In the second private warning in just nine weeks, Nokia CEO Stephen Elop announced that the mobile company will shed further 10,000 jobs. With huge profit losses and increasing loss of market share for Apple and Samsung, the future does not look bright for the mobile giant.
Since 2010 when he took the highest position in Nokia Stephen Elop has cut a total of 40,000 jobs in the company worldwide. This is part of a grand strategy to make Nokia leaner and thinner and flexible enough to be able to seriously compete in the increasingly profitable smartphone market.
It’s a daunting task. When Elop took over the mobile company, he declared that he had ‘inherited a burning platform’. The iPhone mania had taken its toll on the once all-mighty Finnish company and Nokia was having a surprinsingly hard time adjusting to a smartphone-oriented market. Losses were growing exponentially and drastic reforms were badly needed to ensure the survival of the company. Stephen Elop has decided to close several plants around the world, including the last remaining plant on Nokia’s home country, in Salo, and two others in Ulm, Germany and in Burnaby, Canda. The aim is to finish the process of closures and redundancies by the end of next year, a process which is estimated to cost 650m euros this year and 600m in 2013.
Nokia’s future success will depend on its ability to compete in the smartphone market, which currently makes up to a third of all mobile-phone sales. The Finnish company has been losing market share for Apple and Samsung in this field and has had a hard time adjusting to the rise of smartphone sales around the world. This is quite surprising given Nokia’s history of innovation in the mobile-phone market and its current holding of an important collection of intellectual property and patents.
Last April the mobile mogul launched a much-anticipated smartphone which aimed to compete with iPhone and other successful new-generation mobiles. The launch was overshadowed by the detection soon after of a bug in the software system of the new phone. The problem was swiftly solved and affected clients were given $100-worth of credit call (the bug hit clients in the US) but still it was bad publicity, particularly given the fact that Nokia have invested massively in publicity for the new smartphone. Meanwhile, Nokia has announced its plans of phasing out its own Symbian operating system and replacing it from now on with Microsoft Windows phone operating system.
The future doesn’t bode well to the Finnish manufacturer. The next two years will still be of painful and costly adjustments and only then the cut-and-trim strategy will be proved successful or a failure. The history of business has plenty examples of companies who failed to adjust to the changes in the markets that they used to be leaders. Kodak is a recent example of a once-dominating company failing to adjust to the new digital photography market (the bankruptcy included a rather dramatic name-change of the famous Kodak Theatre, home of the Oscar Ceremony, in Los Angeles). In the meantime, Samsung and Apple are growing forces to be reckoned with.