Nokia on Thursday announced a number of moves as it cut second-quarter guidance and upped its bet on Windows Phone, which has yet to help slow a slide that saw the struggling vendor lose nearly $3 billion over the past two reported quarters. Nokia lost $1.2 billion in the fourth quarter last year and another $1.7 billion in the first quarter as the company attempted to regain its footing in an industry that passed it by several years ago. The vendor has shed thousands of jobs recently, and on Thursday Nokia announced it will lay off 10,000 more workers between now and the end of 2013 as it reshuffles a number of executives. Nokia said it expects these new restructuring efforts to cost €1 billion on top of the €900 million tied to its previous restructuring plans. At the same time, Nokia announced it sold its luxury Vertu line to private equity firm EQT, though it will keep a 10% stake, and it has acquired Swedish software firm Scalado AB in an attempt to strengthen its Windows Phone service portfolio. Nokia’s related press releases follow below.
Nokia sharpens strategy and provides updates to its targets and outlook
Company announces targeted investments in key growth areas, operational changes and significantly increased cost reduction target
Company lowers Devices & Services outlook for the second quarter 2012
Stock exchange release
June 14, 2012 at 9.30 (CET+1)
Espoo, Finland – Nokia today outlined a range of planned actions aimed at sharpening its strategy, improving its operating model and returning the company to profitable growth. While planning to significantly reduce its operating expenses, Nokia remains focused on the unique experiences offered by its smartphones and feature phones, including an increased emphasis on location-based services.
Nokia’s strategy is about delivering great mobile products that sense the world. Nokia plans to:
- Invest strongly in products and experiences that make Lumia smartphones stand out and available to more consumers;
- Invest in location-based services as an area of competitive differentiation for Nokia products and extend its location-based platform to new industries; and
- Improve the competitiveness and profitability of its feature phone business.
To execute this strategy, Nokia is making changes to its management team by tapping into the strong leadership bench at the company.
To support this period of transition, Nokia intends to improve its operating model by significantly reducing its Device & Services operating expenses, substantially reducing its headcount and reducing its factory footprint. As a result, Nokia intends to return to sustainable non-IFRS operating profitability in Devices & Services as soon as possible.
“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” said Stephen Elop, Nokia president and CEO. “We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions.”
In Smart Devices, Nokia plans to extend its strategy by broadening the price range of Lumia and continuing to differentiate with the Windows Phone platform, new materials, new technologies and location-based services. In line with this strategy, Nokia today announced the planned acquisition of assets from Sweden-based Scalado, which currently has imaging technology on more than 1 billion devices. This acquisition is aimed at strengthening Nokia’s imaging assets.
Nokia’s location-based platform is expected to be another principal area of investment as Nokia plans to differentiate its portfolio of Lumia smartphones with leading location-based services including navigation and visual search applications such as the recently announced Nokia City Lens. Additionally, the company plans to extend its mapping technology to multiple industries to strengthen the platform and generate new revenue.
In Mobile Phones, Nokia intends to improve its competitiveness and profitability. Nokia aims to further develop its Series 40 and Series 30 devices, and invest in key feature phone technologies like the Nokia Browser, aiming to be the world’s most data efficient mobile browser. Early results of this innovation can be found in Nokia’s latest Asha feature phones which offer a full-touch screen experience at lower prices.
Operational changes and updated cost reduction target
Balancing its investment priorities, Nokia plans to rescale the company by making additional reductions in Devices & Services. Nokia plans to pursue a range of planned measures including:
- Reductions within certain research and development projects, resulting in the planned closure of its facilities in Ulm, Germany and Burnaby, Canada;
- Consolidation of certain manufacturing operations, resulting in the planned closure of its manufacturing facility in Salo, Finland. Research and Development efforts in Salo to continue;
- Focusing of marketing and sales activities, including prioritizing key markets;
- Streamlining of IT, corporate and support functions; and
- Reductions related to non-core assets, including possible divestments.
As a result of the planned changes announced today, Nokia plans to reduce up to 10,000 positions globally by the end of 2013. Nokia is beginning the process of engaging with employee representatives in accordance with country-specific legal requirements.
