TIDMNOKIA
Nokia Corporation
Stock Exchange Release
16 March 2021 at 9:35 EET
Nokia announces plans to reset its cost base to invest in future
capabilities
-- New business groups announce plans to reset their cost bases.
-- On a group level, this is expected to lower the company's cost base by
approximately EUR 600 million by the end of 2023. These savings will
offset increased investments in R&D, future capabilities and costs
related to salary inflation.
-- Nokia expects approximately EUR 600--700 million of restructuring and
associated charges by 2023.
-- The company maintains its 2021 outlook.
-- Planned restructuring is expected to result in an 80 000--85 000 employee
organization, over an 18--24-month period, instead of the approximately
90 000 employees Nokia has today.
Espoo, Finland -- Nokia's business groups today announce plans to reset
their cost bases and invest in R&D and future capabilities including 5G,
cloud and digital infrastructure, as well as other areas that will
benefit Nokia in the long-term.
In October last year the company announced a new operating model
designed to better position the company for changing markets and align
with customer needs. The new model is optimized for better
accountability and transparency, increased simplicity and improved
cost-efficiency.
"Nokia now has four fully accountable business groups. Each of them has
identified a clear path to sustainable, profitable growth and they are
resetting their cost bases to invest in their future," said Pekka
Lundmark, President and CEO.
"Each business group will aim for technology leadership. In those areas
where we choose to compete, we will play to win. We are therefore
enhancing product quality and cost competitiveness, and investing in the
right skills and capabilities," Lundmark continued.
Related to these plans, Nokia expects:
-- Lower cost base of approximately EUR 600 million by the end of 2023.
These savings will take place gradually and will offset increased
investments in R&D, future capabilities and costs related to salary
inflation. Additional long-term benefits that Nokia will action include
streamlining its portfolio and reducing site fragmentation.
-- Total restructuring and associated charges of approximately EUR 600--700
million, of which approximately 50% is expected in 2021, approximately
15% is expected in 2022, and approximately 35% is expected in 2023.
Additionally, Nokia continues to expect approximately EUR 500 million of
cash outflows related to its previous restructuring program.
-- These changes do not change Nokia's views on 2021.
These plans are expected to result in an 80 000--85 000 employee
organization over an 18--24-month period, instead of the approximately
90 000 employees Nokia has today. The exact number will depend on market
developments over the next two years.
"Decisions that may have a potential impact on our employees are never
taken lightly. Ensuring we have the right setup and capabilities is a
necessary step to deliver sustainable long-term performance. My priority
is to ensure that everyone impacted is supported through this process,"
said Lundmark.
Nokia's business groups have outlined the following actions:
-- Mobile Networks aims to be the indisputable top in wireless mobility
networks and associated services. To achieve this goal it will focus on
strengthening technology leadership and will further invest in 5G R&D. It
will also accelerate efforts to digitalize processes and tools across the
value chain.
It will streamline its portfolio and reduce investment levels in mature
or declining parts of the portfolio; continue to reduce site
fragmentation; reduce overlapping activities and drive further cost
efficiencies.
-- Cloud and Network Services' customers are shifting away from owning
products to consuming outcomes, delivered as-a-service from the cloud.
The business group's priorities and how it operates must align with this
shift.
As a result, Cloud and Network Services intends to align portfolios and
streamline service models; strengthen technology leadership by
refocusing R&D resources to emerging growth opportunities; streamline
operations and support functions and increase productivity through
reduced site fragmentation.
-- Network Infrastructure will remain largely unchanged although it will
increase its R&D investments and plan for new capabilities in order to
meet customer demand and support portfolio innovation. Additionally, by
fully realizing the cost efficiencies offered by Nokia's new operating
model it anticipates streamlining SG&A costs as a percentage of sales.
-- Nokia Technologies will remain largely unchanged. It will continue to
carefully manage costs to enable it to invest in future technologies and
maintain high levels of profitability.
Nokia's business groups will provide detailed updates on their future
strategies and financial outlook assumptions on Capital Markets Day on
18 March.
These changes are subject to local consultation requirements with
employee representatives and Nokia's social partners where applicable.
Media Enquiries:
Nokia Communications
Tel. +358 10 448 4900
Email:
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press.services@nokia.com
Investor Enquiries:
Nokia Investor Relations
Tel. +358 4080 3 4080
Email: investor.relations@nokia.com
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About Nokia
We create the critical networks and technologies to bring together the
world's intelligence, across businesses, cities, supply chains and
societies.
