In order to lower its operating cost as well as to generate
savings of at least €1.6 billion by the end of fiscal 2013,
Nokia Corporation
(
NOK
) has taken a few cost cutting measures.
As a part of its cost cutting initiatives, Nokia plans to lay
off 10,000 employees. The company also intends to shut down its
production and research and development unit. It will also divest
its 90% stake in premium handset developing unit Vertu. Further,
the company also restructured its top level management to execute
the laid down objectives in a more effective manner.
Nokia is currently facing a huge cash crunch. Cash flow from
operations dropped 76.2% in 2011 from the previous year. Stiff
competition from
Apple Inc
'.s (
AAPL
) iPhones and
Google Inc
'.s (
GOOG
) Andriod phones have hampered sales over the last few years.
Moreover, mounting operating expenses has forced the company to
lay-off at least 14,500 employees (exclusive of the recent job cut)
over last 15 months.
In February 2012, the company slashed 4,000 staff. This is now
the highest lay-off since April 2011 when the company laid off
7,000 workers.
Nokia will also shut down its oldest production division in
Salo, Finland. Additionally, the company will also terminate its
research and development unit in Ulm, Germany, and Burnaby, British
Columbia. The company remains hopeful of its revival by means of
downsizing of plants and shutting down of research and development
facilities.
In order to address its present cash constraints, Nokia
continues to dispense with most of its non-performing business
units. Over the past one year, the company sold Vertu, quit
commercial licensing, its services business and also an instant
messaging service division. Moreover, the company also possesses
huge patent portfolios for handsets.
We believe that to meet its immediate cash needs, the company
will continue to sell off its patents and dispose its
non-performing business units until its newly launched Nokia
Lumia series of smartphones succeeds in driving sales and gains a
significant share in the smartphone market.
Currently, Nokia has a Zacks #3 Rank, implying a short-term Hold
rating on the stock.
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
Report
NOKIA CP-ADR A (NOK): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research