Nokia will eliminate thousands of jobs as part of a major restructuring the company is embarking upon to reduce nearly $800 million in costs by 2020. CEO Rajeev Suri told CNBC in an interview that the company hasn’t determined the exact number of employees that will be jettisoned, but that it will be in the “thousands.”
Nokia said that the job cuts will be across all its offices around the globe and that it expects to incur $1.02 billion in costs from the workforce reduction.
During the company’s third quarter earnings call today, executives told investors that while it has achieved early success in 5G by securing a number of operator deals, the company will still need to significantly reduce its operating expenses. Nokia plans to do this by adding more automation to its systems, simplifying some of its processes, and significantly reducing its support functions. It also will prioritize its research and development so it stops investing in legacy products.
The company reported third quarter net sales of $6.27 billion compared to $6.53 billion in the second quarter. Operating profit was $554 million, a 27 percent decline from the $760 million it reported for the same quarter last year.
Investors didn’t seem too concerned by the job cuts. Nokia’s stock was trading up 2 percent at $5.37 per share.
Emphasis on Enterprise
In addition to cutting its workforce, Nokia also said it was going to restructure its organization and create a new enterprise focused group that will be headed by Kathrin Buvac who is currently its chief strategy officer. She will report directly to Suri and will remain on the company’s leadership team.
“On the enterprise side, our strategy has been to target high-growth, high-margin opportunities with a limited set of companies needing telco-grade networks,” Suri said in a statement. “Our strong results to date have validated this approach.”
The restructuring will be effective Jan. 1, 2019.
Layoffs Are Becoming Commonplace
This isn’t the first time this year Nokia has talked about downsizing its workforce. Last month the company said it was cutting 500 jobs by year-end from its Naperville, Illinois, office. Those jobs were eliminated because of overlap from Nokia’s 2016 acquisition of Alcatel-Lucent.
And in March the company said it was cutting 353 jobs in Finland as a result of cost-cutting measures. Those jobs were eliminated in the company’s networking and technology units.
Nokia certainly isn’t alone in feeling the pressure from declining sales. Competitor Ericsson implemented a cost savings plan back in November 2014. The company’s goal, which was to achieve a $1.1 billion run rate, was met this year.
Nokia’s headquarters in Espoo, Finland.