Nokia cuts thousands of jobs, plans focus on location services

Nokia’s slashing 10,000 jobs and closing production and research sites, in an effort to staunch its losses.

It’s also cut its earnings forecast for the second time this year, after four consecutive quarterly losses, and announced a management reshuffle.

Sites for the chop include Ulm, Germany and Burnaby, Canada, along with the company’s manufacturing facility in Salo, Finland. As many as 10,000 jobs – a fifth of the total – could disappear by the end of next year.

“These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” says president and CEO Stephen Elop.

“We do not make plans that may impact our employees lightly, and as a company we will work tirelessly to ensure that those at risk are offered the support, options and advice necessary to find new opportunities.”

In terms of strategy, the company now plans to focus on its Lumia smartphones, with new models at different prices. It also says it will invest more in location-based services.

“For some time now, Nokia has believed that its location capabilities could be an important differentiator,” says Mark Newman, chief research officer at Informa Telecoms & Media.

“But the question is whether mobile phone users or the developer community also see this as a major advantage that Nokia has over its competition.”

Nokia says it also plans to try and make its feature phone business more profitable.

“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” says Elop.

“We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions.”

Indeed it must. According to Informa research analyst Julian Jest, the company’s poor performance but relatively good products make it a prime target for a takeover.

“Facebook, for example, have plenty of cash to invest as a result of their recent IPO. In regards to its business in the mobile space, Facebook has not had much success, and may be considering new strategies, including developing their own phone,” he says.

“To avoid such threats, drastic action such as the announced cuts should give Nokia more time to build on its strengths and reverse its declining fortunes.”