With our commitment to innovation and technology leadership, driven by
the award-winning Nokia Bell Labs, we deliver networks at the limits of
science across mobile, infrastructure, cloud, and enabling technologies.
Adhering to the highest standards of integrity and security, we help
build the capabilities we need for a more productive, sustainable and
inclusive world.
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www.nokia.com and follow us on Twitter @nokia.
FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its businesses are exposed to various
risks and uncertainties and certain statements herein that are not
historical facts are forward-looking statements. These forward-looking
statements reflect Nokia's current expectations and views of future
developments and include statements regarding: A) expectations, plans or
benefits related to our strategies, growth management and operational
key performance indicators; B) expectations, plans or benefits related
to future performance of our businesses (including the expected impact,
timing and duration of that impact of COVID-19 on our businesses, our
supply chain and our customers' businesses) and any future dividends
including timing and qualitative and quantitative thresholds associated
therewith; C) expectations and targets regarding financial performance,
cash generation, results, the timing of receivables, operating expenses,
taxes, currency exchange rates, hedging, cost savings, product cost
reductions and competitiveness, as well as results of operations
including targeted synergies, better commercial management and those
results related to market share, prices, net sales, income and margins;
D) expectations, plans or benefits related to changes in organizational
and operational structure; E) expectations regarding competition within
our market, market developments, general economic conditions and
structural and legal change globally and in national and regional
markets, such as China; F) our ability to integrate acquired businesses
into our operations and achieve the targeted business plans and benefits,
including targeted benefits, synergies, cost savings and efficiencies;
G) expectations, plans or benefits related to any future collaboration
or to business collaboration agreements or patent license agreements or
arbitration awards, including income to be received under any
collaboration or partnership, agreement or award; H) timing of the
deliveries of our products and services, including our short term and
longer term expectations around the rollout of 5G, investment
requirements with such rollout, and our ability to capitalize on such
rollout; I) expectations and targets regarding collaboration and
partnering arrangements, joint ventures or the creation of joint
ventures, and the related administrative, legal, regulatory and other
conditions, as well as our expected customer reach; J) outcome of
pending and threatened litigation, arbitration, disputes, regulatory
proceedings or investigations by authorities; K) expectations regarding
restructurings, investments, capital structure optimization efforts,
uses of proceeds from transactions, acquisitions and divestments and our
ability to achieve the financial and operational targets set in
connection with any such restructurings, investments, capital structure
optimization efforts, divestments and acquisitions, including our
current cost savings program; L) expectations, plans or benefits related
to future capital expenditures, reduction of support function costs,
temporary incremental expenditures or other R&D expenditures to develop
or rollout software and other new products, including 5G, ReefShark and
increased digitalization; M) expectations regarding our customers'
future actions, including our customers' capital expenditure constraints
and our ability to satisfy customer's needs and retain their business;
and N) statements preceded by or including "believe", "expect",
"expectations", "deliver", "maintain", "strengthen", "target",
"estimate", "plan", "intend", "assumption", "focus", "continue",
"should", "will" or similar expressions. These forward-looking
statements are subject to a number of risks and uncertainties, many of
which are beyond our control, which could cause our actual results to
differ materially from such statements. These statements are based on
management's best assumptions and beliefs in light of the information
currently available to them. These forward-looking statements are only
predictions based upon our current expectations and views of future
events and developments and are subject to risks and uncertainties that
are difficult to predict because they relate to events and depend on
circumstances that will occur in the future. Factors, including risks
and uncertainties that could cause these differences include, but are
not limited to: 1) our strategy is subject to various risks and
uncertainties and we may be unable to successfully implement our
strategic plans, sustain or improve the operational and financial
performance of our business groups, correctly identify or successfully
pursue business opportunities or otherwise grow our business; 2) general
economic and market conditions, general public health conditions
(including its impact on our supply chains) and other developments in
the economies where we operate, including the timeline for the
deployment of 5G and our ability to successfully capitalize on that
deployment; 3) competition and our ability to effectively and profitably
invest in existing and new high-quality products, services, upgrades and
technologies and bring them to market in a timely manner; 4) our
