Even as the company saw a 20 per cent drop in sales during Q3, finnish telecom gear group Nokia on Thursday announced an ambitious cost savings programme that will lead to up to 14,000 job reductions. The company’s sales dropped 20 per cent in the third quarter due to slowing sales of 5G equipment in markets such as North America.
“Nokia expects to act quickly on the program with at least 400 million euros of in-year savings in 2024 and a further 300 million euros in 2025,” the company said in a statement.
It also said the programme is expected to lead to a 72,000-77,000 employee organisation compared to the 86,000 employees Nokia has today, thus a total reduction of 14,000 employees.
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 per cent reduction in personnel expenses, the company said.
Nokia President and CEO 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.”
Comparable net sales fell to 4.98 billion euros from 6.24 billion euros last year, missing the estimated 5.67 billion euros, according to a LSEG poll.
Lundmark said, “We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialise 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.”
He said first, the company is accelerating its strategy execution by giving business groups more operational autonomy. Second, Nokia is streamlining its operating model by embedding sales teams into the business groups and third, the company is resetting its cost-base to protect profitability. “I believe these actions will make us stronger and deliver significant value for our shareholders.”
Nokia’s comparable gross margin in Q3 declined 120 bps y-o-y to 39.2 per cent (reported declined 140bps to 38.7 per cent) due mainly to regional mix in Mobile Networks. Sequentially mobile networks gross margin improved 140 bps due to favorable regional mix.
Its comparable operating margin declined y-o-y by 200 bps to 8.5 per cent (reported declined 350 bps to 4.8 per cent), demonstrating the resilience of our profitability relative to the net sales decline.
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