Nokia CEO sets out restructuring after shares plunge 17 percent

Nokia CEO sets out restructuring after shares plunge 17 percent
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Nokia CEO Pekka Lundmark has set out his restructuring plans after poor comparative results to Ericsson tanked the company’s shares.

“Our industry is undergoing profound changes. Industrial automation and digitalisation are increasing customer demand for high-performance networks, with a trend towards open interfaces, virtualisation, and cloud-native software,” said Lundmark.

“As we work to renew our strategy, we will ensure we are well-positioned to leverage these trends, improve our performance, and position the company for long-term value creation.”

Revenues for Nokia’s main Western competitor, Ericsson, have increased seven percent year-on-year. In comparison, Nokia’s revenue has dropped eight percent over the same period on a constant-currency basis.

Nokia’s results have spooked investors with the company’s share price dropping 17 percent this morning to trade at its lowest level in five years. However, it’s worth noting the shares have crashed amid a wider market selloff following the news that France and Germany are going back into lockdown.

Lundmark succeeded former Nokia CEO Rajeev Suri in August. Suri notoriously oversaw an $18.3 billion takeover of Alcatel-Lucent in 2016 with the justification that customers want end-to-end solutions.

“It is interesting to have end-to-end discussions but that is not how customers buy,” Lundmark said this morning to reporters, in stark contrast to his predecessor.

Nokia is restructuring into four new business groups:

  • Mobile Networks (will include mobile network products, network deployment and technical support services, and related network management.)
  • IP and Fixed Networks (will include IP Routing, Optical Networks and Fixed Networks, as well as Alcatel Submarine Networks business)
  • Cloud and Network Services (will include the existing Nokia Software business—except Mobile Networks network management, Nokia’s enterprise solutions, core network solutions including both voice and packet core, and managed and advanced services from its current Global Services unit.)
  • Nokia Technologies

Each group aim to lead the market in each category – rather than focus on end-to-end solutions – and will be measured in terms of success by revenues and profitability.

“Our goal is to better align with the needs of our customers, and through that increase accountability, reduce complexity, and improve cost-efficiency,” commented Lundmark. 

“Going forward, we will have a more rigorous approach to capital allocation and will invest to win in those segments where we choose to compete.”

Mobile Networks will be headed by Tommi Uitto, IP and Fixed Networks by Federico Guillén, Cloud and Network Services by Raghav Sahgal, and Nokia Technologies will remain led by Jenni Lukander.

The new structure and appointments will come into effect on January 1st 2021.

(Image Credit: Pekka Lundmark by EU2017EE Estonian Presidency under CC BY 2.0 license)

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