No one ever said turnarounds were easy, and Nokia (NYSE: NOK) — currently the world’s largest handset maker — is one big ship. Today the company announced that it would be downsizing its manufacturing, as well as its mapping and commerce divisions, which will result in job losses totalling 3,500.
This is the second big round of cuts announced by the company, which cut 4,000 jobs earlier this year when it rationalized its R&D division and outsourced Symbian operations to Accenture.
Nokia has said that its realignment strategy has been created in part to manage its transition from being a vertically-integrated handset maker into one that is developing handsets, specifically smartphones, based on a third party’s operating system — Microsoft’s Windows Phone.
But reducing operations in mapping and commerce — divisions that include not only the Navteq mapping business, but location-based services, social media services and mobile commerce operations — raises questions about how well it will be able to differentiate those future products from the many others that will made on the same platform. Other OEMs using Windows Phone include HTC, ZTE, Fujitsu, and Samsung — the number-two handset maker that is currently nipping at Nokia’s feet to become the biggest.
To be sure, the mapping and commerce division is not a big revenue driver for Nokia at the moment.
In the company’s last quarterly earnings, Q2 released in July, Nokia reported that Navteq made €245 million ($331 million) in revenues, a three percent decline on the same quarter a year before. Moreover, it posted an operating loss of €50 million ($67.6 million).
As consumers become more phone-savvy, devices become more advanced, and technology like NFC becomes more ubiquitous, the relevance and usefulness of the kinds of products that the location and commerce division makes will only grow. But it seems that Nokia does not have the time right now to be patient and wait for that. (NB That’s a vote in favor of small startups, ideally funded by generous VCs, working on developing these kinds of services rather than large organizations.)
The details. In manufacturing, Nokia says it will be closing down its factory in Cluj, Romania, by the end of this year, resulting in 2,200 job losses. The facility mainly worked on feature phones, and Nokia says that these operations will be moved to Asia, where its high-volume factories “provide greater scale and proximity benefits.” The latter may be a reference to the still-thriving feature phone business that Nokia has in developing markets in that part of the world.
Meanwhile, factories in Salo, Finland; Komarom, Hungary; and Reynosa, Mexico, which were focused on smartphones, are not being closed but are shifting their focus to customizing devices with “market-specific software” relevant to the regions in which they are located. No job losses in these factories yet, although Nokia says it may announce cuts here in 2012.
As for the location and commerce division, Nokia is closing down operations in Bonn, Germany and Malvern, PA, in the U.S., which will result in 1,300 jobs lost. Operations will be consolidated into existing offices in Berlin, Boston, Chicago “and other supporting sites.”
Expect more job cuts ahead. In addition to the possible cuts at the factories in Finland, Hungary and Mexico, Nokia also says it is entering into a period of consultation with employees in sales, marketing and corporate functions.
Even with the cuts in the location and commerce division, though, there are signs that Nokia is not giving up on putting something new into the mix: the company earlier this month appointed a new CTO, Henry Tirri, who will be based in Silicon Valley and presumably trying to fuse Nokia’s culture a bit more with that of the current capital of startups and innovation.