Nokia Seeks Volunteers for Cutting Labor Costs
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Nokia is initiating a voluntary employee resignation program aimed at reducing its workforce by 1,000 jobs and launching several other voluntary initiatives to streamline personnel costs.
The labor move announced Wednesday is a global effort that excludes managers and executive leaders and includes Nokia Siemens Network and its Navteq personnel. All told, Nokia has 128,445 employees. The voluntary program is available to workers from March 1 to May 31 and Nokia is supporting short-term. unpaid leaves and sabbaticals where business allows it to cut labor costs.
"We are encouraging people to take holiday as time off instead of taking cash compensation," a Nokia spokeswoman told InternetNews.com. For example, in Finland, many Nokia employees receive a holiday bonus that translates to a two-week pay cost. "We are encouraging those employees to instead take additional time-off instead of the extra payment," Nokia said.
Nokia added that the reductions are part of an overall company cost-saving effort to trim $885.9 million this year. It's unclear how many of the cuts would be from the U.S. As of the end of 2007, Nokia employed 5,269 people in the country. A spokesperson said the company would release 2008 U.S. employment figures this spring.
The news comes as mobile handset makers experience financial strain due to a U.S. recession, the global impact of the ongoing banking and credit fallout and a drop in consumer spend that is propelling greater price competition in the market.
While Nokia sells most of its handsets abroad -- North America represented just 4.1 percent of sales in the fourth quarter of 2008 -- several product moves last year illustrate its quest to gain deeper traction in the US smart phone market and compete with Apple's iPhone and Research in Motion's (RIM) consumer BlackBerry product line.
The arrival of Nokia'sN97smartphone last year was a key element to being a competitor, according to industry analysts.
The N97 not only offers features both iPhone 3G fans and BlackBerry consumer users enjoy -- a touchscreen display, full QWERTY keyboard and hefty video and music support -- but it expands on those capabilities with an "always on" browser window and advanced social networking and messaging services.
Competitor RIM debuted its first touch-screen BlackBerry, the Storm, late last year as well.
Apps push coming
Nokia also aims to tap lucrative revenue streams tied to mobile application sales from which some smart phone players are reaping big rewards.
Just last week it launched a new online software and media store, called Ovi Store, hoping to follow the runaway success of Apple's App Store.
Research firm Strategy Analytics has predicted the value of the mobile content market will grow 18 percent over 2008 to $67 billion this year.
Nokia, eyeing the lucrative revenues gained from high-end smart phone sales, is looking to shore up U.S. effort as North American sales were down 1 percent in the fourth quarter compared to a year ago.
Before it debuted the N97, Nokia's chief candidate for an "iPhone killer" was its 5800 XpressMusic smartphone, which launchedin the fall of 2008. It features a drop-down menu for easy access to music, as well as one-touch access to a Web browser and other applications. The user interface also provides a widescreen display -- another feature similar to the iPhone's and G1's designs.
In 2008, Nokia also launched the N96, N85 and N79, ranging in price from $400 to $900.
Yet despite last year's handset push, Nokia said mobile device sales of 113 million units in the fourth quarter of 2008 represented a decline of 15 percent from a year ago same quarter, and four percent down from the third quarter of 2008.
The vendor fared worse than its own market segment. Nokia said industry volumes were 305 million for the quarter, a nine percent drop from a year ago same quarter, and two percent from the third quarter of 2008.
Nokia said its estimated global mobile device market share for the fourth quarter of 2008 was 37 percent, down three percent compared to the fourth quarter of 2007 and one percent from third quarter 2008.
Europe accounts for 34.7 percent of Nokia's sales, Asia Pacific is 29.9 percent of the market, the Middle East and Africa account for 18.2 percent, Latin America is 13.3 percent and China accounts for 12.9 percent, according to its financial statements.
During the earnings call CEO Olli-Pekka Kallasvuo told investors the mobile handset decline was due to a deteriorating market climate as well as weak consumer confidence and the ongoing global credit crisis.
'We are taking action to reduce overall costs and to preserve our strong capital structure," Kallasvuo said in a report release.
The financial picture is bleaker this year as Nokia expects mobile device volume sales will mirror and industry drop of 10 percent from 2008 levels. It had previously estimated the industry dip would be just about five percent.
Update adds comments on savings and U.S. employment figures.