Nokia to slash up to 14,000 jobs in latest restructuring effort

Nokia is overhauling its business and slashing up to 14,000 jobs in an effort to counter challenging market conditions and the slowdown in deployment of 5G, particularly in North America. Nokia expects the restructuring to save the company between $850 million and $1.3 billion by 2026.

Nokia is just the latest telecom company to announce layoffs. Ericsson announced in February that it would be slashing 8,500 jobs starting in the second half of this year and into 2024. In addition, Crown Castle said this summer that it would cut about 15% of its workforce, and Qualcomm revealed last week that it will slash 1,258 jobs at its San Diego headquarters.

Nokia said that it will reduce its headcount from around 86,000 employees today to between 72,000 and 77,000 employees. These cuts will impact Nokia’s Mobile Networks, Cloud and Network Services business units as well as its corporate functions.

Nokia announced the layoffs during is Q3 earnings call with investors. Nokia President and CEO Pekka Lundmark said the layoffs are part of a restructuring initiative that will result in the business groups having more operational autonomy because sales teams will now be embedded in the business groups.

Nokia reported Q3 net sales of $5.2 billion, a 20% drop from the same quarter in 2022. Its Mobile Networks and Network Infrastructure business units were hit the hardest. Mobile Networks declined 24% in the third quarter to $2.3 billion down from $3 billion in Q3 2022. The Network Infrastructure unit had net sales of $1.9 billion in Q3, down 18% from $2.3 billion in the same quarter of 2022.

In Mobile Networks, the biggest decline was in North America where customers are winding down their 5G network deployments and are depleting their existing equipment inventories. In North America Nokia reported Q3 net sales of $1.38 billion down from $2.4 billion in net sales it reported in Q3 2022.

The company’s Cloud and Network Services sales also declined 7% from $848 million in Q3 2022 to $785.9 million in Q3 2023.

The one bright spot in Nokia’s quarter was Enterprise where net sales were flat for the year. Lundmark said that Nokia now has approximately 675 private wireless customers.

Nokia said it expects its full year 2023 net sales to be in the range of $25 billion to $26 billion with an operating margin in the range of 11.5% to 13%.

Uncertain turnaround

Like other telecom equipment vendors, Nokia doesn’t seem to have a clear picture on when a market turnaround might occur. Lundmark is banking on increased data traffic to result in more equipment sales, noting that network traffic is expected to grow 20% to 30% per year and that there are huge expectations that cloud computing and AI will increase the need for operators to invest in their networks.   

Lundmark also admitted that 5G monetization has been slower than expected and that operators need to move to standalone 5G so they can take advantage of many of the advanced 5G capabilities like network slicing.

Similar to Ericsson, Nokia is touting the need to make the network more programmable so it’s easier for application developers to bring new use cases to market.  Interestingly, Lundmark said that Nokia’s Network as Code platform, which it introduced in Q3 and is similar to Ericsson’s Vonage platform, already has four customer deals and more in the pipeline.