That stampeding sound you hear is yet another European heavyweight packing up its gear and getting the heck out of Dodge.
Following similar moves from fellow European giants, Siemens (NYSE: SI) and Royal Phillips Electronics, the once all-conquering Finnish wireless firm, Nokia (NYSE: NOK) announced today that it will shift its smartphone manufacturing operations out of Europe and over to its existing facilities in China and South Korea.
In the process, it will lay off 4,000 more employees at its plants in Finland, Hungary and Mexico, bringing the total number of job losses to a whopping 30,000 since September 2010.
Why close down more facilities?
According to Niklas Savander, Nokia’s Executive Vice President for Global Markets:
“Shifting device assembly to Asia is targeted at improving our time to market.”
Yeah, mate… but you fail to point out another key factor that’s surely at play here: Manufacturing labor is cheaper in Asia than it is in Europe. Not to mention the fact that Nokia will gain from being in emerging markets, as opposed to the death spiral in which Europe’s economy is mired.
To Nokia’s credit, Savander continues:
“We recognize the planned changes are difficult for our employees and we are committed to supporting our personnel and their local communities during the transition.”
Still, the numbers make for ugly viewing…
No Plant Spared the Carnage
Nokia’s plant in Reynosa, Mexico will take the hardest hit, with 700 of the 1,000 production jobs leaving.
In Hungary, the Komarom plant will cut 2,300 out of 4,400 jobs.
And Nokia’s flagship factory in Salo, Finland isn’t spared, either. Of the 1,700 production-based jobs there, the firm will cut 1,000.
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On the bright side, the 3,500 boffins that work on research and development in Salo will keep their jobs. That’s just as well, I suppose – even if their fellow designers and innovators at Apple (Nasdaq: AAPL) have completely upstaged them in recent years.
Is there any cause for hope?
Nokia… No Hope
On the face of it… not much.
Nokia unit sales tumbled by 25% to 77.3 million last year. And with Apple and Google (Nasdaq: GOOG) now leading the mobile pack, it would take a miracle for Nokia to claw its way back to the top.
Consider that in the three years following Apple’s launch of the iPhone in 2007, Nokia saw its market value plunge by 60 billion euros ($79 billion), according to Bloomberg. Which is when Nokia appointed Microsoft (Nasdaq: MSFT) executive, Stephen Elop, as CEO.
And in February last year, Nokia ditched its Symbian platform and teamed up with Microsoft to marry the Windows Mobile operating system with Nokia’s Lumia smartphone lineup.
Having launched the first Lumia device in December, the company says sales have topped one million units.
A good start.
Nevertheless, since its partnership with Microsoft, Nokia shares have plummeted by around 50%, eroding its market share even further.