Nokia Plans 4,000 Job Cuts

By Diana ben-Aaron - Feb 8, 2012 7:33 PM GMT+0700

Nokia Oyj will eliminate 4,000 jobs, including at its oldest factory in Finland, as the mobile-phone maker shifts manufacturing to Asia, its largest market.

Handset production will end in Hungary, Mexico and Finland, where the plants will focus on final adjustments to finished phones, Espoo, Finland-based Nokia said today. Most of the production will move to existing factories in Beijing and Masan, South Korea, spokesman James Etheridge said.

The firings add to more than 10,000 job cuts Chief Executive Officer Stephen Elop has announced since Nokia linked up with Microsoft Corp. (MSFT) a year ago to fight a loss of smartphone market share to Apple Inc. (AAPL) Nokia’s first handsets based on Microsoft’s software, called Lumia, were assembled at a Compal Communications Inc. (8078) factory in Taiwan.

“They have to follow the suppliers,” said Mikko Ervasti, a Helsinki-based analyst at Evli Bank. “This is part of the actions Nokia has to take to reach the cost savings target of 1 billion euros by the end of 2013.”

The eliminations include 2,300 in Komarom, Hungary, 700 in Reynosa, Mexico, and 1,000 in Salo, Finland, Nokia spokesman Doug Dawson said.

Nokia added 0.4 cents to 3.90 euros at 2:10 p.m. in Helsinki, after rising as much as 1.4 percent. The shares have lost about 52 percent since the Microsoft partnership, cutting Nokia’s market value to 14.6 billion euros.

Oldest Factory

Apple, which introduced the iPhone in 2007, already assembles the smartphones in China. Nokia is building a plant in Vietnam to manufacture entry-level handsets and a site in Dongguan, China, makes about a third of all of the company’s output, according to Nokia’s website.

Nokia sold a factory in Romania earlier this year. Today's announcement marks the latest shift of consumer electronics manufacturing out of Europe, after Siemens AG and Royal Philips Electronics NV retreated from businesses ranging from mobile phones to televisions in the region.

Nokia would follow the model of its Bochum closure in Germany in 2008, where fired workers received 12 months of training for new jobs and Nokia spent 200 million euros on severance packages, Riku Aalto, chairman of the Finnish Metalworkers’ Union, said today.

Lumia Sales

Salo was spared from the earlier rounds of job cuts and outsourcing deals, which affected engineers working on the Symbian smartphone software Nokia is phasing out in favor of Microsoft’s Windows Phone.

Nokia’s smartphone sales declined 25 percent to 77.3 million units last year as customers shunned the Symbian line. Nokia introduced Lumia handsets running Windows Phone six weeks before the end of the year and said on Jan. 26 that it had sold “well over” 1 million of the devices “to date.”

The fact that Nokia had been eclipsed in smartphones gradually became apparent to shareholders in the three years after the 2007 introduction of the iPhone. Nokia lost more than 60 billion euros in market value before then-Microsoft executive Elop was appointed to take over in Sept. 2010. Nokia’s debt ratings were cut last year by Standard & Poor’s and Moody’s on concerns that a turnaround would take too long.

The Salo plant, established in 1979 and the oldest of the production plants listed on Nokia’s website, makes smartphones for European markets. Nokia said Dec. 1 it will start making the Lumia 710 at a plant in Manaus, Brazil.

Nokia, which gets more than 80 percent of its unit sales from low-end phones, has nine handset factories including the one under construction in Hanoi, according to its website.

Nokia Siemens Networks, the wireless-equipment venture with Siemens AG (SIE), announced 17,000 job cuts on Nov. 23 as it narrows its product lines in an effort to become profitable.

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net