Nokia to Reset its Cost Base to Invest in Future Capabilities
Nokia’s business groups plans to reset their cost bases and invest in R&D and future capabilities including 5G, cloud and digital infrastructure, as well as other areas. In October last year the company announced a new operating model designed to position them for changing markets and align with customer needs. The new model is optimized for better accountability and transparency, increased simplicity and improved cost-efficiency.
“Nokia now has four fully accountable business groups. Each of them has identified a clear path to sustainable, profitable growth and they are resetting their cost bases to invest in their future,” said Pekka Lundmark, President and CEO. “Each business group will aim for technology leadership. In those areas where we choose to compete, we will play to win. We are therefore enhancing product quality and cost competitiveness, and investing in the right skills and capabilities,” added Lundmark.
Related to these plans, Nokia expects lower cost base of approximately €600 million by the end of 2023. These savings will take place gradually and will offset increased investments in R&D, future capabilities and costs related to salary inflation. Additional long-term benefits that Nokia will action include streamlining its portfolio and reducing site fragmentation.
The company also expects total restructuring and associated charges of approximately €600–700 million, of which approximately 50% is expected in 2021, approximately 15% is expected in 2022, and approximately 35% is expected in 2023. Additionally, Nokia continues to expect approximately EUR 500 million of cash outflows related to its previous restructuring program.
These plans are expected to result in an 80 000–85 000 employee organization over an 18–24-month period, instead of the approximately 90 000 employees Nokia has today. The exact number will depend on market developments over the next two years.
“Decisions that may have a potential impact on our employees are never taken lightly. Ensuring we have the right setup and capabilities is a necessary step to deliver sustainable long-term performance. My priority is to ensure that everyone impacted is supported through this process,” said Lundmark.