Nokia is set to eliminate between 9,000 and 14,000 jobs by the end of 2026, as the company aims to reduce expenses.

This decision comes as Nokia reports a 20% drop in sales between July and September. Slowing demand for 5G equipment in regions like North America has been a major contributing factor. Nokia, which currently employs around 86,000 people globally, plans to reduce costs by €800 million to €1.2 billion (£695 million to £1 billion) by 2026. This move reflects the impact of high inflation and interest rates on customer spending. While Nokia's CEO, Pekka Lundmark, acknowledges the need for substantial investments in advanced networks due to cloud computing and AI advancements, the uncertain market recovery has driven the company to take decisive cost-cutting action.

Nokia's plan is to quickly cut costs by €400 million in 2024 and €300 million in 2025, with expectations of an improved network business in the current quarter. The specifics of the job cuts and their geographical distribution are yet to be disclosed, leaving many employees anxious about their job security. Nokia refers to these cuts as a "necessary step to adjust to market uncertainty and protect our long-term profitability and competitiveness." Nevertheless, the company emphasizes its support for the affected employees and will decide on the timing and details of final job cuts based on the evolution of end market demand.

Nokia's Evolution from Phone Manufacturer to Telecom Equipment Specialist

Once a dominant mobile phone manufacturer, Nokia faced a significant setback when it underestimated the demand for internet-enabled touchscreen phones such as the iPhone and Samsung Galaxy, leading to a loss of its top position. The company sold its handset business to Microsoft, which later wrote off this acquisition. Nokia shifted its focus to telecom equipment, specializing in the software and hardware used in telecommunications, including physical and cloud infrastructure for calls and internet use. In 2020, it struck a deal with BT to become the largest equipment provider after Huawei was blocked from the UK's 5G networks.

5G Slowdown and the Telecom Industry's Challenges

Despite the promising future of the telecom industry, marked by high demand for its services, operators in the US and the EU have been cutting back on spending. This trend has posed challenges for 5G equipment manufacturers like Nokia and its Swedish rival, Ericsson. Both companies have tried to counterbalance this weakness by increasing sales to India, where 5G rollout has been slower. Ericsson, which reported a decline in sales, has also laid off thousands of employees, citing ongoing business uncertainties extending into 2024.

Tech Industry Job Cuts amid Economic Challenges

Nokia's cost-cutting measures are part of a broader trend in the tech industry. Various factors, including inflation and higher interest rates, have prompted both individual and business customers to reduce spending. Companies like Meta, Amazon, and X (formerly Twitter now owned by Elon Musk) have all implemented staff reductions. Nevertheless, the demand for tech workers remains strong. Job posting firm Zip Recruiter reports that 80% of tech employees who lost their jobs found new employment within three months.

These are challenging times for Nokia, as it grapples with the changing landscape of the telecom industry and economic uncertainties. While it takes necessary steps to maintain its competitiveness, the human impact of these job cuts cannot be overlooked.