Mobile phones maker Nokia Corp. (NOK: Quote) announced Thursday a new set of restructuring actions, which include cutting 10,000 jobs globally by the end of 2013 and divesting some non-core assets. The struggling Finnish company expects additional restructuring charges of 1 billion euros next year. It also raised the cost reduction target for its device-making unit, aiming to return the business to sustainable profitable growth.
The handset maker, which is fast losing market share to competitors, also lowered its second-quarter operating margin forecast for the devices division, stating "competitive industry dynamics are negatively affecting the Smart Devices business unit to a somewhat greater extent than previously expected."
Under the announced changes, Nokia plans to reduce certain research and development projects, and close or consolidate facilities in the devices business. It expects these measures to reduce operating expenses in the unit to an annualized run rate of about 3 billion euros by the end of 2013, compared to previous forecast of more than 1 billion euros.
In line with its plan to divest non-core assets, Nokia has agreed to sell its luxury mobile phones business Vertu to European private equity firm EQT VI. The terms were not disclosed. The company expects to close the deal during the second half of 2012, after which, it will retain a 10 percent minority shareholding.
Stephen Elop, Nokia's president and CEO, said, "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 has already recorded charges of 900 million euros related to previously-announced restructuring activities.
The company said it now expects second-quarter adjusted operating margin in Devices & Services business to be below the first quarter level of negative 3 percent. This is lower than the previous outlook of margins coming similar to or below the first quarter levels.
Further, Nokia cautioned that the negative impact of competitive industry dynamics experienced in the second quarter would continue into the third quarter.
As part of its renewed strategy, the company plans to invest strongly in Lumia smartphones, to invest in location-based services, and to improve the competitiveness and profitability of its feature phone business.
In line with this, Nokia plans to acquire imaging specialists as well as all technologies and intellectual property from Sweden-based Scalado AB. The terms were confidential. Scalado currently has imaging technology on more than 1 billion devices. The deal is expected to close during the third quarter of 2012.
Nokia also shuffled its management team by appointing Juha Putkiranta as executive vice president of Operations, Timo Toikkanen as executive vice president of Mobile Phones, Chris Weber as executive vice president of Sales and Marketing, Tuula Rytila as senior vice president of Marketing and Chief Marketing Officer and Susan Sheehan as senior vice president of Communications.
In Helsinki, Nokia shares are currently trading at 2.03 euros, down 0.20 euros or 8.90 percent, on a volume of 27 million shares.
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by RTT Staff Writer
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