In an attempt to streamline its IT operations,
) is downsizing its employee strength in the IT sector. This move
is part of the Finnish handset manufacturer's broader
restructuring strategy to cut operating costs and improve
Nokia is reducing its headcount from the IT department by 300
and outsourcing 820 IT jobs to its Indian strategic partners -
HCL Technologies and Tata Consultancy Services. Most of the
employees that are getting affected are based in Finland.
Nokia has lost its significant market share in a crowded
smartphone market, now being dominated by
) iPhone and other smartphone manufacturers, which runs on
) Android platform. The company lost its title as the world's
largest cell phone manufacturer to Samsung Electronics with its
credit rating being downgraded to junk status.
To counter this difficult situation, Nokia initiated a
restructuring effort in June last year. The Espoo, Finland-based
company decided to retrench 10,000 employees, shutting down its
production and research unit as well as divesting 90% stake in
its premium handset division Vertu. Additionally, the company is
also offloading some of its non core patents, from its impressive
basket of 30,000 patents. The company expects to reduce $2 billon
in cost by the end of 2013 through these restructuring
It seems now that its restructuring plan is yielding positive
results for the company as it now expects a negative 2% operating
margin (+/-4 percentage points) for its Device and Service
business, far better than the previous estimate of a negative
operating margin of 6% (+/-4 percentage points).
The company's decision to join hands with
) has started to show positive signs as the latest Lumia 920 is
attracting more customers and is expected to deliver a sequential
gain of 52%. Nokia's low-range smartphone - Asha has also
performed better than expected, reporting a sequential growth of
Significantly, the company declared that the IT job cut is the
last anticipated job reduction of its broader restructuring
strategy. However, we expect Nokia to lay off some more of its
resources until its Lumia series of smartphones is able to
generate consistent increase in sales and establish a significant
mindshare in the smartphone market.
The 2013 Zacks Consensus Estimate for Nokia Corporation is
pegged at 3 cents with a growth rate estimate of 109.69%.
Currently, it holds a short-term Zacks Rank #1 (Strong Buy).
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