Nokia Q3 earnings revealed a financial slump, leading the Finnish telecommunications behemoth to announce a cut of 14,000 jobs as a cost-saving manoeuvre.
Here’s why Nokia plans to cut 14,000 jobs by 2026
Amid challenging economic conditions, Nokia has resolved to significantly reduce its workforce, projecting a reduction of between 9,000 to 14,000 jobs by the close of 2026.
This drastic measure comes as part of a broader initiative to mitigate operational costs and bolster the company’s financial footing.
Simultaneously, Nokia has unveiled strategic alterations and operational modifications aimed at revamping its business model.
The reshuffle is intended to expedite strategy execution across its four business segments by granting them greater operational autonomy and agility.
A notable change includes integrating sales and other go-to-market teams directly into these business groups.
This structural modification is expected to enhance the business groups’ ability to capture growth opportunities with both existing and new clientele and diversify into enterprise, web-scale, and government sectors, Nokia President Pekka Lundmark revealed in his Q3 earnings note.
“We continue to believe in the mid to long term attractiveness of our markets,” Lundmark remarked.
Nokia Q3 earnings report shows 15% decline in year-on-year net sales
Furthermore, the company plans to transition towards a leaner corporate centre to offer strategic oversight and set guidelines for critical areas like financial performance, portfolio development, and compliance, while continuing to uphold its commitment to long-term research through Nokia Bell Labs.
To combat the adverse market conditions, Nokia aims to trim its cost base and augment operational efficiency, all while safeguarding its research and development (R&D) capacity and adhering to its technology leadership ethos.
The objective is to shave off between €800 million and €1.2 billion from its gross cost base by the end of 2026, compared to 2023.
This endeavour is anticipated to yield a streamlined organisation, downsizing from the current 86,000 employees to a figure ranging between 72,000 to 77,000.
The Q3 report disclosed a 15% year-on-year dip in net sales, attributing the decline to macroeconomic uncertainty and rising interest rates which have squeezed operator spending.
Despite a 5% increase in enterprise net sales, the comparable gross margin shrank, and the comparable operating margin decreased year-on-year, underscoring the economic pressures facing the company.
As a reflection of its financial performance, Nokia also revised its full-year 2023 net sales projection, now anticipating a range of €23.2 to 24.6 billion with a comparable operating margin range of 11.5% to 13.0%, contingent on the closure of outstanding deals in Nokia Technologies.