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Nokia making ‘drastic cuts’

10,000 jobs, key plant; phone-maker’s stock nose-dives

Elop

– Nokia says it will slash 10,000 jobs and close plants as the ailing company fights fierce competition and gave a grim outlook for most of the year, causing its shares to plummet 18 percent to close at $2.30.

The Finnish cellphone maker also on Thursday announced personnel changes and said it has agreed to sell its luxury phone brand, Vertu.

The measures, aimed at additional savings of $2 billion by the end of next year will shut down research and development facilities in Ulm, Germany, and Burnaby, British Columbia.

Nokia said it will also close its main Finnish manufacturing plant in Salo, with 850 layoffs, but will keep its research and development center there.

Nokia Corp. updated its outlook, saying that heavy competition would continue to hit its smartphone sector in the second quarter, but to a “somewhat greater extent than previously expected” and that the downturn would continue in the third quarter.

Markets were disappointed, plunging Nokia shares to below 2.00 euros for the first time ever on the Helsinki Stock Exchange.

Sami Sarkamies, Nordea analyst in Helsinki, said Nokia’s scale of the cost cutting took many by surprise and might not help strengthen the company.

“When you make such drastic cuts you have to abandon a lot of things,” Sarkamies said. “It may be that they just can’t anymore afford to come up with innovative, new things.”

CEO Stephen Elop said the planned cuts were “a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength.”

The company has been struggling against fierce competition from Apple Inc.’s iPhone and other makers using Google Inc.’s popular Android software, including Samsung Electronics Co. and HTC of Taiwan. It is also being squeezed in the low end by Asian manufacturers making cheaper phones, such as China’s ZTE.

Last year, Nokia announced more than 10,000 layoffs, aimed at cutting operating expenses by $1.31 billion by 2013.

Thursday’s savings aims come on top of those.

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