Manufacturer admits losses will be much bigger than expected in Q2 as it makes a range of changes in an attempt to return it to profitability
Nokia has announced plans to cut 10,000 jobs globally by the end of 2013 and said that losses in the second quarter of this year will be greater than originally expected.
The Finnish handset manufacturer said it needs to improve its operating model by significantly reducing expenses in its mobile phone business, substantially reducing headcount and reducing its factory footprint, in order to return it to profitability as soon as possible.
Since Stephen Elop took over as the company’s CEO in 2010, Nokia has announced a total of 24,000 job loses when the company had 66,000 employees.
It will close research and development facilities in Ulm, Germany and Burnaby,Canada. It will also close manufacturing facilities in Salo, Finland.
Nokia said that during this quarter, ending June 30, competitive industry dynamics are negatively affecting the smartphone business unit to a somewhat greater degree than expected, and expects competitive industry dynamics to continue to negatively impact its mobile phone business in the third quarter.
It said it now expects operating margin within its mobile phone business in Q2 to be below the Q1 level of minus three per cent, which compares to the previous outlook of similar or below the first quarter level of minus three per cent.
Elop said: “These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Noia’s long-term competitive strength.
“We do not make plans that may impact our employees lightly, and as a company we will work tirelessly to ensure that those at risk are offered the support, options and advice necessary to find new opportunities.”
In its smartphone business, Nokia is planning to extend its strategy by broadening the price range of its Lumia handsets.
It said is location-based platform is expected to be another principal area of investment as the company plans to differentiate its Lumia handsets with leading services including navigation and visual search applications such as the recently announced Nokia City Lens.
The company also plans to extend its mapping technology to multiple industries to strengthen the platform and generate new revenue.
Nokia added that to improve competitiveness and profitability in its mobile phone division, it will aim to develop its Series 30 and 40 devices, and invest in feature phone technologies such as Nokia Browser, “aiming to be the world’s most data efficient mobile browser”.
Elop added: “We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia.
“We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions.”
Nokia has also announced a number of changes to its leadership team.
It has appointed Juha Putkiranta as executive vice president of operations, Timo Toikkanen as executive vice president of mobile phones, Chris Weber as executive vice president of sales and marketing, Tuula Rytila as senior vice president and chief marketing officer and Susan Sheehan as senior vice president of communications.
Putkiranta, Toikanen and Weber will join the leadership team on July 1.
Formerly, Putkiranta was senior vice president of supply chain, Weber was senior vice president of markets in Americas, and Toikkanen was vice president of business development, programs and special projects.
Rytila, who will report to Weber, was formerly senior vice president of portfolio and business management and Sheehan, who reports to Elop, was vice president of communications.
A number of other executives are also leaving the company. Executive vice president and chief marketing officer Jerri DeVard, executive vice president of mobile phones Mary McDowell and executive vice president of markets Niclas Savander will all step down from their roles, effective from June 30.