Nokia to cut 14,000 jobs due to falling U.S. demand.

On Thursday, Nokia, a Finnish telecommunications equipment company announced on Thursday that it plans to cut as many as 14,000 jobs as part of a new cost reduction strategy, driven by a 20% decline in 5G equipment demand in the third quarter. In response to this news, the company's stock experienced a 5% decrease during early trading.

Nokia, along with its competitor Ericsson (ST:ERICb), has been trying to mitigate the effects of reduced demand in countries like the United States by increasing sales in India, a market with lower profit margins.

Nokia's CEO, Pekka Lundmark, acknowledged the challenging market conditions, particularly in their most significant market, North America, where net sales dropped by 40% in the third quarter, stating this during an interview with Reuters.

To achieve its long-term operational margin goal of at least 14% by 2026, the company is aiming to save between 800 million euros and 1.2 billion euros through this cost-saving program. It is expected that this program will lead to a reduction in the workforce, with 72,000 to 77,000 employees compared to the current 86,000 employees at Nokia.

Pekka Lundmark refrained from providing more detailed information, noting that the company first needs to consult with employee representatives. However, he emphasized the company's commitment to safeguarding research and development.

Nokia plans to achieve at least 400 million euros in savings by 2024 and an additional 300 million euros in 2025.

Ericsson, which also downsized its workforce by several thousand jobs this year, indicated on Tuesday that the uncertainty affecting its operations would persist until 2024.

In response to these comments, Nokia mentioned that its network business would see a more consistent seasonal improvement in the fourth quarter. The company also maintained its full-year forecasts.

"We maintain our confidence in the medium and long-term market outlook, but we will not simply wait and hope for a quick market recovery," said the CEO. "We just don't know when it will rebound."

He added that to revitalize the market, the industry needs to invest in faster mid-band frequency equipment to handle the growth in data traffic.

"Currently, only 25% of 5G base stations worldwide, excluding China, have mid-band frequency," he pointed out.

In the third quarter, comparable net sales fell to 4.98 billion euros from 6.24 billion euros a year earlier, which was also below the analysts' forecast of 5.67 billion euros according to LSEG.

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