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Nokia cuts 3,500 more jobs as its OEM role continues to evolve

A new round of consolidations and layoffs were announced by Nokia this week as the company faces growing competition on the smartphone front.

Nokia said this week that it will lay off 3,500 employees and close a manufacturing facility in Romania as it looks to bring efficiencies and speed to the organization. Once the leading smartphone manufacturer, Nokia shipped 34 percent fewer smartphones during the second quarter.

?There?s no doubting that its role as lead player in the handsets market has changed dramatically but it is making tough decisions, lead by [Nokia chief executive officer] Elop, to change with it,? said David McQueen, principal analyst at Informa Telecoms & Media, Westborough, MA.

?It still has a massive part to play in the emerging markets, but is starting to feel some competitive pressure there so is acting accordingly,? he said. ?Nokia needs to take these actions if it is to remain competitive long term.?

Competitive moves
In July, Nokia reported a 7 percent drop in overall revenues and a 20 percent decline from devices and services as sales of its mobile phones took a dive.

The problem is that Nokia has not had a strong strategy in place to address the growing uses for smartphones.

With the company having to go up against not only Apple but Google, which recently announced a deal to acquire Motorola, it is feeling the pressure.

?Nokia should leverage its R&D capabilities, global supply chain, distribution reach, and brand awareness to aggressively build a stronger ecosystem of devices, applications and services to survive and match up with its biggest competitors such as Apple and Google,? said Neil Shah, an wireless device strategies analyst at Strategy Analytics, Newton, MA.

The streamlining announced yesterday is in addition to a realignment announced earlier this year focused on Nokia?s R&D operations in smart devices and mobile phones that saw the company take steps to reduce its workforce by 12 percent.

The new round of consolidation focuses on streamlining operations for its feature phone and mapping businesses.

?Similar to its competitors, consolidating and outsourcing some portion of manufacturing will help Nokia boost its profitability and overall time-to-market which are the biggest concerns Nokia faces at this moment,? Mr. Shah said. 

?Regaining its lost mind-share in the smartphone space, especially in important markets of North America and Europe, is the next step for Nokia which can be done with effective marketing, promotions and by training an incentivizing the sales channels,? he said.

One of the steps announced this week is the closing of Nokia?s manufacturing facility in Cluj, Romania by the end of 2011, with plans to transfer production to more efficient plants in Asia.

Feature phones
The moves reflect that Nokia is feeling the pressure of feature phone price competition in emerging markets.

?The company is rationalizing and aligning its feature phones business, which is sensible as the segment is becoming a margins business,? Informa?s Mr. McQueen said.

?It needs to control cost here as it faces growing price competition in emerging markets,? he said.

Nokia will also close operations for its Location & Commerce business in Bonn, Germany, and Malvern, PA and consolidate the business across other locations.

?Nokia has very strong mapping assets and this cost reduction move should give the company more streamlined operations,? Mr. McQueen said.

The company said it also plans to shift the focus to customer and market specific software and sales package customization at several manufacturing operations around the world, which will result in additional layoffs in the first quarter of next year.

The question is if the moves are enough to keep the company playing a leading role in the mobile space.

?The recent introduction of Nokia dual-SIM devices has proved popular,? Mr. McQueen said.

?It still needs to be successful in this segment in the short- to mid-term until it can start growing its smartphone volumes again on the Windows Phone platform, which is still by no means a certainty,? he said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York