Nokia plans 10,000 layoffs, cuts second-quarter outlook

Company says the layoffs are needed to "ensure Nokia's long-term competitive strength."

Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
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Nokia CEO Stephen Elop has some serious work ahead of him.
Nokia CEO Stephen Elop has some serious work ahead of him. Stephen Shankland/CNET

Nokia will cut 10,000 positions by the end of 2013, the company announced today.

The layoffs are part of a strategy on Nokia's part to "rescale" its operation. In doing so, it plans to close facilities in Ulm, Germany and Burnaby, Canada; consolidate certain manufacturing operations; and streamline its IT, corporate, and support functions.

"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Nokia CEO Stephen Elop said today in a statement. "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."

Nokia had 122,100 employees at the end of March, including 68,600 at Nokia Siemens Networks.

The layoff announcement comes seven months after the decision to slash 17,000 jobs by 2013 at Nokia Siemens Networks.

But that was just part of the bad news. The company also said that "competitive industry dynamics" in the mobile market are negatively affecting its operation this quarter even more than anticipated. Therefore, it has slashed its Devices & Services operating earnings margin outlook for the second quarter to below negative 3 percent. During the first quarter, Nokia's margin was negative 3 percent, and it anticipated about the same for the second quarter.

Still, that's a short-term issue. And according to Nokia, it has a plan to handle its long-term prospects. The key elements of the strategy include investing heavily in its Lumia line of Windows Phone-based smartphones, improving the "competitiveness and profitability" of feature phones, and investing in location-based services.

"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," Elop said. "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."

Nokia expects the layoffs and consolidation to tally annualized savings of about 3 billion euros ($3.77 billion) by the end of 2013.

The people leading that charge have also changed. Nokia said today that Juha Putkiranta has been appointed executive vice president of operations, Timo Toikkanen will serve as executive vice president of Mobile Phones, and Chris Weber has been tapped as executive vice president of sales and marketing. A host of other executives also were named to new positions. Mary McDowell, Nokia's former executive vice president of Mobile Phones has stepped down, effective June 30.

Nokia, which has been struggling heavily over the last several quarters, said the moves today will help it grow. However, investors don't seem so convinced. In pre-market trading today, Nokia shares are down 10 percent to $2.51.

This story has been updated throughout the morning.