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https://content.fortune.com/wp-content/uploads/2023/10/GettyImages-1247671440-e1697711960920.jpg?w=2048Nokia dominated the world of phones in the early 2000s when landlines and mobile “chocolate bar” and flip phones were found in almost every household, and smartphones were nothing but a distant dream. The Finnish telecom company has since lost its spot among Samsung Galaxys, Apple iPhones and other high-tech phones, and carved out a niche for itself in the network equipment and licensing space instead.
Now, after experiencing a dramatic fall in third-quarter profits, Nokia said that it would undertake cost-cutting efforts including laying off as many as 14,000 people to “address the challenging market environment.”
“The most difficult business decisions to make are the ones that impact our people,” Nokia CEO Pekka Lundmark said in a statement. “Resetting the cost-base is a necessary step to adjust to market uncertainty and protect our long-term profitability and competitiveness.”
Nokia didn’t respond to questions on the departments these layoffs would target.
The sweeping layoffs were announced along with the company’s third-quarter results—profits for the period plunged 69% to €133 million ($140 million) while net sales fell by 20% year-on-year.
Spending pullback
Nokia, one of the largest telecommunications equipment companies, is facing the pinch of macroeconomic volatility and higher interest rates as mobile operators pull back from spending. The slowdown in North America specifically was significant, Nokia noted, as customers tightened their purse strings.
In response to the mounting pressures, Nokia said it planned to slash up to €1.2 billion ($1.26 billion) in costs by 2026 compared to current levels. Nokia’s shares have fallen about 30% since the start of the year.
“We are now beginning the process of consultation on initial reductions. The program to lower cost base is a 3 year program and the timing and detail of final reductions will be decided only after careful consideration, and will depend on the evolution of end market demand,” a Nokia spokesperson told Fortune in an emailed statement.
Turmoil at the telecom twins
Nokia and its rival, Sweden-based Ericsson, issued warnings in July regarding weak profit growth. Ericsson reported a loss of $2.84 billion for the third quarter earlier this week, and said it expected pains in the mobile network business to stretch into 2024.
“We are not going to guide for 2024 specifically, because the timing of the recovery of the market is uncertain,” Ericsson’s CFO Carl Mellander told Reuters on Tuesday.
While Nokia has echoed sentiments of a turbulent time ahead for the mobile network industry, Lundmark remains optimistic about Nokia’s business in the long run.
“We continue to believe in the mid to long term attractiveness of our markets but we are not going to sit and wait and pray that the market will recover anytime soon,” Lundmark said, according to Reuters. “We simply don’t know when it will recover.”
New but old Nokia
Nokia’s history goes back to 1865—and at the time, it had nothing to do with phones or communications, but instead took off as a paper mill. It eventually entered the cable and electronics business, before setting up radio telephone operations in 1979. By 1998, Nokia was a front-runner in the phone market, becoming almost synonymous with the mobile revolution.
Nokia was a clear leader in the space for close to a decade before it started seeing stiff competition from the likes of Apple. It quickly began to lose market share to its rivals in the years leading up to Microsoft’s purchase of its handset business for €5.44 billion in 2013.
Nokia long left the phone-making business, although that’s what it’s often remembered for. Now, the company still remains in the telecoms industry but in a different capacity. In an effort to rebrand, the company in February 2023 unveiled a new logo for today’s version of Nokia: one that specializes in telecom networks.
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