Nokia (like Ericsson) announces fresh wave of job cuts; Ericsson lays off 240 more in China
- Nokia Oyj’s Q1 2024 results showed a 26% decrease in net sales and a decrease in operating margins from Network Infrastructure.
- Nokia Technologies saw a doubling of net sales, benefiting from licensing deals and aiming to raise annual net sales to EUR 1.4-1.5 billion.
- Mobile Networks experienced a nearly 40% decrease in net sales, with speculation that telecom firms will prioritize debt repayment over equipment spending.
On a call with reporters today, Nokia said it will cut ~11,500 jobs and end up with a workforce of approximately 74,500 employees at the end of 2026. Like Ericsson, it has responded to the global telecom market contraction by announcing a fresh wave of job cuts. Having already eliminated 16,000 jobs since 2016 (the year of that Alcatel-Lucent acquisition), Nokia last year said up to 14,000 jobs would disappear, and no fewer than 9,000, by the end of 2026. The aim is to save between €800 million ($854 million) and €1.2 billion ($1.3 billion) in annual expenses. That newest layoff round follows Ericsson’s announcement that it will lay off ~1,200 employees in Sweden as part of cost-cutting measures announced earlier this year as telco customers reduce their spending on 5G network equipment.
“We are progressing toward this target and currently looking at somewhere around the midpoint of that range,” Lundmark said when asked by Light Reading if there is now more certainty about the ultimate size of the company at the end of the program. “That will then finally depend on the development of the market situation.”
North American customers that previously gorged on supplies have seen little need in the last year to replenish inventory. The pace of a 5G rollout in India has dramatically slowed. Denied the opportunity to consolidate, European telcos still underinvest in 5G, complain vendors. After managing a €137 million ($146 million) mobile operating profit for the first quarter of 2023, Nokia slid a year later to a €42 million ($45 million) loss.
Nokia’s network infrastructure business group – including fixed residential, optical and Internet Protocol activities – sales were down 26%, to less than €1.7 billion ($1.8 billion). An engine of sales growth during Lundmark’s first years in charge, it registered a 42% fall in operating income, to €82 million ($88 million). At cloud and network services, meanwhile, revenues dropped 14%, to €652 million ($696 million), and losses widened 35%, to €27 million ($29 million).
“We have said that we are continuously doing active portfolio management – you have seen some our recent moves that we did last year,” Lundmark said. Disposals included the €185 million ($198 million) sale of a device management business to Canada’s Lumine Group and the earlier transfer of about 350 employees working on cloud platforms to IBM-owned Red Hat.
“We are pleased with the strategy that we have in place in mobile networks,” said Lundmark. “We have a strong value proposition there, we have increased our market share in recent years, and we have a good strategy to deliver value to our shareholders,” he added.
After Intel’s failure to deliver 10-nanometer microprocessors, Nokia resorted to field programmable gate arrays (FPGAs) and its competitiveness suffered. But Nokia’s Mobile Networks boss Tommi Uitto subsequently introduced the well-regarded Broadcom and Marvell Technology as chip suppliers alongside Intel, and the FPGAs have now been replaced. Outside China and the U.S., Nokia’s market share has recently grown, say independent analysts.
In mobile, the full-year outlook remains relatively bleak, even if the second half brings some improvement. “The market has been really, really weak, which is not a Nokia issue,” said Lundmark, in his detailed answer to that question about a sale of mobile assets. “It is an industry issue. It has to be a matter of time before operators again will have to start investing, and, once that happens, we will be in a strong position,” he concluded.
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Update: Ericsson has laid off 240 employees in China, part of a restructuring in the country that will affect one of its largest research hubs globally. Ericsson said the positions would be cut in line with the company’s effort to diversify its research and development footprint to better align with its sales globally. The employees impacted would be in its core network R&D division in China, a spokesman said.
The Swedish telecommunications-equipment company told employees at an internal meeting in early March that it was embarking on a transformation of its China operations that would continue into 2025, several people who attended the meeting told The Wall Street Journal. The company has plans to reduce headcount further in the coming months, people familiar with the company said. One of the people said the R&D team recently had been excluded from working on at least two large projects in the U.S. and Australia.
Ericsson’s market share has been dwindling in China in the 5G era amid intensified competition from local players like Huawei and heightened geopolitical tensions. In its 2023 annual report, Ericsson cautioned that a further escalation of trade tensions between the U.S. and China could hurt its operations in China.
Ericsson had 9,950 employees in China last year, down from 13,783 in 2019, according to company data.
