Nokia, a global telecommunications giant, has announced significant job cuts as it grapples with falling profits due to weakening demand for its 5G equipment, particularly in North America. The move marks the latest in a series of layoffs in the technology sector as companies adjust to changing market dynamics following a pandemic-induced boom.
Nokia CEO Pekka Lundmark addressed the company’s challenges in a statement, stating, “In the third quarter, we saw an increased impact on our business from the macroeconomic challenges.” This impact has prompted Nokia to implement a cost-saving program aimed at reducing its workforce to as low as 72,000 employees, with an anticipated cost reduction of up to 1.2 billion euros ($1.14 billion) by 2026. The program will primarily target business areas including Mobile Networks, Cloud and Network Services, and corporate functions.
Lundmark emphasized the difficulty of such decisions, acknowledging that they directly affect their employees. Nokia’s profits for the third quarter stood at 133 million euros, representing a significant 69 percent drop from the same period the previous year. “The earnings were much weaker than expected, and the outlook is more uncertain. So it’s not looking that good in the short term for Nokia,” noted Atte Riikola, an analyst at equity analysis firm Inderes.
Despite the challenges faced during the third quarter, Nokia expressed optimism about an “improvement in our network businesses in the fourth quarter.” However, Riikola cautioned that Nokia’s estimates might face substantial downward revisions. “There’s a possibility for a negative profit warning,” he added.
In the highly competitive race for dominance in 5G networks, Nokia found itself in direct competition with Swedish rival Ericsson and China’s Huawei. The tough market conditions led to a 20 percent drop in Nokia’s sales, totaling 4.98 billion euros in the third quarter of 2023. Nokia had initially hoped that its 5G deployment in India would offset the slowdown in spending by North American telecom operators. However, this expectation fell short.
“We saw some moderation in the pace of 5G deployment in India, which meant the growth there was no longer enough to offset the slowdown in North America,” explained Lundmark.
5G technology, synonymous with fifth-generation mobile technology, holds the potential to facilitate lightning-fast video downloads and innovative applications like high-speed autonomous vehicles. Nevertheless, Nokia, along with Ericsson, reported a slowdown in investment by mobile network operators this year, primarily attributed to the global economic downturn.
Like many technology companies, Nokia experienced a surge in profitability during the COVID-19 pandemic, only to face the reality of downsizing as the industry experiences a slowdown. Nokia’s decision to cut jobs adds to the tally of tens of thousands of job cuts seen across the tech sector this year. In May, British telecom group BT announced plans to eliminate up to 55,000 jobs by the end of the decade, while tech giants Meta and Microsoft unveiled their intentions to reduce their workforce by as many as 10,000 employees this year. In January, online retail giant Amazon announced the elimination of over 18,000 jobs worldwide, and Google parent company Alphabet disclosed cuts affecting approximately 12,000 people.