Nokia closes down R&D centre, slashes 320 positions, temporarily lays off 2,500 workers

No.1 mobile phone manufacturer Nokia Corp. said today it would close a research centre in Finland and slash up to 320 jobs in a move to save costs as the global economic downturn hit the mobile phone industry. It also announced temporary layoffs.

Nokia will close the research and development center in Jyvaskyla, southern Finland by the year-end, the world's largest mobile phone maker said. All 320 people working there will be affected, it said.

The Finnish company is also planning to temporarily lay off some 2,500 workers at a plant in Salo, on the southern coast, although production there will continue. It will concentrate its Finland-based mobile devices R&D operations in Tampere, Oulu, Salo and the metropolitan Helsinki area.

According to the company, the planned change aims at adjusting the production capacity of its Devices unit to reflect the portfolio cuts, increase efficiencies in its R&D operations and reduce operating expenditure. The company also targets the optimal use of competencies and infrastructure.

Mobile phone sales are set to dive this year, affected by consumers' reluctance to spend on new gadgets in the midst of the economic recession and large inventories built up by phone sellers at the end of last year. Nokia, which plans to slash annual costs at its key handset unit by more than €700 million ($905 million), said it would continue to seek savings in operational expenses, looking at all areas and activities

"With these plans, we aim to scale down Salo production to reflect reduced market demand, while operations in the factory continue uninterrupted," said Juha Putkiranta, from Nokia's demand supply network department. "This is one of the measures we are taking to adjust our global demand supply network to the current situation."

Nokia said it would also lay off some 90 employees as it discontinues some operations in the global support and new businesses departments.

Last month, Nokia warned of imminent cost-cutting measures after its fourth-quarter net profit crashed 69 percent to €576 million ($744 million) from €1.8 billion in 2007. It also reported a loss of market share in the period - to 37 per cent, from 38 per cent in the previous quarter and 40 percent in the fourth quarter of 2007. (See: Nokia posts 69 per cent profit drop in fourth quarter, loses market share to rivals)

On average, Nokia's earnings per share is expected to fall to €0.08, the weakest level since the third quarter of 2001, when all vendors sold a total of 94 million phones - less than Nokia is set to sell alone this quarter. Turnover at Nokia's key phone unit is expected to slump 31 per cent, hurting group profits, with underlying operating profit seen plunging 65 per cent from a year ago.

Last year, Nokia remained the No.1 cell phone maker selling 468 million handsets, up 7 per cent on 2008. But its net profit plunged 42 per cent to €4 billion, while sales decreased 1 percent to €51 billion. Nokia stock was unchanged in Helsinki, at €9.77 ($12.67), in late morning trading.