Nokia Corp. NOK -1.92% plans to cut between 5,000 and 10,000 jobs over the next two years, a move it said would make it more competitive in the 5G equipment market against rivals Huawei Technologies Co. and Ericsson AB.
The job cuts would reduce the Finnish company’s current workforce of about 90,000 workers by as much as 11% and lower its cost base by around $700 million, the company said Tuesday. It said the savings would offset increased investment in research and development, among other areas.
Nokia is in the early stages of its second major restructuring program in less than a decade. After selling its once-dominant handset business, Nokia acquired French rival Alcatel-Lucent to focus on making cellular antennas, internet routers and other telecommunications equipment. But it has lost ground to Huawei and Ericsson because of its struggles to integrate Alcatel-Lucent, as well as a blunder in procuring computer chips that made its products more expensive and less desirable.
Nokia’s share of revenue in the total telecom-equipment market fell to 15% last year from 16% in 2019, according to research firm Dell’Oro Group, while Huawei increased its lead to 31% from 28% in the same period.
Last year Nokia replaced Chief Executive Rajeev Suri with Pekka Lundmark, who said the company would retreat from its previous plan of offering a range of products to focus on becoming a leader in 5G cellular technology. The company said Tuesday that it would streamline its product portfolio and continue to reduce costs. It plans to announce more details about its strategy Thursday.
Part of Nokia’s challenges stem from the company mistiming 5G rollouts around the world. Wireless carriers started buying 5G equipment earlier than anticipated and Nokia hadn’t yet secured enough cheap, efficient computer chips to go into its cellular equipment. Its rivals had. As a result, Nokia’s products were more expensive and less power efficient than those of its competitors.
In the U.S., Nokia last year lost a major 5G equipment contract with Verizon Communications Inc. to Samsung Electronics Co. It didn’t win any major cellular contracts in its longtime market of China, where Ericsson has become the leading foreign supplier of 5G-equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to become more competitive after the restructuring, especially as the U.S. campaign to curb Huawei has resulted in the industry leader losing market share outside China.
After missing out on the smartphone revolution, Nokia sold its cellphone business to Microsoft for $7 billion in 2013. The company then decided to double down on its remaining telecom-equipment business by buying Alcatel-Lucent for $17 billion in 2015, a move aimed at broadening its product offerings.
That turned out to be a mistake, analysts said. “Many of the problems that Nokia experienced over the past years stem from the Alcatel-Lucent deal,” Mr. Sarkamies said.
The deal left Nokia with two sets of equipment: One under the Nokia brand, and another under the Alcatel-Lucent brand. Nokia told its customers, which are wireless carriers, that it would replace the Alcatel-Lucent equipment with Nokia gear.
The company has said that process took more time and money than anticipated. Instead of investing in research-and-development as Huawei and Ericsson did, Nokia had to focus on a complex integration of two big companies Mr. Sarkamies said.
Write to Stu Woo at Stu.Woo@wsj.com
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