Telecommunications giant Nokia (NYSE:NOK) announced on Thursday its plan to cut 14,000 jobs, equivalent to 16% of its workforce over the next three years. The move is part of an extensive restructuring effort aimed at reducing costs by $1.3 billion amid a 20% sales decline and a staggering 69% drop in profits.
CEO Pekka Lundmark underscored the necessity for this substantial overhaul, attributing it to challenges such as inflation and escalating energy prices. Nokia, once a global leader in the mobile phone market before the advent of the iPhone, now focuses on telecom infrastructure. The company divested its mobile unit to Microsoft (NASDAQ:MSFT) in 2013.
Despite these challenges, Nokia holds more cash than debt on its balance sheet and has consistently been increasing its earnings per share, according to InvestingPro Tips. The Finnish company is also a prominent player in the Communications Equipment industry and is trading at a low earnings multiple of 4.08, as per InvestingPro data.
The Finnish company is grappling with macroeconomic uncertainties and intense competition in the 5G sector from rivals like Huawei. It has lost a substantial market share to these competitors. Adding to its woes, Nokia recently ended its relationship with MTS, Russia's top telecom service provider. The decision came after the company ceased sales following Russia’s invasion of Ukraine. Nokia had previously assisted a Russian surveillance system for approximately ten years.
The challenges Nokia faces are reflective of broader struggles within Western telecom companies. A prime example is Ericsson (BS:ERICAs), which has also had to implement significant layoffs due to decreasing demand.
Despite the current challenges, Nokia has some positive indicators. It has a high shareholder yield and the stock generally trades with low price volatility, which could be seen as a positive aspect for potential investors. However, seven analysts have revised their earnings downwards for the upcoming period, according to InvestingPro Tips.
With a market cap of 19.11B USD and a revenue of 27564.38M USD, Nokia's financial health seems to be robust. The company's PEG ratio stands at 0.03, indicating that it could be undervalued given the expected growth rates.
For more in-depth analysis and additional tips, readers may consider the InvestingPro product, which includes a total of 12 tips on Nokia, accessible at InvestingPro.
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