In response to a significant slump in profits and challenging market conditions, Finnish telecommunications giant Nokia (NYSE:NOK) Corporation is set to implement an aggressive cost reduction plan. This strategy includes laying off between 9,000 and 14,000 employees, which will reduce its workforce from the current 86,000 to between 72,000 and 77,000.
The move follows a third-quarter net profit drop of 45% to €304 million ($320 million), significantly below analysts' expectations of €399 million ($421 million). Sales also suffered a year-on-year decrease of 20%, falling to €4.98 billion ($5.25 billion) from €6.24 billion ($6.58 billion) the previous year. This was again below the LSEG poll estimate of €5.67 billion ($5.98 billion).
Nokia's financial instability has been attributed to macroeconomic factors, lower customer spending, and slowed deployment of 5G technology in India and North America. The company reported sluggish demand for its 5G equipment, particularly in North America.
The cost reduction plan aims to achieve savings of between €800 million ($842 million) and €1.2 billion ($1.26 billion) by the end of 2026. Nokia expects immediate benefits from this program, forecasting savings of at least €400 million ($421 million) by 2024 and an extra €300 million ($316 million) by 2025.
Despite these challenges, Nokia remains committed to its long-term operating margin target of at least 14%. CEO Pekka Lundmark expressed hope for a potential recovery in the fourth quarter, indicating that the company's future strategy aligns with these targets.
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