Is Nokia's "Reset" Bad News for Investors?
Telecom equipment and services giant Nokia (NYSE: NOK) is cutting between 5,000 and 10,000 names of its payroll over the next two years. The Finnish company calls it a "reset" of Nokia's cost structure. This sounds like a big deal, maybe even a panic-tinged act of crisis management but Nokia's stock barely moved on the news. Let me show you how Nokia's "reset" actually is a fairly standard and quite calm strategy shift.
Nokia will bring its employee count down by as much as 10,000 names over the next 18 to 24 months, starting from roughly 90,000 employees. The company expects to save more than $700 million per year by the end of this restructuring, but the savings won't go toward boosting Nokia's bottom line. Instead, the company will increase its R&D spending and infrastructure investments in a targeted manner. It's all about 5G networking, cloud computing, and digital infrastructure from this point on. All told, the restructuring charges should match the cost savings almost exactly.
We're not talking about a flurry of pink slips. Nokia will reduce its headcount in a slow and steady manner, largely by restricting new hires outside the chosen target areas. A few non-core operations will be closed along the way, but that's a small piece of the planned strategy shift.
Source Fool.com
