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Nokia to cut jobs as it tries to catch up to rivals

Nokia to cut jobs as it tries to catch up to rivals

By Kevin J O'brien, New York Times | Updated: 7 June 2012 17:03 IST

Highlights

Nokia, the largest cellphone maker in the world, said on Thursday that it would cut 1,800 jobs as it tries to streamline operations and speed up delivery of new software and better Web services for its besieged smartphones.

Nokia, the largest cellphone maker in the world, said on Thursday that it would cut 1,800 jobs as it tries to streamline operations and speed up delivery of new software and better Web services for its besieged smartphones.

The job cuts, which amount to 3 per cent of the core work force, came as Nokia, the leader in basic cellphones and smartphones, reported third-quarter earnings of €529 million, or $742 million, a figure that was much better than expected.

Analysts surveyed by Bloomberg had predicted a profit of €182.5 million, after a loss of €559 million a year earlier.

Taking into account the non-controlling interests that Nokia holds in outside ventures, the profit was €322 million for the quarter.

Sales of Nokia smartphones rose 16 per cent, with strong demand from China, Latin America and North America. Overall sales rose 5 per cent in the period to €10.27 billion from €9.81 billion a year earlier.

In his first extensive public comments since being named president and chief executive, Stephen Elop said the job cuts were necessary as the cellphone industry goes through "a remarkably disruptive time."

Recent results demonstrate "that we must reassess our role in and our approach to this industry," said Mr Elop, the former head of Microsoft's business software division. Mr Elop, a Canadian, became Nokia's first non-Finnish chief executive on September 21.

Mr Elop said he intended to refocus Nokia to eliminate internal barriers that may have held up new features for the company's handsets. Three former Nokia executives have publicly blamed the company's formidable bureaucracy for stifling innovation.

"Nokia has been characterized as an organization where it's too hard to get things done, whether internally or externally," Mr Elop said. "But the board has vested in me the mandate to lead Nokia through this change. This marketplace is moving very rapidly and we as a company have to move even faster to ensure that we lead in this market environment."

While he said the company was not likely to make major announcements before an investor's conference in February, Mr Elop gave a glimpse into his leadership style, which appears to be marked by increased openness with investors and the press.

In the future, Mr Elop said, Nokia would no longer announce the introduction of new handsets until they were actually ready for delivery. The company seemed to create problems for itself this year by introducing the N8, its newest touchscreen device, and then finding itself forced to announced repeated delays for its delivery.

Along those lines, Mr Elop said Nokia would not be releasing its first phones using a new operating system it is developing with Intel, called MeeGo, until 2011. Nokia had previously suggested that the first MeeGo devices might be ready by Christmas.

Mr Elop said he also intended to make it a personal priority to bolster Nokia's market share in the United States, which slipped to just 8.1 per cent in April, according to comScore, a research firm based in Reston, Virginia. That is down from 35 per cent in 2002.

Nokia, which is based in Espoo, Finland, has seen its share price decline by more than half since Apple introduced its iPhone in 2007, a device that set a new standard for touchscreen maneuverability that Nokia has struggled to match.

Sales of Apple's iPhones are growing faster than Nokia's vastly larger but less profitable line-up. That has caused some analysts to speculate that Nokia may even be considering abandoning its attempts to improve its own operating system, Symbian, in favor of systems developed by Microsoft or Google, the maker of the Android operating system.

But during the conference call, Mr Elop appeared to rule out that possibility, saying that the decision to use a third-party operating system from a rival would leave Nokia little room to differentiate itself from the competition and would cut off new sources of profit. As margins on mobile phones are squeezed, makers are increasingly relying on new revenue from software and services sold on smartphones.

"When you consider the other alternatives, it is so far unclear to me how we could maintain differentiation" by using a third-party operating system, Mr Elop said.

Mr Elop described the job cuts, which will target software development and Web services, as a way to improve the agility and responsiveness of those departments, which have been criticized for allowing Apple, Google and others to take the lead in innovation. Nokia's Ovi Store trails far behind Apple's App Store in the number and types of applications.

In a related announcement, Nokia said it would use a new software application development tool called Qt to speed the creation of applications for its Symbian and MeeGo handsets.

One analyst said that Nokia's attempts to accelerate the development of its Symbian operating system and improve its Web business are key to defending its position.

"We have been waiting and waiting and waiting for Symbian to deliver something more compelling and this is a sign, I think, that Nokia is now willing to do anything it takes to make that happen," said Carolina Milanesi, an analyst at Gartner in London.

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