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Nokia job cuts become reality

Nokia says it will cut 1,700 jobs as demand for its products slows.

Nokia, the world's largest maker of cell phones, said Tuesday it will cut 1,700 jobs as demand for its products continues to wane.

The job cuts will affect workers who work in its Devices and Markets units as well as in its Corporate Development Office and global support functions. The company said in a statement that it plans to scale its sales, marketing and technology business units to match the slowing demand for its products.

The company is based in Finland and about 700 workers there will likely lose their jobs, according to a report by Bloomberg News. The company had about 128,445 employees at the end of 2008.

For the fourth quarter of 2008, Nokia's sales dropped 19 percent to $16.5 billion compared with the same period a year earlier. Its profit fell about 69 percent. Nokia is expecting sales to slide at least 10 percent in 2009.

To cope with the deteriorating economic situation, Nokia CEO Olli-Pekka Kallasvuo told investors earlier this year on its quarterly conference call that the company plans to slash annual costs by about $905 million by the end of 2010. Kallasvuo also acknowledged that the cost cutting would likely result in job cuts. The cuts announced Tuesday are part of these cost cutting measures.

In February, Nokia announced it would temporarily layoff 20 percent to 30 percent of workers at one manufacturing facility and close at least one R&D site.

Nokia isn't the only cell phone maker suffering during the economic downturn. Market research firm IDC predicts that all manufacturers will be affected in the coming year as fewer consumers buy new phones. The firm recently released a report saying that it expects volume of all mobile handsets to decline by 8.3 percent in 2009. And it expects sales of smartphones, like Apple's iPhone and Research In Motion's BlackBerry phones, to slow to about 3.4 percent growth. Smartphones have been a hot ticket for mobile phone makers over the past year. In December, IDC had predicted a growth rate for smartphones in 2009 to be about 8.7 percent.

But Nokia has lagged in the smartphone market. IDC and Gartner have each issued reports noting Nokia's decline. Gartner's smartphone report has Nokia's market share dipping from 49.4 percent in 2007 to 43.7 percent in 2008.

The fourth quarter was particularly tough for Nokia, according to Gartner. The firm notes that Nokia's smartphone sales declined by 16.8 per cent compared with the same quarter a year ago. Its share for the fourth quarter dipped to 40.8 percent compared with 50.9 percent for the fourth quarter of 2007.