According to Inderes analyst Atte Riikola, Nokia’s large savings program is primarily due to the fact that operators’ investments have decreased.
Network equipment company Nokia’s earnings difficulties and savings demands are primarily the result of a weak market situation and not the company’s internal state, the analyst estimates Atte Riikola from analysis company Inderes to STT.
Nokia announced on Thursday that its comparable result in the third quarter of the year fell by 36 percent year-on-year to 424 million euros, and the company’s turnover also fell. At the same time, the company announced that it would launch a savings program that could lead to a reduction of up to 14,000 employees worldwide by the end of 2026. In Finland, the estimated need to reduce jobs is 447 so far.
Riikola says that the business of Nokia and other network equipment manufacturers is largely dependent on the investment budgets of telecom operators. Telecom operators, on the other hand, are affected by the current state of the economy, in addition to which, according to Riikola, the biggest investment spike for 5g devices is already behind us.
“Interest rates have risen and the economic outlook has weakened. It will forcefully affect operators’ investments,” says Riikola.
Nokian according to the interim report, the decline in its mobile phone network business was mainly due to the fact that business in North America was weaker than before.
According to Inderes’ Riikola, the North American market is important for network equipment companies because of its good profitability, and now investments there have quieted down. Riikola points out that a similar development was also seen in the results announcement of Nokia’s competitor, the Swedish Ericsson.
In a weakened market, according to Riikola, it is important for the network equipment company to start saving so that its profitability does not suffer too much. In addition, it is important to start saving so that it starts to show in the company’s product development.
“In Nokia’s market, it is forced to invest heavily in new technologies and product development. You have to have a strong financial position to be able to do it and that the operators trust that it will also be delivered in the next technology cycle, in the case of Nokia, the 6g cycle,” he says.
Network equipment company according to Riikola, has already changed its own organizational structure in recent years, which has already had personnel effects. The current CEO Pekka Lundmarkin According to Riikola, during this period, the structure has been changed and investments have been made in product development so that Nokia was able to catch up with its competitors in 5g products. Riikola estimates that in itself the company’s structure and products are fine.
“Now we just have to, when the market weakens, trim even more and make operations more efficient. It’s just an inevitable situation.”
Nokia anticipates that this year’s net sales will be around 23.2–23.6 billion euros.
Read more: Nokia trustee mourns lost jobs: “Joy is not at the top now”
Read more: Nokia plans to cut up to 14,000 jobs – cuts in Finland up to 447 people
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