Another round of Nokia cuts and a profit warning announced

Finnish mobile phone manufacturer Nokia (OMX: NOK1V, NYSE: NOK) had been hinting of more large scale cuts to come in connection with its Q1 2012 results, as the company admitted it is now smaller than it used to be. For weeks on end speculation of the number of redundancies had been going on, as the company waited to hear news on how the new Windows phone line-up starts selling and how quickly the legacy Symbian phones die out.

Nokia is also carving out its own heart with the closure of manufacturing at Salo factory and it also plans to close down Ulm, Germany and Burnaby, Canada facilities. R&D activities in Salo do however continue. These closures come at a time when others have done the strategic shift to Asia years ago and are propably closer to bringing back production than other way around. In total up to 10 000 jobs are to be lost by the end of 2013 with 3700 in Finland.

The measures are expected to result in non-IFRS operating expenses savings of nearly 2.5 billion Euros per annum by the end of 2013. In 2010 the total Devices & Services expenses were 5.35 billion and Nokia now targets a level close to 3 billion per year. The anticipated 1 billion Euros in restructuring charges comes on top of an earlier 900 million Euros. Also Nokia lowered the Devices & Services outlook to state that it will definitely fall below operating margin level of -3% and warned that “competitive industry dynamics” will continue to have a negative impact on Q3 2012 as well.

Nokia plans to invest further in location based services. Nokia maps have until now been another differentiating factor, although with continued pressure from Google and Apple entering that space as well, that remains to be seen as well. The rumoured divestment of luxury phone brand Vertu to private equity firm EQT VI was confirmed. Nokia is keeping a 10% stake. Nokia is also doing an acquisition in getting imaging specialists, technologies and intellectual property from Scalado Ab with Scalado’s Lund site becoming a key for Nokia’s imaging software development.

Several executives are also getting the axe with Chief Marketing Officer Jerri Devard, Mobile Phones unit Chief Mary McDowell and executive Vice President of the Markets Niklas Savander being replaced by Tuula Rytilä, Timo Toikkanen and Chris Weber with Susan Sheehan becoming senior vice president of communications and Juha Putkiranta the executive vice president of operations;. The share is set to open sharply lower.