Nokia to cut 10,000 more jobs as it loses market share
NOKIA plans to cut 10,000 more jobs, bringing the total to one-in-three staff, as it loses market share to cellphone rivals Apple and Samsung and burns through cash, raising new fears over its future.
In a second profit warning in nine weeks, Nokia said yesterday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition, which it expected to continue.
Once the world's dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsung and Google. It is also losing market share in cheaper, more basic phones.
Chief executive Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft software.
But Lumia sales have so far been slow, exasperating investors who have seen its stock crash more than 70pc since it announced the software switch in February 2011.
"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," said Ben Wood, head of research at CCS Insight.
Nokia, whose cash position is increasingly scrutinised by investors, also said restructuring-related cash outflows would be around €65m in the remaining three quarters of 2012, and around €600m in 2013.
With the cost of Nokia's debt rising, the most bearish of analysts in a Reuters poll last month said the company could even be at risk of default if it fails to slow its cash burn.
Over the past five quarters, the one-time darling of mobile telecoms has eroded its cash pile by €2.1bn -- a rate that would wipe out its entire €4.9bn in a couple of years.
Analysts at JP Morgan said yesterday they expect operating losses, combined with restructuring outflows, to leave Nokia with €1.63bn cash at the end of next year.
"This is not a comfort zone for a company as large as Nokia," the analysts said.
Nokia's five-year credit default swaps (CDS) were at a new all-time high of 933 basis points yesterday.
This means it costs $933,000 (€739,000) annually to buy $10m of protection against a Nokia default using a five-year CDS contract and implies a default probability of 55pc.