Nokia enacts hundreds of job cuts in research and development

Anssi Vanjoki

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Mobile telephone manufacturer Nokia announced on Tuesday that it was cutting hundreds of jobs in research and development in its Multimedia Business Group. In Finland up to 250 people could lose their jobs. Dismissal also looms over the heads of hundreds of Nokia employees in Germany.
      The move is part of Nokia's plans to bring down costs in research and development in the coming years.
      In November Nokia said that it would cut the proportion of R & D spending in its budget from the current 13% to 9-10% by the end of 2006. This would mean spending cuts of hundreds of millions of euros, unless the company's turnover increases.
     
The final number of dismissals could go down in mandatory negotiations on the arrangements between staff and management.
      Anssi Vanjoki, Executive Vice President of the multimedia unit, said that the decision was an unpleasant one.
      "These are the last kinds of decisions that anyone wants to make. Naturally those at the receiving end are very concerned about the situation."
     
Nokia's Multimedia Business Group designs wireless devices in which sound and graphics play an important role. Mobile televisions, music players, game phones, and camera phones are examples of their products.
      The unit's turnover is fairly modest in proportion to the massive research and product development costs. This is largely because many of the products are not expected to start generating income for some time.
      Camera phones are currently Nokia's best-selling product.
      In January - September last year, the result of the multimedia unit showed a profit of EUR 15 million. In 2003 the unit sustained losses of EUR 293 million during the same period.
     
The multimedia unit employs about 3,000 people worldwide, and about two thirds of them are in product development.
      About half of the group work in Finland. The job cuts will have their greatest effect on Oulu, where about 400 employees of the Nokia's multimedia unit work. Also in jeopardy are many jobs in Salo.
      Nokia will not say how much money it expects to save, but one analyst at Mandatum Bank expects the figure to be between EUR 75 and EUR 90 million a year.
      Cutting staff also involves costs of its own. The company plans to budget "tens of millions" of euros in the first three months of this year for severance pay and other similar costs.
     
The Nokia cutbacks were a slight disappointment for investors; the company's share price on the Helsinki Stock Exchange went down by 2.2 percent on Tuesday.
      The staff cutbacks are Nokia's first major action in trimming its research and development costs. Analysts expect similar moves in other units in the company.


Previously in HS International Edition:
  Nokia to cut R&D expenditure - expects to save hundreds of millions by 2007 (5.11.2005)

Links:
  Nokia press release 11.1.2005: Nokia's Multimedia unit to streamline its research and development activities

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