors during the vendor’s third-quarter earnings call that the total number of job cuts and financial impact will be tied to ongoing market conditions.

“The exact scale of the program will depend on the evolution of the market demand in the coming years,” Lundmark said. “We do expect net savings, but the magnitude will depend on how inflation develops.”

Lundmark did note that the vendor was focused on also protecting its research and development (R&D) efforts, which could include a greater use of artificial intelligence (AI) to replace human efforts.

“There is obviously very interesting opportunities to improve R&D productivity through new technologies,” Lundmark said. “We have already seen that in the right hands, for example, AI co-pilots are significantly improving the productivity of software development. So, there are opportunities in terms of R&D productivity, but we are clearly going to always defend our ability to deliver R&D output.”

Nokia is also restructuring its operational model to provide more independence for its various business units. This is targeted at allowing those units to be more agile in how they approach their specific markets.

“This will enable the business groups to better address opportunities in their distinctive markets with our existing and new customers,” the vendor stated. “They will be empowered to faster diversify, build new ecosystem partnerships, implement new business models and invest for technology leadership.”

Lundmark linked this move to his presentation at this year’s MWC Barcelona event where he laid out a segmented approach to how Nokia would look to grow its operations. That approach has already been seen in the market through Nokia’s decision earlier this year to offload primary support and ongoing development of its container and cloud infrastructure operations to Red Hat.

The timing of the latest round of job cuts and restructuring aligns with the end of Lundmark’s often referenced Nokia turnaround strategy implemented shortly after he took over leadership of the company from previous CEO Rajeev Suri. Lundmark’s turnaround plan included a similar resetting of its cost base that called for Nokia to cut up to 10,000 jobs over a two-year period.

Those efforts have so far failed to gain consistent traction, with Nokia facilitating wildly between highs and lows. This includes its most recent operating quarters.

Nokia entered this year on a high backed by the tail-end of strong 5G equipment sales to early adopters and the beginning of robust growth in India. However, the past two quarters have seen Nokia crash back to earth.

Nokia reported a 20% year-over-year drop in revenues for its fiscal third quarter, which it attributed to macroeconomic uncertainty and higher interest rates. Nokia’s management explained that near-term prospects are being impacted by continued “inventory digestion” in established 5G markets like North America and the beginning of a slowdown in spending by India operators tied to their initial 5G deployments.

In looking for market opportunities, Lundmark stressed the need for operators to deploy a 5G standalone (SA) core to help drive network monetization efforts around services like network slicing. This was linked to Nokia’s recent network-as-code platform launch, which Lundmark said has already attracted four customers.

However, operators remain mixed on their current need for 5G SA. Domestically, T-Mobile US and Dish Network have fully deployed their 5G SA cores, while Verizon and AT&T remain on the sideline.

“We don’t see that there’s a huge need to move in that direction,” Joe Russo, EVP and president of Verizon’s global networks and technology business, recently told SDxCentral. “I have the capacity and coverage that our customers need, and I have the feature functionality that they can do what they need to do.”

Beyond an immediate need, Russo also said that Verizon’s own testing of 5G SA has shown a need for the technology to improve.

“We’re not going to put technology in the network that steps us back from a reliability and performance perspective,” Russo said. “And I would say generally, based on the testing we’ve done, based on the work we’re doing trialing our standalone capabilities, we are not ready to put that out into the network.”

There is less uncertainty around the private network space, which continues to be a bright spot for Nokia.

Lundmark said the vendor produced double-digit growth in that market during Q3, ending the period with approximately 675 customers.

“Overall, enterprise remains a key part of our strategy and we are pleased with the progress here despite the macro uncertainty we have been seeing elsewhere in the business,” Lundmark said.

Lundmark also noted that Nokia could see growth from the U.S. government’s Broadband Equity, Access and Deployment (BEAD) program. He said Nokia estimates its addressable market at about 10% of the $42 billion that has been set aside as part of that program.

Nokia has been touting efforts to expand its U.S. manufacturing base in support of gaining access to BEAD funding.

“We have had significant traction from several service providers, including tier-two and tier-three service providers that will be making investments and getting funding from the BEAD initiative,” Lundmark said, adding that this opportunity “will start coming gradually during 2024.”

Nokia’s management noted that it will flesh out more of its restructuring efforts during its annual investor conference later this year.