dependence on the development of the industries in which we operate,
including the cyclicality and variability of the information technology
and telecommunications industries and our own R&D capabilities and
investments; 5) our dependence on a limited number of customers and
large multi-year agreements, as well as external events impacting our
customers including mergers and acquisitions and the possibility of our
customers awarding business to our competitors; 6) our ability to
maintain our existing sources of intellectual property-related revenue
through our intellectual property, including through licensing,
establishing new sources of revenue and protecting our intellectual
property from infringement; 7) our ability to manage and improve our
financial and operating performance, cost savings, competitiveness and
synergies generally, expectations and timing around our ability to
recognize any net sales and our ability to implement changes to our
organizational and operational structure efficiently; 8) our global
business and exposure to regulatory, political or other developments in
various countries or regions, including emerging markets and the
associated risks in relation to tax matters and exchange controls, among
others; 9) our ability to achieve the anticipated benefits, synergies,
cost savings and efficiencies of acquisitions; 10) exchange rate
fluctuations, as well as hedging activities; 11) our ability to
successfully realize the expectations, plans or benefits related to any
future collaboration or business collaboration agreements and patent
license agreements or arbitration awards, including income to be
received under any collaboration, partnership, agreement or arbitration
award; 12) Nokia Technologies' ability to protect its IPR and to
maintain and establish new sources of patent, brand and technology
licensing income and IPR-related revenues, particularly in the
smartphone market, which may not materialize as planned, 13) our
dependence on IPR technologies, including those that we have developed
and those that are licensed to us, and the risk of associated
IPR-related legal claims, licensing costs and restrictions on use; 14)
our exposure to direct and indirect regulation, including economic or
trade policies, and the reliability of our governance, internal controls
and compliance processes to prevent regulatory penalties in our business
or in our joint ventures; 15) our reliance on third-party solutions for
data storage and service distribution, which expose us to risks relating
to security, regulation and cybersecurity breaches; 16) inefficiencies,
breaches, malfunctions or disruptions of information technology systems,
or our customers' security concerns; 17) our exposure to various legal
frameworks regulating corruption, fraud, trade policies, and other risk
areas, and the possibility of proceedings or investigations that result
in fines, penalties or sanctions; 18) adverse developments with respect
to customer financing or extended payment terms we provide to customers;
19) the potential complex tax issues, tax disputes and tax obligations
we may face in various jurisdictions, including the risk of obligations
to pay additional taxes; 20) our actual or anticipated performance,
among other factors, which could reduce our ability to utilize deferred
tax assets; 21) our ability to retain, motivate, develop and recruit
appropriately skilled employees; 22) disruptions to our manufacturing,
service creation, delivery, logistics and supply chain processes, and
the risks related to our production sites; 23) the impact of litigation,
arbitration, agreement-related disputes or product liability allegations
associated with our business; 24) our ability to re-establish investment
grade rating or maintain our credit ratings; 25) our ability to achieve
targeted benefits from, or successfully implement planned transactions,
as well as the liabilities related thereto; 26) our involvement in joint
ventures and jointly-managed companies; 27) the carrying amount of our
goodwill may not be recoverable; 28) uncertainty related to the amount
of dividends and equity return (if any) we are able to distribute to
shareholders for each financial period; 29) pension costs, employee
fund-related costs, and healthcare costs; 30) our ability to
successfully complete and capitalize on our order backlogs and continue
converting our sales pipeline into net sales; 31) risks related to
undersea infrastructure; and 32) the scope and duration of the COVID-19
impact on the global economy and financial markets as well as our
customers, supply chain, product development, service delivery, other
operations and our financial, tax, pension and other assets, and the
shape of the economic recovery following the pandemic as well as the
risk factors specified in our 2019 annual report on Form 20-F published
on March 5, 2020 under "Operating and financial review and
prospects-Risk factors" as supplemented by the form 6-K published on
April 30, 2020 under the header "Risk Factors" and in our other filings
or documents furnished with the U.S. Securities and Exchange Commission.
Other unknown or unpredictable factors or underlying assumptions
subsequently proven to be incorrect could cause actual results to differ
materially from those in the forward-looking statements. We do not
undertake any obligation to publicly update or revise forward-looking
statements, whether as a result of new information, future events or
otherwise, except to the extent legally required.
(END) Dow Jones Newswires
March 16, 2021 03:35 ET (07:35 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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