Paris: Nokia plans to cut one in five jobs at its global cellphone business as it loses market share to rivals Apple and Samsung and burns through cash, raising new fears over its future.
In a second profit warning in nine weeks, Nokia said on Thursday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition.
Once the world’s dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsumg and Google. It is also losing market share in cheaper, more basic phones.
Chief executive officer (CEO) Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft Corp software. But Lumia sales have so far been slow, disappointing investors.
Nokia, whose cash position is increasingly scrutinized by investors, also said restructuring-related cash outflows would be around €650 million in the remaining three quarters of 2012 and around 600 million in 2013.
Shares in Finland-based Nokia were down 10.5% to €1.99, below the psychologically important €2 mark last, not seen since 1996. The stock has crashed more than 70% since it announced the switch to Microsoft’s software in February 2011.
Analysts have said that even with the dramatic fall in the share price, the worsening outlook made it hard to judge how much lower the shares could go.
“I won’t comment on the stock price anymore, since it’s been seen over and over, that there is no definitive bottom,” said Evli analyst Mikko Ervasti.
“People are worried over Lumia sales. I think expectations for the third quarter will be cut,” said Nordea analyst Sami Sarkamies.
The job cuts, which include the closure of Nokia’s only plant in Finland, bring total planned cuts at the group since Elop took over as chief executive in 2010 to more than 40,000.
The move will result in additional restructuring charges of around €1 billion ($1.3 billion) by the end of 2013.
The company said it expects its operating margin in the second quarter to be below the negative 3 percent level reported in the first quarter. It previously forecast it would be similar to or below that level.
Nokia also said it would sell luxury phone business Vertu to venture firm EQT and revamp its management team.
livemint.com adds: according to Nokia spokesperson, “Today’s planned changes will impact Nokia employees throughout our operations globally. While we anticipate impact at other sites, we don’t see significant impact on India operations. Having said that, we have no specifics to provide at this stage.”
Nokia has around 11,000 of its total global workforce in India. The company has its largest manufacturing facility in Chennai with over 8,000 employees.
India is an important market for the company considering that it generated the highest sales of mobile devices after China in 2011 and 2010. The company had reported a 28% drop in net sales of devices and services in the Asia-Pacific market to €945 million in the last quarter. The drop was heaviest in Greater China at 70%. In 2011, Nokia’s overall sales in India amounted to €2.92 billion, compared with €2.95 billion in 2010.
