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Nokia plans to cut thousands of jobs over the next couple of years as the networking company reorganizes its enterprise business and sharpens its focus on selling Nokia 5G mobile radio products and core cloud software to communications service providers.
Shortly after releasing third-quarter earnings this week, Nokia CEO Rajeev Suri told CNBC he planned to reduce headcount globally to reach annual cost savings of 700 million euros ($796 million) by the end of 2020. At the end of last year, the Finnish company had almost 103,000 employees.
"We don't have the headcount number yet, but we'll start to work on that and go country by country in terms of revealing those numbers at the right time," Suri said. Pressed for an estimate of job cuts, Suri added, "Well, there will be thousands."
Nokia's net sales in the third quarter were 5.46 billion euros ($6.3 billion), down 1% from the same period a year ago. Non-IFRS operating profit fell 27% year over year to 487 million euros ($554 million).
Focusing on Nokia 5G, enterprise business
To improve its finances, Nokia is restructuring its enterprise business, starting with the appointment of Kathrin Buvac as president of enterprise. Buvac, formerly chief strategy officer at Nokia, will report directly to Suri.
"On the enterprise side, our strategy has been to target high-growth, high-margin opportunities with a limited set of companies needing telco-grade networks," Suri said in a statement filed with the Securities and Exchange Commission. "Our strong results to-date have validated this approach, and we are taking steps to build even further on our progress."
Nokia typically sells to enterprises the size of Bank of America or companies with hyperscale data centers, said Frank Marsala, an analyst at Gartner. "[The reorganization] is meant to take things that Nokia is already doing and focus a business unit on it, not a broad expansion into Cisco, Arista and Juniper [Networks] territory."
Nokia is also making changes to its largest business, which is selling networking hardware and software to communications service providers. The company is aiming its resources at developing and selling Nokia 5G mobile radio products, Suri said. Also, Nokia is focusing on delivering "fully integrated and tested" software for telcos' and cable operators' cloud computing environments.
Nokia competes in the market for software-defined WAN (SD-WAN) and software-based data center networking through its company Nuage Networks. But Nuage, whose rivals include Cisco and Juniper, rarely makes it to the shortlist of U.S. companies, said Shamus McGillicuddy, an analyst at Enterprise Management Associates, based in Boulder, Colo.
"They have a good product, but they need more than a good product to be a threat to networking market leaders," McGillicuddy said. So far, Nuage's sales and marketing teams have failed to convince many U.S. companies to take a chance on a newcomer over their incumbent vendor.