“These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” added Elop. “We do not make plans that may impact our employees lightly, and as a company we will work tirelessly to ensure that those at risk are offered the support, options and advice necessary to find new opportunities.”
Taking into account these planned measures the company now targets to reduce its Devices & Services non-IFRS operating expenses to an annualized run rate of approximately EUR 3.0 billion by the end of 2013. This is an update to Nokia’s target to reduce Devices & Services non-IFRS operating expenses by more than EUR 1.0 billion for the full year 2013, compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.35 billion. This means that in addition to the already achieved annualized run rate saving of approximately EUR 700 million at the end of first quarter 2012, the company targets to implement approximately EUR 1.6 billion of additional cost reductions by the end of 2013.
As part of these planned changes, Nokia will closely assess the future of certain non-core assets. In line with this, Nokia today announced plans to divest Vertu, its luxury mobile phones business to EQT VI, a European private equity firm.
Renewed leadership team
Nokia also announced today in a separate press release a number of changes to its senior leadership. Nokia announced that it has appointed Juha Putkiranta as executive vice president of Operations; Timo Toikkanen as executive vice president of Mobile Phones; Chris Weber as executive vice president of Sales and Marketing; Tuula Rytila as senior vice president of Marketing and Chief Marketing Officer; and Susan Sheehan as senior vice president of Communications. Putkiranta, Toikkanen and Weber will join the Nokia Leadership Team effective July 1, 2012.
Jerri DeVard steps down as chief marketing officer; Mary McDowell steps down as executive vice president of Mobile Phones; and Niklas Savander steps down as executive vice president of Markets. DeVard, McDowell and Savander will all continue in advisory roles through the transition of their roles; however, they step down from the Nokia Leadership Team effective June 30, 2012.
Financial impact and outlook for Devices & Services
Nokia expects further charges of approximately EUR 1.0 billion relating to restructuring activities in Devices & Services by the end of 2013 in connection with its updated Devices & Services operating expense target. This is in addition to cumulative charges of approximately EUR 900 million recognized as of the end of first quarter 2012 in connection with previously announced restructuring activities. By the end of the first quarter 2012, Nokia had cumulative restructuring related cash outflows of approximately EUR 450 million. From the second quarter 2012 onwards, Nokia expects restructuring related cash outflows to be approximately EUR 650 million in 2012 and approximately EUR 600 million in 2013. Out of the total expected charges relating to restructuring activities of EUR 1.9 billion, Nokia expects non-cash charges to be approximately EUR 200 million.
These cost reduction measures are designed to return Nokia’s Devices & Services business to sustainable non-IFRS operating profitability as soon as possible.
During the second quarter 2012, competitive industry dynamics are negatively affecting the Smart Devices business unit to a somewhat greater extent than previously expected. Furthermore, while visibility remains limited, Nokia expects competitive industry dynamics to continue to negatively impact Devices & Services in the third quarter 2012. Nokia now expects its non-IFRS Devices & Services operating margin in the second quarter 2012 to be below the first quarter 2012 level of negative 3.0%. This compares to the previous outlook of similar to or below the first quarter level of negative 3.0%.
“Nokia is significantly increasing its cost reduction target for Devices & Services in support of the streamlined strategy announced today,” said Timo Ihamuotila, executive vice president and CFO. “With these planned actions, we believe our Devices & Services business has a clear path to profitability. Nokia intends to maintain its strong financial position while proceeding aggressively with actions aimed at creating shareholder value.”
Nokia announces executive changes; renews Leadership Team
Stock exchange release
June 14 at 9.30 (CET + 1)
Espoo, Finland – Nokia today announced that it has appointed Juha Putkiranta as executive vice president of operations; Timo Toikkanen as executive vice president of Mobile Phones, Chris Weber as executive vice president of sales and marketing; Tuula Rytila as senior vice president and chief marketing officer; and Susan Sheehan as senior vice president of communications. Putkiranta, Toikkanen and Weber also will join the Nokia Leadership Team effective July 1, 2012.
Formerly, Putkiranta was senior vice president, supply chain; Weber was senior vice president Markets, Americas, and Toikkanen was vice president, business development, programs and special projects.
