NOK Nokia Corp

By Dominic Chopping

Nokia plans to cut thousands of jobs as it seeks to save up to 1.2 billion euros ($1.26 billion) amid a sharp downturn in spending by telecom operators.

The Finnish telecommunications company said it could cut as much as 16% of its workforce, with demand weakening in its network-infrastructure and mobile-networks businesses as customers face a tough macroeconomic environment beset by high inflation and rising interest rates. Operators are also working through stockpiles of inventory that were ordered during previous periods of tight-supply.

Nokia's comments mirror those made by Swedish rival Ericsson earlier this week, with the two Nordic telecom gear giants also having faced challenges from a shift in business mix from higher-margin 5G work in early-mover markets such as North America to lower-margin developing markets such as India.

However, after a period of frantic 5G roll-outs in India, work there is starting to level off.

"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," Nokia Chief Executive Pekka Lundmark said.

Sales at Nokia's network infrastructure business fell 14% in the quarter due to weaker customer spending while mobile networks sales fell 19% due to the moderating 5G deployments in India.

The company said it continues to believe in the mid- to long-term attractiveness of its markets, as cloud computing and artificial intelligence revolutions won't progress without significant investments in networks that offer vastly greater capabilities, but given the uncertain timing of a market recovery it is now taking steps to weather this period of market weakness.

Nokia is targeting between EUR800 million and EUR1.2 billion in cost savings by 2026 to keep it on track to deliver its long-term comparable operating margin target of at least 14% by 2026.

It will cut between 9,000 and 14,000 jobs from its total workforce of 86,000, with the exact figure dependent on how market demand evolves.

The company backed its sales and comparable operating margin targets but said it is now tracking toward the lower end of the sales range and toward the midpoint of the operating margin range.

Nokia targets full-year sales of between EUR23.2 billion and EUR24.6 billion and an operating margin of 11.5% to 13.0%.

The company posted a 45% fall in its third-quarter comparable net profit to EUR304 million as sales fell 20% to EUR4.98 billion.

Analysts polled by FactSet had expected comparable net profit of EUR399 million on sales of EUR5.67 billion.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

October 19, 2023 04:34 ET (08:34 GMT)

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