Nokia to cut another 3,500 jobs

The latest cuts are part of a broader transformation as the beleaguered company looks to trim bloat built up over years of stagnation in the wireless industry.

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Roger Cheng
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Nokia's headquarters in Espoo, Finland. Nokia

Nokia said today it would cut another 3,500 jobs as the handset giant continues to seek ways to lower its operating costs to run more efficiently.

The Finnish company will close a manufacturing facility in Cluj, Romania, and reduce workers in its supply chain operations, accounting for a loss of 2,200 employees. It will also cut 1,300 workers in its commerce and location business, which was made up of its Navteq operations and Nokia's social location services.

The cuts come on top of its initial wave of layoffs announced in April, slashing 4,000 jobs and transferring another 3,000 to consulting firm Accenture. As with the previous layoffs, the job cuts will take effect by the end of next year.

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The cuts are part of a broader transformation of Nokia as it looks to cut some of the company's bloat built up over years of stagnation in the wireless industry. Chief Executive Stephen Elop has put his hopes on a turnaround on the embrace of Microsoft's Windows Phone platform, parting from the company's own legacy Symbian operating system. The company also set a goal of reducing operating expenses for devices and services by 1 billion euros, or $1.46 billion, for 2013 compared with 2010.

"We must take painful, yet necessary, steps to align our workforce and operations with our path forward," Elop said in a statement today.

Wall Street applauded the effort as beneficial to the company in the long run.

"We believe these announcements indicate the important changes CEO Stephen Elop is helping implement in order to make Nokia more competitive longer term," said T. Michael Walkley, an analyst at Canaccord Genuity. He added the steps were necessary for the company to survive.

While the rest of the wireless industry has shifted most of its business toward smartphones, Nokia still has a hefty presence in basic phones. As a result, it needs to reduce the costs in those areas as it makes its own transition to more profitable smartphones.

Nokia opted to close the Cluj facility because it plans to lean more heavily on its factories in Asia, which are closer to key suppliers and markets. The company also plans to make cuts in its facilities in Salo, Finland; Komarom, Hungary; and Reynosa, Mexico. While the factories will continue to serve North American and European smartphone customers, Nokia plans to shift their focus to a customer and market-specific software and sales strategy. Cuts at those facilities are scheduled to occur next year.

On the location and commerce side, Nokia said its plans to merge the Navteq business with the social location services operations allowed it to cut some workers. The company said it plans to focus the business in Berlin, Boston, Chicago and other supporting sites, but plans to close its operations in Bonn, Germany and Malvern, Ark.

The company said it is in talks with employees at its sales, marketing and corporate functions regarding the layoffs.

Nokia is essentially in a holding pattern over the past few months as it works to introduce its first Windows Phone, expected later this year. In the meantime, the company continues to churn out Symbian phones, which have never been popular in the U.S. despite wide adoption elsewhere in the world.

Updated at 7:16 a.m. PT: to add a comment from an analyst.