Rytila, who will report to Weber, was formerly senior vice president of portfolio and business management, and Sheehan, who reports to Elop, was vice president of communications.
Nokia also announced the following executives are stepping down from the Nokia Leadership Team effective June 30, 2012 to pursue other opportunities outside of Nokia: Jerri DeVard, executive vice president and chief marketing officer; Mary McDowell, executive vice president of Mobile Phones; and Niklas Savander, executive vice president of Markets.
DeVard, who joined the company in January 2011, led Nokia’s marketing and brand management and served as a member of the Nokia Leadership Team.
McDowell has held a number of senior management positions at Nokia, including serving on the NAVTEQ board of directors, and most recently led Nokia’s global mobile phones business unit. She has served as a member of the Nokia Leadership Team since joining the company in 2004.
Since 1997, Savander has held a number of senior management positions at Nokia and Nokia Networks, including serving on the NAVTEQ Board of Directors and the Nokia Siemens Networks Board of Directors. Most recently, Savander led Nokia’s sales, marketing, supply chain, manufacturing operations and information technology teams and has served as a member of the Nokia Leadership team since 2006. Savander also will step down from the Nokia Siemens Network Board of Directors, effective June 30, 2012.
DeVard, McDowell and Savander will serve as senior advisors to Nokia through the transition of their roles.
“Juha has demonstrated exceptionally strong leadership in leading our supply chain operations,” said Stephen Elop. “His breadth of experience at Nokia will help with our focus.”
“Timo is well known as an engaging leader with valuable business acumen and keen insights into delivering customer satisfaction,” said Stephen Elop. “These attributes will be key as we progress through our transformation.”
“Chris has made tremendous strides in kick starting our re-entry into the US and his track record of driving results will serve Nokia well,” said Stephen Elop.
“Tuula is widely known at Nokia for her versatility, creativity and focus on results,” said Stephen Elop. “She has played an instrumental role in Lumia product marketing and strategy, which will be valuable moving forward.”
“Susan brings a breadth of experience in the technology industry to her new role,” said Stephen Elop. “Her experience in consumer, employee and financial communications will serve us well through this transition.”
“Jerri has made a positive impact on Nokia’s advertising, marketing and brand efforts. Our marketing has made great strides under her leadership,” said Stephen Elop. “I will particularly miss the fresh insight and new energy that Jerri injected into the Nokia brand.”
“Mary’s leadership has been instrumental in our efforts to connect the next billion people to the Internet through innovation in new devices and services,” said Stephen Elop. “Under her direction, Nokia has brought new opportunities to consumers throughout growth markets and contributed strongly to Nokia’s business. I will miss the value she has brought to Nokia.”
“During his 16-year Nokia career, Niklas has successfully supported our growth and transformation through leadership roles in groups ranging from services to, most recently, sales, marketing, supply chain and IT,” said Stephen Elop. “Niklas has been a valued partner to me during my tenure at Nokia and his many ongoing contributions will be missed.”
Nokia to acquire developers, technologies and intellectual property for imaging from Scalado
Acquisition aimed at enhancing imaging experiences for Nokia Lumia devices
Espoo, Finland and Lund, Sweden: Nokia is announcing plans to acquire world-class imaging specialists as well as all technologies and intellectual property from Scalado AB.
“Nokia has been working with Scalado for more than ten years and they’ve contributed to many of our leading imaging applications,” said Jo Harlow, executive vice president, Smart Devices at Nokia. “This transaction would enable us to combine our leadership in camera devices with their expertise in imaging, helping people move beyond taking pictures to capturing moments and emotions and then reliving them in many different ways.”
The Lund site is planned to become a key site for Nokia’s imaging software for smartphones, in addition to Nokia’s existing locations in Espoo and Tampere, Finland.
“This is a great opportunity for many of our people to show their leadership in imaging and to continue to build its future,” said Håkan Persson, chief executive officer of Scalado AB. “Doing this as part of Nokia, already a leader in mobile imaging, will reinforce the strength of the technologies and competences developed at Scalado. We are very excited about this opportunity, which is a natural next step in our longstanding relationship with Nokia.”
The transaction, which is subject to customary closing conditions, is expected to close during the third quarter of 2012. The terms of the transaction are confidential.