sommai - Fotolia
Nokia could cut about 11% of its workforce over the next two years, as the company realigns its spending to focus on supplying emerging technologies like cloud-based 5G infrastructure.
The company said Tuesday it will reduce the number of employees from 90,000 workers today to 80,000 to 85,000 by 2023. The reduction will amount to 5.6% to 11.1% of the workforce.
Nokia expects to reduce costs by about 600 million euros ($714 million) over the next two years. It also expects to incur 600 million euros to 700 million euros ($834 million) in restructuring charges.
"Ensuring we have the right setup and capabilities is a necessary step to deliver sustainable long-term performance," Nokia CEO Pekka Lundmark said in a statement. "My priority is to ensure that everyone impacted is supported through this process."
In October, the company restructured into four business groups: mobile networks, cloud and network services, network infrastructure and Nokia technologies. The latest job cuts stem from each group's growth strategy.
"Each of them has identified a clear path to sustainable, profitable growth, and they are resetting their cost bases to invest in their future," Lundmark said.
In part, the restructuring -- the second in less than 10 years -- focused on developing 5G infrastructure delivered through cloud providers.
On Monday, the company announced plans to provide its open and virtual radio access network (O-RAN and vRAN, respectively) on AWS, Microsoft Azure and Google Cloud. RAN is a critical component for connecting devices, such as mobile phones, PCs and tablets, to a service provider's core 5G network. It is also crucial to secure an enterprise's private 5G network to a carrier's core.
"As they restructure and focus on areas of strength, such as private networking and Open RAN, invariably, they are going to prune other parts of the business to get Opex aligned," said Will Townsend, an analyst at Moor Insights & Strategy.
Nokia's new cloud and network services business focuses on shifting the company from selling product licenses to offering its technology as a cloud service. The mobile networks group focuses on wireless networks, particularly 5G.
Other than cost-cutting, Nokia said its technology and infrastructure groups will not embark on significant technology shifts. The technologies group is responsible for patent and brand licensing and technology focused on specific verticals, such as digital media and healthcare.
Nokia has struggled since it acquired rival telecommunications equipment maker Alcatel-Lucent in 2016. Rather than strengthen its position in the market, Nokia has lost ground to Ericsson and Huawei. Since 2014, Nokia's revenue share fell from just over 20% to 15% in the first quarter of 2020, according to the Dell'Oro Group.