Nokia today announced a new strategy for reviving its profitability that will include dispensing with around 10,000 posts globally. The company is attempted to soothe investors’ nerves, promising to reduce its operating expenses from €5.32bn in 2010 to less than €3bn by the end of next year.
This year has been a tumultuous one for Nokia, with credit rating downgrades, a profit warning, and technical issues with newly released phone models, and a continuously falling share price.
The firm was once the unbeatable juggernaut of the mobile phone market, with its iconic 3310 handset and in-phone games (remember Snake?). But Nokia has suffered an inexorable decline in recent years thanks to tough competition from Apple’s iPhone and manufacturers using the Android operating system. In 2011, the firm reported a loss of €1.07bn on sales of €38.6bn. Shares in the company have slumped 70% since February 2011, and more than 90% since the iPhone was launched.
The company has already announced lay-offs totalling 24,000 since the new chief executive Stephen Elop took over in September 2010, but its fortunes have not improved. Nokia’s most recent model, the Lumia range of handsets, has enjoyed moderate success, but ironically, the company still makes more money licensing out patents to Apple for the iPhone than it does from selling anything in its own smartphone range.
Nokia’s statement also described the possibility of divesting certain products and services, the first of which to be confirmed is Vertu, its line of luxury diamond-encrusted mobile phones that offer on-call concierge services to wealthy individuals. The sale is rumoured to be on the verge of completion to Swedish private equity firm EQT for around €200m. Not a massive amount when Nokia is talking about trying to make saving in the billions, but no doubt a welcome chunk of cash.
Competition in the fast-paced smartphone industry was always going to threaten Nokia’s position as the pioneer of ‘calling, texting and gaming’ phones. But whether or not the company can pull itself back from the brink against giants like Apple…? Your guess is as good as ours…