Finnish networking company Nokia plans to cut between 9,000 and 14,000 jobs through 2026. The company says that it considers this necessary due to declining demand for 5G equipment, which is not expected to recover quickly.
A maximum of 16 percent of Nokia’s current employees will be laid off in the next three years, it appears a press release from Nokia announcing the ‘strategic and operational changes’. The network company currently has approximately 86,000 employees and this should increase to between 72,000 and 76,000 by the end of 2026. The company expects to ultimately save between 800 million and 1.2 billion euros. It is not clear where exactly the layoffs will occur, but the company wants to leave the research & development department intact as much as possible, says CEO Pekka Lundmark to Reuters.
The reason for the mass layoffs is the declining demand for 5G equipment. Lundmark told Reuters that in its largest market, North America, net sales of 5G equipment fell 40 percent in the past quarter from a year earlier. Many companies in Europe are also said to be cutting back on 5G equipment. To somewhat compensate for declining revenues in these markets, Nokia has recently focused more on India, a market where demand is higher, but margins are much smaller. The company’s quarterly profit has always been lower than expected in the past year.
According to Lundmark, the industry needs to invest more in mid-band equipment to keep up with the growth in data traffic. Many telecom providers currently still use low frequency bands because it is cheaper, claims the Nokia CEO. Only when midband frequencies become the norm can the market recover, according to Lundmark. “We continue to believe in the medium to long term, but we are not going to wait and pray that the market will recover quickly,” the CEO said. It has therefore been decided to take measures now to maintain profits.
Despite the disappointing demand for 5G equipment, the company expects demand for networking equipment to rise in the current quarter, partly due to cloud computing and AI. Nokia has not lowered its outlook for the entire year, Reuters writes.