Nokia Is Cutting Up To 10,000 Jobs to Boost 5G Investment
The stock, which has been a favourite among retail investors in recent months.
The stock, which has been a favourite among retail investors in recent months.
Nokia has unveiled plans to axe up to 10,000 jobs as part of a €600 million cost-cutting program aimed at boosting investment in 5G.
The telecom-equipment maker said resetting its cost base would allow it to invest in research and development and long-term growth areas, including 5G, cloud technologies and digital infrastructure.
The stock, which has been a favourite among retail investors and Reddit users in recent months, edged 0.5% higher in premarket trading, while the Finnish-listed shares rose 0.6% on Tuesday.
The company said it expects to lower its cost base by around €600 million by the end of 2023. As part of the restructuring, Nokia said its global workforce would be reduced from 90,000 to between 80,000 and 85,000 employees over the next two years. The company maintained its 2021 outlook.
The U.S.-listed shares are up 10% year-to-date but that doesn’t tell the whole story. The shares climbed 55% in the space of three days at the end of January, prompting the company to release a statement saying it could not explain the rally. The stock has since retreated 52%.
Aside from the volatility, Nokia’s fourth-quarter earnings were stronger-than-expected, driven by 5G margin expansion. Nokia and its Nordic rival Ericsson have benefited from a number of western countries banning China’s Huawei from 5G networks on national security grounds.
However, the Finnish company said its rate of converting its 4G footprint into 5G in 2020 was affected by shortfalls in China and North America. It also lost out to Samsung on a $6.6 billion deal with Verizon. Revenue is expected to fall for a second consecutive year in 2021, Nokia said, citing market share loss and price erosion in North America.
Looking ahead. When Chief Executive Pekka Lundmark, who took charge in August last year, unveiled a new strategy in October, he promised to do “whatever it takes” to lead in 5G. The company’s restructuring plan is evidence of that. After falling behind, Nokia needs to start picking up market share to challenge the likes of Ericsson and Huawei.
Nokia’s capital markets day on Thursday will be the next major event for investors to closely monitor, as Lundmark sets out his long-term strategy and financial outlook. JPMorgan Cazenove analysts said Nokia was likely to come across as confident of turnaround potential. But they said the company was unlikely to “raise the bar significantly” with mid-to-long-term guidance, leaving upside potential if the turnaround proceeds better than expectations.
They rated the stock ‘neutral’ with a target price of $4.30. “We see no reason to turn bullish ahead of the day as we think the turnaround is going to take time,” they said.
Lundmark’s words again were clear on Tuesday as he said “in those areas where we choose to compete, we will play to win.” Words are one thing, it’s now time for action.
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The bank posted unaudited cash earnings for the quarter of A$1.7 billion, down 2% on the average of its prior two quarters
National Australia Bank said that higher credit impairments against business loans contributed to a small fall in its unaudited December quarter cash earnings.
NAB , which is Australia’s second-largest bank by market capitalization, on Wednesday posted unaudited cash earnings for its fiscal first quarter of 1.74 billion Australian dollars, equivalent to about US$1.11 billion.
That was down 2% on the average of its prior two fiscal quarters. NAB did not give a year-earlier comparison.
The lender said that revenue grew by 3% compared with the average of its prior two fiscal quarters. Underlying profit growth of 4% over the same period was offset by higher credit impairment charges and income tax expenses, it added.
NAB, which posted an unaudited quarterly statutory profit of A$1.70 billion, said the A$267 million credit impairment charge included A$152 million of individually assessed charges. Those were mainly against Australian businesses and unsecured retail portfolios, it said.
The individual charges were up by 54% compared with a year earlier. NAB said that it had not altered its economic assumptions and scenario weightings.
“The economic outlook is improving but cost of living and interest rate challenges persisted,” Chief Executive Andrew Irvine said. “While most customers are proving resilient, we have maintained prudent balance sheet settings.”
NAB said it had seen a small decline in net interest margin due to funding costs, lending competition and deposits, partially offset by the benefit of higher interest rates.
On Tuesday, the Reserve Bank of Australia cut the country’s cash rate for the first time since 2020 but warned against expecting subsequent near-term cuts.
NAB is still targeting full fiscal-year productivity savings of more than A$400 million, and for operating expenses to grow by less than 4.5%, Irvine said.
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