The downward spiral continues for Nokia with the announcement that it will slash 10,000 jobs, estimated to be around 19% of its worldwide workforce, by the end of 2013 as part of drastic measures to change its fortunes.
The jobs cuts will save the firm €1.6 billion ($2bn) by the end of next year and will result in the closure of a handset factory in Salo, Finland with a loss of 3,700 jobs. It will also result in the closure of research and development centers in Ulm, Germany, and Burnaby, Canada.
The layoffs are a stark reminder of the Finnish phone maker's precarious position and its dramatic change from its 1990's dominant position as the undisputed global leader in mobile phones, due to a host of poor business decisions, serious mishaps with its Symbian OS and strong competition from rivals.
"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength," said Stephen Elop, Nokia's CEO. "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 addition to this, the company told investors that its second quarter ending June 30 is likely to reveal larger than expected losses as they continue to struggle against the likes of Apple and Samsung. It will follow a 29% decline in revenue in the first quarter, and the third quarter also looks bleak with the CEO warning investors that the transition to Microsoft's Windows Phone mobile OS will continue to hurt earnings.
"It is an unfortunate but necessary action to streamline the business to ensure that it has the best chance of competing," said Pete Cunningham of Canalys, a UK-based research firm when summing up the Finnish firm's announcement. "Apple and Samsung are really turning the thumbscrews on the rest of the market. Nokia is having to work very hard to make its Lumia handsets attractive due to the lack of traction that Windows Phone has in the market today."
Nokia also announced it intends to sell luxury phone maker Vertu to private equity group EQT for a reported €200 million ($251m) in a bid to further reduce costs.