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Why is Nokia cutting 10,000 jobs?

Finnish mobile phone giant Nokia has announced that it is to cut a massive 10,000 jobs worldwide by the end of next year.

Shares in Nokia fell by as much as 8% on the news that it was reducing its workforce in order to keep costs down.

It is also planning to close a number of plants around the world, including research and development projects in Ulm, Germany, and Burnaby, Canada. Nokia has also said it plans to close its manufacturing plant in Salo, Finland. However, research and development will still be carried out there.

It is certainly a drastic move for Nokia, but not one that is all that surprising to many people. So how did the former king of the mobile phone industry find itself struggling?

Smartphone challenge for Nokia

Nokia once ruled supreme in the mobile world, pioneering some excellent feature phones. But since Apple brought the smartphone to our attention, things have turned sour.

While other manufacturers were quick to try and catch up with Apple, such as Samsung and HTC, Nokia found itself left out in the cold.

Nokia Lumia Job Cuts

It has launched a fresh assault on the smartphone market with its critically-acclaimed Lumia range, but sales have so far failed to live up to expectations.

Nokia’s challenge at the low end

It’s not just at the high end that Nokia is being squeezed – it’s also being put under pressure by competing manufacturers and the bottom of the market.

While feature phones are still Nokia’s bread and butter, they are losing out to manufacturers in Asia, such as ZTE, who are able to undercut the Finnish phone company.

Nokia has said it expects not to see an improvement in fortunes in the third quarter of this year, but will continue to focus on smartphones and feature phones.

“Nokia is significantly increasing its cost-reduction target for devices and services in support of the streamlined strategy announced today,”

“With these planned actions, we believe our devices [and] services business has a clear path to profitability. Nokia intends to maintain its strong financial position while proceeding aggressively with actions aimed at creating shareholder value.”

said chief financial officer Timo Ihamuotila.

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