References:
https://www.lightreading.com/5g/nokia-ceo-bids-to-revive-loss-making-mobile-unit-amid-sale-rumors
https://www.wsj.com/tech/ericsson-lays-off-more-than-200-employees-in-china-f4ab7db3″ rel=”noopener” target=”_blank”>https://www.wsj.com/tech/ericsson-lays-off-more-than-200-employees-in-china-f4ab7db3
Wireless and fixed-network equipment maker Nokia on Thursday reported a smaller-than-expected profit and a double-digit fall in sales in the first quarter due to a market weakened by a lack of clients investing in 5G technology.
The Espoo, Finland-based company reported a net profit of 501 million euros ($535 million) for the January-March period, up 46% from 342 million euros a year earlier. The figure was still lower than analysts had expected. One-off gains from Nokia’s licensing business contributed to the profit.
https://www.centralillinoisproud.com/news/business/ap-nokia-sees-double-digit-fall-in-january-march-sales-as-weak-market-for-5g-technology-prevails/
Iain Morris, Light Reading:
This global RAN market dominated by Ericsson, Huawei and Nokia looks increasingly dysfunctional, too. Deemed a security threat by western governments, China’s Huawei can no longer sell 5G products in the UK and other European countries, and it has long been seen as a public enemy by US authorities. In a tit for tat, China has squeezed Ericsson and Nokia to the fringes. And outside China, Nokia looks in desperate shape.
Big US contracts have instead gone to Ericsson and South Korea’s Samsung, a RAN challenger, and other customers have not picked up the slack. What was a lightning-fast rollout of 5G in India last year has now shifted down several gears. While sales at Ericsson have also dwindled, Nokia’s fell dramatically for the recent first quarter. Having recorded an operating profit for 12 consecutive quarters, its mobile networks business group this year slumped to its first-ever loss.
It’s unsettling for telcos such as Vodafone UK, which have had few other choices. “What is the state of Nokia? Not great, from what I read. It’s worrying,” said Andrea Dona, the operator’s chief network officer. “So we need to inject diversity in the network. We need another option. Samsung could be it.”
The South Korean vendor has come to figure prominently in Vodafone UK’s network strategy. Under government orders, Vodafone is stripping out Huawei equipment and software installed at 2,500 RAN sites, a job it must finish by the end of 2027. Using a system called open RAN, it has been replacing those with a mix of vendors. But Samsung is the key. It is not only down to supply many of the radio units (RUs) but also the sole provider of RAN software.
After spending about two years on technology trials at a “golden cluster” of around 20 sites in Devon, a county in southwest England, Vodafone kicked off its commercial deployment last August. Vodafone is not sharing current site numbers, but Dona insists it has now gone significantly beyond that original golden cluster. It has also ticked off some important milestones.
The most recent was the critical pairing of Samsung’s software with RUs supplied by Japan’s NEC. The original goal of open RAN was to find an alternative to CPRI, a fronthaul interface that has required operators to buy software and RUs from the same vendor’s system. With an open fronthaul interface, they would supposedly be able to combine software from one vendor with RUs from another. Yet this remains tricky.
The big problem is an advanced 5G technology called massive MIMO, which crams dozens of transmitters and receivers into antenna units. “Open interfaces does not equal multivendor,” said Ericsson in a guide to massive MIMO published in February. It notes four “fundamental challenges.”
First, new interfaces do not minimize the cost and effort of systems integration, the work a vendor would normally do before bringing a fully integrated product to market. Different vendors also need to coordinate on software releases to maintain interoperability, said Ericsson. Support for technology features is dictated by a “minimum common denominator,” it added, “resulting in performance limitations.” Finally, in the event of problems, identifying the vendor at fault, and therefore responsible for providing a fix, can be difficult.
Much of this seems to echo comments made by Tommi Uitto, the head of Nokia’s mobile business, at Mobile World Congress (MWC). Massive MIMO relies on complex algorithms in both the RU and distributed unit (DU), a server box hosting RAN software, and these need to match, he told Light Reading.
“If I have to connect my DU to someone else’s massive MIMO RU, he will have to make changes to his software, I will have to make changes to my software, or both will,” he said. Falling back on simpler algorithms could make integration easier, but these could also reduce throughput by up to 80%, according to Uitto.
In February, nevertheless, Vodafone showed off its first open RAN site where a massive MIMO NEC radio, featuring 64 transmitters and receivers, was linked to a Samsung DU. “You need to choose your partners and be very specific to your partners about the role they have and the rules of engagement,” said Dona, when asked how it was accomplished.
He insists, too, that performance is not worse than Vodafone would get from a single-vendor product. “There are difficulties to overcome, obviously, but I am not going to compromise, and we’ve worked very hard to ensure parity on the KPIs [key performance indicators],” he said. “I am not going to introduce something that doesn’t perform to at least the same level, if not better.”
