Nokia to shed 14,000 staff
October 19, 2023
Noki has announced that Q3 net sales declined 15 per cent y-o-y in constant currency (-20 per cent reported) as macroeconomic uncertainty and higher interest rates continue to pressure operator spending. Following the slump in sales Nokia has revealed plans to shed up to 14,000 jobs, saying “these actions will better position the company for longer-term growth and enable it to navigate the current market uncertainty”.
Nokia added it continues to expect full year 2023 net sales in the range of €23.2 to 24.6 billion with a comparable operating margin in the range of 11.5 per cent to 13 per cent assuming closure of outstanding deals in Nokia Technologies.
Pekka Lundmark, Nokia CEO, said in a press statement: “Our third quarter performance demonstrated resilience in our operating margin despite the impact of the weaker environment on our net sales. In the last three years we have invested heavily to strengthen our technology leadership across the business giving us a firm foundation to weather this period of market weakness.
We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialise without significant investments in networks that have vastly improved capabilities. However, given the uncertain timing of the market recovery, we are now taking decisive action on three levels: strategic, operational and cost. I believe these actions will make us stronger and deliver significant value for our shareholders.
First, we are accelerating our strategy execution by giving business groups more operational autonomy. Second, we are streamlining our operating model by embedding sales teams into the business groups and third, we are resetting our cost-base to protect profitability. We target between €800 million and €1,200 million in cost savings by 2026. These actions keep us on track to deliver our long-term target comparable operating margin of at least 14% by 2026.
In the third quarter we saw an increased impact on our business from the macroeconomic challenges that are pressuring operator spending, resulting in a 15% net sales decline in constant currency compared to the prior year. Network Infrastructure declined 14% due to weaker spending impacting IP Networks while Fixed Networks was impacted by the same challenge combined with customer inventory digestion. In Mobile Networks net sales declined 19% as 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. Cloud and Network Services proved more robust in the quarter with a 2% decline and continued to benefit from strong growth in the Enterprise Solutions business.
Considering the net sales decline, our comparable operating margin of 8.5% proved resilient due to our continued cost discipline and some additional other operating income in the quarter. Positively we saw a sequential improvement in our Mobile Networks gross margin as regional mix is starting to become more favorable along with continued improvements on product cost.
In Nokia Technologies we remain confident the business group will return to a net sales annual run-rate of EUR 1.4-1.5 billion as we work through the smartphone license renewal cycle and continue to grow in new areas.
We had a number of important product launches in the quarter as we continue to invest for technology leadership. In IP Networks, we announced our new FPcx routing silicon which helps us to extend the high-performance capabilities of our IP Networking silicon further across the network to provide a broader range of applications to customers. In Cloud and Network Services we launched our organically developed Network as Code platform enabling developers and service providers to accelerate the use and monetisation of 5G and 4G assets through network APIs. We have significant interest from operators globally and we have already signed four agreements.
Looking forward, while our third quarter net sales were impacted by the ongoing uncertainty, we expect to see a more normal seasonal improvement in our network businesses in the fourth quarter. Based on this and assuming we resolve the outstanding renewals impacting Nokia Technologies, we are tracking towards the lower end of our net sales range for 2023 and towards the mid-point of our comparable operating margin range.”