Nokia To Slash 3,500 Jobs in Major Overhaul

Mobile phone firm Nokia (NYSE: NOK) said it would cut 3,500 jobs and review its operations in Finland, Hungary and Mexico as part of its cost-cutting measures.

The Finnish company said it would close its Cluj facility in Romania by the end of 2011 as it plans to shift production to its Asian facilities. The closure of the Cluj facility, which started its operations only in 2008, would affect about 2,200 jobs.

Nokia is also proposing changes to its Location & Commerce business, consolidating location assets including NAVTEQ and Nokia's social location services operations. The company plans to close its operations in Bonn, Germany and Malvern, U.S., impacting about 1,300 jobs.

Investors seem to have welcomed the move as shares were up 2 per cent in the pre-market hours on NYSE. Shares of Nokia closed Wednesday's regular trading session at $5.55.

The company also said it would review the long-term role of its manufacturing operations in Salo, Finland, Komarom, Hungary and Reynosa, Mexico, as it plans to gradually shift its focus to customer- and market-specific software and sales package customization.

Nokia, who will engage in discussions with employee representatives and stakeholders in these sites, expects to have more visibility into the possible headcount impacts in the first quarter of 2012.

Nokia is also starting consultations with employees in sales, marketing and corporate functions, in line with Nokia's earlier announcement on April 27 when it slashed 4,000 jobs, mainly in research and development.

We are seeing solid progress against our strategy, and with these planned changes we will emerge as a more dynamic, nimble and efficient challenger, said Stephen Elop, Nokia President and CEO. We must take painful, yet necessary, steps to align our workforce and operations with our path forward.

Separately, Nokia and Siemens would invest 500 million euros each in their joint venture, Nokia Siemens Networks, to further strengthen its financial position and set the stage for strategic flexibility, productivity and innovation in areas such as Mobile Broadband and related services.

Nokia and Siemens also appointed Jesper Ovesen as Executive Chairman of the Board of Nokia Siemens Networks, effective today. Nokia Siemens Networks, which makes wireless networking equipments, has been unprofitable for all but one quarter since it started in April 2007 and faces tough competition from Chinese rivals such as Huawei.

Nokia, once the worlds' leading mobile phone company, had been slow to adapt to the smartphone revolution in the U.S., which has been led by Apple's (Nasdaq: AAPL) iPhone and Google's (Nasdaq: GOOG) Android devices. Ever since the iPhone was launched in 2007, Nokia has witnessed a steady erosion of its smartphone market share.

The company's share price has also fallen by almost two-thirds since the iPhone was launched in 2007, wiping about 60 billion euros off the group's market capitalization. Nokia's insistence on designing and selling its devices without operator input, despite the strong presence of wireless carriers like Verizon (NYSE: VZ) and AT&T (NYSE: T) in the U.S., has further prevented it from gaining traction in the world's largest smartphone market.