Nokia has announced plans to cut a further 3,500 jobs on top of the 6,800 job cuts announced earlier this year. The job cuts are part of plans to cut costs by 1bn euros and will also include closing a factory in Romania.
The chief executive of Nokia, Stephen Elop said: “With these planned changes we will emerge as a more dynamic, nimble and efficient challenger. We must take painful, yet necessary, steps to align our work force and operations with our path forward.”
The company’s shares have almost halved this year as Apple and Google continue to increase their share of the smart phone market. A statement released by the company said: “Nokia plans to close its manufacturing facilities in Cluj, Romania, by the end of 2011… and plans to close its (locations and commerce development) operations in Bonn, Germany and Malvern, US.” The factory closures are part of Nokia’s plans to “focus its feature phone manufacturing on those locations with optimal proximity to suppliers and key markets” in an effort to keep down costs.
Speaking about the closures, CCS Insight analyst Geoff Blaber said: “The scaling back of its manufacturing presence was sadly inevitable but it’s clear that Elop is not afraid of taking the tough decisions to ensure Nokia’s long-term survival.”
The restructuring is sorely needed as the company made a net loss of £323m from April to June of this year as opposed to a profit of nearly 230m euros over the same period the previous year.
Richard Windsor a technology specialist with Nomura believes these job cuts are only the first step. “When we look at Nokia’s profitability, obviously the company needed to do something,” he said. “Given their tone, it’s probably not the last. A lot of their volume is now…increasingly in Asia, it would make sense to relocate their manufacturing capacity from Romania to Asia.”
Factories in Mexico and Finland are currently being reviewed. According to a statement released by Nokia: “These factories are expected to continue to play a key role in serving European and North American smart phone customers.” However the statement added that they would shift the focus to software and sales pages, which could lead to further job cuts in 2012.