Unlike several years ago, when Nokia was hurt by 5G product problems, its current malaise largely reflects the market downturn. Outside China and the US, Nokia’s RAN market share has recently grown, according to independent analysts. It has won plaudits from other commentators on open RAN. AT&T’s decision to replace Nokia across one third of sites with Ericsson, already the supplier to the other two thirds, seems mainly about having a single technology platform and the efficiencies this could bring.
Nevertheless, Nokia’s technology approach does not align with Vodafone UK’s. The open RAN the telco is building will also be entirely virtualized, using technologies that derive from the IT world. This means running the Samsung software on Intel chips in Dell servers and relying on Wind River as the cloud platform. Nokia is unopposed to much of this, but it prefers to keep its Layer 1 software – a resource-hungry part of the RAN – on custom silicon from Marvell Technology. Smart network interface cards (SmartNICs) hosting these Marvell chips can slot directly into servers.
Nokia does not, accordingly, have Layer 1 code that works with Intel’s chips. It has recently taken issue with the marketing of these as “general purpose” central processing units (CPUs), arguing that new Intel generations like Granite Rapids-D feature plenty of customization and embed that in a server. “It’s not a general-purpose processor,” said Uitto at MWC. “And if you build servers with only those CPUs, it would be ridiculous because you’d have all this overhead of hardware acceleration in the product cost and power consumption.”
The Finnish vendor’s earlier criticisms focused on the shortcomings of using general-purpose silicon for Layer 1 functions. Even Ericsson, which uses Intel chips in its virtual RAN products, says custom silicon will remain ahead for some key performance measures. In comments emailed to Light Reading earlier this year, Michael Begley, the head of Ericsson’s RAN compute product line, said that “purpose-built hardware will continue to be the most energy-efficient and compact hardware for radio site deployments going forward.”
But Dona says Vodafone has not seen any drawbacks. “We wouldn’t have gone to mass deployment if we hadn’t met the minimum criteria, but it took a while,” he said, noting that it has been nearly three years since Vodafone UK first announced its open RAN partners.
Vodafone has now taken what Dona calls the same “blueprint” into parts of Romania, where it also needs to replace Huawei under government orders (there is a huge amount of Huawei across Vodafone’s European footprint). And there is a strong hint from Dona that this Samsung-based template will play an even bigger role in future. Margherita Della Valle, Vodafone’s CEO, confirmed on a recent earnings call that suppliers have been invited to pitch for future work across Vodafone’s entire European and African footprint of about 170,000 sites.
The danger for Nokia could be the perception it is in financial trouble and that the market needs alternatives. This gave impetus to the open RAN movement several years ago, when operators were unimpressed by Nokia’s initial 5G products. If decision makers at other telcos share Dona’s view about the “state” of Nokia, and are convinced they must introduce new suppliers, Nokia’s condition may only worsen.
But if it were perilously weakened, operators would simply be substituting one vendor for another, not boosting choice. The consolidation that happened years ago showed that a global RAN market supporting low-cost mobile usage at scale was not big enough for more than a handful of vendors. Last year, it shrank 11%, according to Omdia (a Light Reading sister company).
Omdia forecasts another decline this year of between 4% and 6%. Nokia’s mobile business, meanwhile, has just suffered a first-quarter operating loss of €42 million (US$45 million), after sales dropped 39% year-over-year, to less than €1.6 billion ($1.7 billion). It worryingly suggests there is not enough pie to keep even a few vendors well nourished.
https://www.lightreading.com/open-ran/nokia-plight-shows-need-for-samsung
Research from Omdia, a Light Reading sister company, reads like a horror novel for anyone in the radio access network (RAN) products business. Sales for the first three months of 2024 fell more than 20%, compared with the year-earlier quarter. Omdia has revised down its outlook after the worse-than-expected start to the year. Previously it had been looking at a 4% to 6% drop. Sales will fall 7% to 9%, according to its latest figures.
Analyst Stefan Pongratz at Dell’Oro Group says the RAN market a “disaster” in a recent update. The results in the first quarter were exceptionally weak, underpinned by poor results across most suppliers. Preliminary findings suggest that the overall 2G-5G RAN market—including baseband plus radio hardware and software, excluding services—declined 15 to 30 percent in 1Q 2024, resulting in a third consecutive quarter of double-digit contractions.
“The velocity of the deceleration is now simply unprecedented.” His preliminary estimates point to a year-over-year decline in RAN spending of up to 30% – and no less than 15% – for the first quarter. This range makes it the steepest drop that Dell’Oro has observed since 2000, the year of the dotcom crash.
https://www.linkedin.com/feed/update/urn:li:activity:7197000012113862658/
According to Dell’Oro, Nokia’s global RAN market share has declined YoY and it is #3 behind Huawei and Ericsson.
Maybe the U.S. government will arrange a U.S. buyer for Nokia (the whole company) in the national interest. That might curtail telecom equipment company layoffs.