In today’s Q2 earnings, Nokia noted declining revenues and overall unit sales in handsets, but also improving operating profits — cross currents that point to a company still doing quite a lot of cost cutting to right-size itself. And in its earnings statement, Nokia added one more detail indicating that this cutting exercise will continue to be played out in the quarters ahead: up to 440 jobs will be cut in its mobile phones division — that is, the legacy part of its devices business that does not include smartphones.
Asked for more elaboration on the statement, a spokesperson says the company is “certain” that the restructure, although “estimated to impact a maximum of 440 positions globally,” will in fact be “much smaller than 440.”
“The planning is starting today,” the spokesman said. “That means the consultations with the 440 employees who may be affected are getting underway as per the normal practice. So the exact net impact is not yet known, but what is certain is that the total number of job losses will be much smaller than 440.”
A Finnish newspaper notes that some 160 of the potential jobs impacted are in Nokia’s home market of Finland. In all, Nokia Group now has 92,874 employees, although that also includes over 55,000 in the Nokia Siemens Networks division alone. The devices division, which also includes smartphones, has just under 31,400 — 12,000 down on a year ago, and 200 down compared to Q1.
The statement from today’s earnings report, first spotted by blogger Stefan Constantine, notes that the purpose of this latest restructure is to take people out of legacy services and “deliver more innovation”:
“Nokia continuously works to improve the efficiency of its operations and its long-term competitive investments. In order to respond to industry dynamics, Nokia’s Mobile Phones business unit is planning to focus its product offering with the aim of improving product competitiveness and delivering more innovation. The planned restructure is estimated to impact a maximum of 440 positions globally, while also creating a number of new positions and offering possibilities for redeployment.”
It looks like this latest consultation with 440 employees will be the biggest round of job losses at the company since cutting 300 jobs and outsourcing 820 more in January of this year.
Once the world’s biggest mobile phone maker, Nokia lost that crown to Samsung last year and has been steadily declining since. In that sense, the cuts are part a strategy to bring the company down to size, while also positioning itself as a player for the future.
And they should come as no surprise, really. Nokia has a longer-term plan to reduce operating expenses to an annualized run rate of “approximately €3.0 billion [$4 billion] by the end of 2013” in its devices and services division.
Earlier today, when Nokia reported sales of $7.5 billion and an operating loss of $150 million in its quarterly earnings for Q2, it also noted that operating expenses in devices and services were €696 million ($911 million), down 36% from a year ago, and down 2% from last quarter. Lower end mobile phones are gradually declining in adoption as more people switch to smart devices, an adoption pace charted in the U.S. earlier today by Asymco. Nokia, for its part, has been looking to make more low-end smartphones to cater to these new smartphone adopters who may not be so inclined to buy high end devices.
As we pointed out earlier today, Nokia still makes more money from lower end phones than it does its smart devices, so a lot of focus, including staffing, is on continuing to make sure Nokia can get a good return on the investments it’s made into the smart devices division. So far, it has taken “longer than previously thought to recover,” CFO Timo Ihamoutila admitted in the earnings call today.