Nokia to axe 3,500 jobs and close factory

Nokia will axe 3,500 jobs and close a manufacturing plant in Romania, as the Finnish handset maker continued its evolution to cope with the growing impact of smartphones on its markets.

Nokia, the world’s largest maker of mobile phones by volume, said the closure of the factory in Cluj would result in 2,200 job losses, with a further 1,300 to be axed at its Location and Commerce division. The division includes Navteq, the digital mapping group, which had just under 6,000 employees when Nokia bought it for $8.1bn in 2007.

Nokia, which employs some 138,634 people, said there could be further job losses announced next year as it changes production at its factories in Salo, Finland, as well as in Hungary and Mexico. These will shift away from assembly and packing of smartphones to focus on customising phones for different markets. Details of any cuts are expected in the first quarter of 2012.

“We must take painful, yet necessary, steps to align our workforce and operations with our path forward,” said Stephen Elop, Nokia president and chief executive. “With these changes we will emerge as a more dynamic, nimble and efficient challenger.”

Manufacturing operations at Nokia’s Cluj factory, which makes low-end feature phones rather than smartphones, will be moved to Asia where feature phones are predominantly used. Nokia has factories in China, South Korea and India and is building a further facility in Vietnam.

The Cluj factory, which took seven months to build at a cost of $88m, was only opened in 2008 as a replacement for a plant in Bochum, Germany.

“The European market has shifted towards smartphones, whereas the feature phone market is predominant in Asia and we can get greater scale and proximity benefits by using our Asian factories in China and Korea,” said Nokia.

Nokia has struggled to produce smartphones to match Apple’s iPhone and devices featuring Google’s Android software, and the Finnish handset maker is trying to revive its fortunes by using Microsoft’s Windows Phone operating system rather than its own Symbian system.

Analysts view the launch as crucial to claw back market share from the increasingly dominant Android and Apple operating systems, which have left Nokia struggling in the premium smartphone market even though it is still a strong competitor in low- to mid-tier handsets.

It emerged this week that Nokia was working on a new, Linux-based operating system for lower-end phones, codenamed Meltemi. While Nokia would not comment on any future products, it confirmed that the company was keen to innovate in the low- to mid-tier area.

“We have a lot of activities under way around connecting the next billion mobile users,” Nokia said.

Thursday’s move is part of a plan announced in April to cut its operating expenses by €1bn over the next three years, which included the axing of 4,000 staff. The 3,500 job cuts at the Romania plant and at the Location and Commerce divisions are in addition to the earlier redundancies.

Nokia shares, which have fallen more than 40 per cent over the past 12 months, on Thursday edged up 2 cents, or 0.38 per cent, to €4.20.

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