Nokia announced a corporate realignment and cost cutting program aimed at refocusing its efforts on high-performance, end-to-end networks, expansion into new enterprise segments, building a standalone software business, and generating significant licensing revenues.
Specifically, Nokia aims to reduce of its annualized operating expenses and production overheads by EUR 700m by the end of 2020 compared to the end of 2018, of which EUR 500m is expected from operating expenses.
Cost savings will come from automation; process and tool simplification; significant reductions in central support functions; prioritization of R&D programs; a sharp reduction of R&D in legacy products; efficiency from further application of a common software foundation and innovative software development techniques; the consolidation of selected cross-company activities; and further reductions in real estate and other overhead costs.
Nokia said the cost cutting will entail a net reduction of employees globally but did not disclose the size of the expected cuts.
"Nokia has made considerable progress in executing on its strategy, with excellent momentum in providing high-performance end-to-end networks, targeting new enterprise segments and creating a standalone software business," said Rajeev Suri, President and CEO. "Our early progress in 5G is extremely strong, we continue to increase our investment in this critical technology, and our win rate for new deals suggests that we are in a very good competitive position."
"With the successful Alcatel-Lucent integration and cost-saving program soon to be behind us, we are taking steps to accelerate the execution of our strategy and sharpen our customer focus. We will also redouble our efforts to ensure that Nokia's disciplined operating model remains a source of competitive advantage for us, and that we maintain our position as the industry leader in cost management, productivity and efficiency. We noted earlier this year that we would need to take further cost actions in order to deliver on our 2020 guidance. Today, we are quantifying those actions and raising the certainty that we can meet those commitments," Suri said.
Highlights of the plan include:
- Creating a new Enterprise Business Group that consolidates a range of existing, fast-growing activities into one focused organization reporting directly to the President and CEO.
- Accelerating Nokia's strong momentum in 5G by sharpening the focus of the Mobile Networks Business Group to be on mobile radio products.
- Strengthening Nokia's capability to deliver industry-leading, fully-integrated and tested Cloud Core solutions by aligning both resources and accountability to the Nokia Software Business Group.
- Kathrin Buvac, who is currently Chief Strategy Officer for Nokia, has been nominated as President of Enterprise.
