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The Lowdown: Nokia Layoffs, Executive Changes, Vertu and Scalado Acquisitions

Nokia has made a series of announcements, outlining the company’s new strategy, leadership changes and measures to improve its operating model. Here is a quick lowdown on all these announcements:

New Strategy: As part of the company’s new strategy, Nokia stated that it plans to invest in creating unique products and experiences for its Lumia range of Windows phone handsets, develop new location based services across navigation and visual search and extend its location based Where platform to multiple industries. It also plans to improve the competitiveness and profitability of its Series 40 and Series 30 devices and invest in various feature phone technologies like Nokia Browser which claims to compress pages by up to 90%.

Nokia had reported a 16% decline YoY and 25% decline QoQ in its feature phone sales which stood at 70.8 million units globally as of March 31,2012. It had said this decline was more pronounced in India and Europe and had attributed this decline to lower seasonal demand for its feature phones and aggressive price competition from other players, especially in entry-level feature phones. A recent Nielsen India report however had stated that Nokia currently has a 30% share of the total multi-SIM handset market, followed by Samsung which had 16% market share and Micromax which has 12% market share.

Executive Changes: Nokia has made several changes to its executive team by appointing Juha Putkiranta as its executive vice president of operations, Timo Toikkanen as its executive vice president of Mobile Phones, and Chris Weber as its executive vice president of sales and marketing. Putkiranta, Toikkanen and Weber will also will join the Nokia Leadership Team effective July 1, 2012. Besides this, Nokia has also appointed Tuula Rytila as its senior vice president and chief marketing officer and Susan Sheehan as senior vice president of communications.

Putkiranta was previously Nokia’s senior vice president (supply chain) while Weber was Nokia’s senior vice president in charge of American markets, Toikkanen was the company’s vice president in charge of business development, programs and special projects and Rytila, who will report to Weber, was formerly Nokia’s senior vice president of portfolio and business management.

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Nokia also announced that Jerri DeVard, who was previously the company’s executive vice president and chief marketing officer, Mary McDowell, the company’s executive vice president of Mobile Phones and Niklas Savander, Nokia’s executive vice president of Markets will be stepping down from their respective positions and will serve as senior advisors to Nokia through the transition of their roles. In addition, Nokia also added that Savander will stepping down from the Nokia Siemens Network Board of Directors, effective June 30, 2012.

Reduced Headcount: Nokia plans to lay off around 10,000 employees globally by end of 2013 and close several global facilities including its facilities in Ulm, Germany and Burnaby, Canada and its manufacturing facility in Salo, Finland, although it noted that the company’s research and development efforts in Salo will continue as before. The company is also planning consolidations in its manufacturing operations, reductions within certain research and developments projects, and non-core assets as well as streamlining of its IT, corporate and support functions. The company is also prioritizing its key markets to focus on its marketing and sales activities.

Lower Devices & Services outlook: Nokia also plans to significantly reduce its operating expenses in the Devices & Services division, to an annual run rate of EUR 3.0 billion (Rs 209.98 billion) by end of 2013. That is, the company is targeting for an EUR 1.6 billion (Rs 111.99 billion) cost reduction in addition to the already achieved run rate savings of about EUR 700 million at the end of Q1 2012. Nokia had previously reported an operating expense of EUR 5.35 billion (Rs 374.48 billion) for the devices and services division in 2010 and had targeted to reduces its expenses by more than EUR 1.0 billion (Rs 70 billion) for the full year 2013.

Vertu Divestment: Nokia announced that it has divested Vertu, the company’s luxury mobile phones business to EQT VI, an investment fund of a Northern Europe based private equity group. Vertu will now work as a standalone company and EQT VI will fund Vertu’s retail expansion, marketing and product development plans. While the financial details of the deal was not disclosed, Nokia said that it will continue to have 10% stake in the company and the acquisition is expected to close during the second half of 2012.

Scalado Acquisition: Nokia has acquired a Sweden based mobile imaging company Scalado to strengthen its imaging assets and improve its imaging technology on its Lumia range of smartphones. While the financial details of the acquisition was not disclosed, Nokia stated that this deal includes all imaging technologies, developers and intellectual property from Scalado AB and is expected to be completed by Q3 2012. Nokia claimed that Scalado’s imaging technology is currently on more than 1 billion devices and they have been working with the company for more than ten years with Scalado contributing to many of Nokia’s imaging applications.

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