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Nokia’s Struggles: Evaluating Effects of Job Cuts and Declining Sales

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Finnish telecommunications equipment company Nokia cites an increasingly challenging market as one of the primary motives behind its decision to reduce staff numbers by thousands in the coming years. The news broke at the same time as Nokia’s newly released quarterly results were reported, revealing a discouraging decline of 15% in sales year-on-year.

Mobile customers in North America have been identified as one of the primary factors in this downturn, however, the traditionally profitable Indian market is also dimming. Worryingly for Nokia, their fixed-line Network Infrastructure division is similarly underperforming.

Addressing the significance of these sobering third-quarter figures, Nokia CEO Pekka Lundmark stated, “In the third quarter, we saw an increased impact on our business from the macroeconomic challenges that are pressuring operator spending, resulting in a 15% net sales decline in constant currency compared to the prior year.”

According to Lundmark, the Network Infrastructure sector saw a tumble of 14% due to weaker spending on IP Networks, while the Fixed Networks side was impacted by these same issues, on top of customer inventory digestion. Mobile Networks, in turn, saw a decline in net sales of 19% due, in part, to the slowed pace of 5G deployment in India. Yet, despite such market challenges, Cloud and Network Services managed to hold their ground better, observing a more modest 2% decline.

Nokia now faces the unenviable task of restructuring, and the grim reality is that it will significantly cut jobs. The intention is to eliminate between 9,000 and 14,000 jobs by the close of 2026 in a bid to reduce annual costs by up to €1.2 million. It also appears that tasks related to salesforce allocation will primarily bear the brunt of these cuts, hinting where the bulk of job reductions will likely be implemented, particularly as R&D reportedly is to be unaffected.

However, all is not doom and gloom. Speaking on the prospect of future operations, Lundmark advised that “while our third-quarter net sales were impacted by the ongoing uncertainty, we expect to see a more normal seasonal improvement in our network businesses in the fourth quarter.”

As the market absorbed the news of the impending layoffs, Nokia’s shares fell by 3%. Although the announcement might appear to wane investor confidence, it’s notable that Nokia’s actions may actually have helped to stem a more substantial plunge in share value. And given the stark reality of Nokia’s market surroundings, it would be hard to dispute the necessity of such cost-cutting measures.

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