Nokia Cuts R&D, Production

Singing the macro-economic woes, Finnish telecommuncations giant Nokia has decided to cut production and to close one of its R&D sites. Ultimately, the company has failed to capitalize on the strength of the smartphone market.

Nokia is reducing production at its plant in Salo, Finland, and has begun to phase in furlough days that will affect 20 to 30% of the plant’s 2,500 employees, on a rotational basis. The company is also shuttering its facility in Jyvaskyla, Finland, costing 320 people their jobs.

Nokia told investors in January that it expects cell phone demand to fall 10 percent in 2009. However, it managed to increase its share of the worldwide mobile market in 2008 even while demand was weakened by lowered consumer confidence, according to a September 5 report by Nordic Business Report. It experienced a 69 percent drop in its 2008 fourth-quarter net profit.

In many markets, Nokia’s sales grew–it’s the U.S. market that has remained its albatross. RCR Wireless News reported in July that Nokia claimed 40% of the market in 2008, and its sales were particularly strong in the Asia-Pacific region, Latin America, and Middle East.

The company is relying upon high-end smartphones to help them cope with economic crisis, the Wall Street Journal reported in a December interview with Jonas Geust, vice president of Nokia Nseries unit. The smart phone market is growing, but Nokia is not a benefiting much. It is losing out to fierce competition from Apple and Research In Motion.

It seems counterintuitive for Nokia to cut its expenses when its most advanced devices are failing to sell. The 5800 XpressMusic, Nokia’s initial answer to the iPhone, lacked multitouch capabilities. That should have been an indication that it needed to invest more, not less. I don’t see how a move away from innovation is good for customers.


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