Nokia Cuts Deep to Stave Off Potential Suitors

by Matt Klassen on June 18, 2012

In an attempt to ward off the currently unrequited stares of company’s potentially looking to acquire the fading Finnish mobile giant, Nokia has once again turned to rigid austerity measures to help return its flagging divisions to profitability. To that end, Nokia has again announced that it is planning to close factories around the world, unfortunately handing pink slips to some 10,000 more employees by the end of 2013.

Apart from these drastic measures, Nokia is also mulling over sweeping changes to its business model as well, selling off assets it deems to be outside of its core focus and then reinvesting its new found capital back into what it sees as its key strengths: smartphones, feature phones, and its location services.

Amidst these cuts, however, persists the discussion of who might be interested in scooping up the struggling Finnish company, as Nokia’s global consumer base and strong feature phone presence still make it an attractive acquisition, and while several names have been bandied about there is one that continues to top the list…Facebook.

Returning for a moment to the sweeping austerity cuts Nokia plans to enact by 2013, there was one entry on the list of R&D and production facilities the company is planning on closing that hit close to home for me, as the Finnish company has announced it will be shutting down its research facility just up the road in Burnaby, BC. In addition, the company also announced the closure of a similar facility in Ulm, Germany and a manufacturing centre in Finland itself.

While it remains to be seen whether these deeper cuts will be able to help Nokia shore up its weaknesses and return to profitability, its purpose is clearly to help Nokia refocus on the few areas of the company that are generating, or even have the potential to generate, much needed revenue.

“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” Nokia CEO Stephen Elop said, adding. “However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions.”

As mentioned, Nokia’s refocus will include increased investment in its Lumia smartphone line-up, its strong global feature phone business, and its location services. While some analysts speculate that Nokia’s drastic measures are designed to hold back the looming threat of acquisition, particularly from social networking giant Facebook, perhaps such a refocus might also serve to highlight what little Nokia has left to offer.

As Informa Telecoms & Media research analyst Julian Jest speculates, Nokia’s austerity measures are likely designed to stave off increasing interest from company’s looking to make inroads into the mobile market, a category in which Facebook is clearly at the top. For several years now the social network has been rumoured to be working on its own phone, clearly desperate to get a piece of the mobile revenues it helps generate. Facebook has the resources and the interest, Jest says, and would certainly be interested in a brand like Nokia with an established global base.

But on the other hand, many speculate that Nokia’s cuts will simply hasten its demise, leading me to conclude that perhaps Nokia’s cuts are designed to attract suitors instead of ward them off, streamlining its operations in hopes that someone, anyone, sees the value left in the company and saves it from its seemingly never ending slide.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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