Nokia cuts production, closes R&D facility

Nokia, the largest handset maker in the world, is cutting jobs at one plant and closing down at least one R&D site, as demand for cell phones plummets amid the worldwide recession.

The Finnish company said Wednesday that it will cut production at a key plant in Salo, Finland. It also plans to temporarily lay off about 20 percent to 30 percent of the plant’s 2,500 employees on a rotational basis. All workers at the plant will be affected as groups rotate through the temporary layoffs.

Nokia also plans to shut down one R&D center in Jyvaskyla, Finland, where it currently employs 320 people. And it will cut another 90 jobs elsewhere, the company said.

The cuts come as Nokia is being hit by slowing demand in the cell phone market. In January, executives told investors that they expect the overall cell phone market to drop around 10 percent in 2009.

For the fourth quarter of 2008, Nokia’s sales dropped 19 percent to $16.5 billion compared with the same period a year earlier. Its profit fell about 69 percent.

While the overall cell phone market has declined, smartphones sales have actually been growing. In the fourth quarter, smartphone sales were up about 22.5 percent year over year, buoyed by new products from Apple and Research In Motion. But Nokia has actually been losing share in this high-end niche to these competitors.

To cope with the deteriorating economic situation, Nokia CEO Olli-Pekka Kallasvuo told investors last month on its quarterly conference call that the company plans to slash annual costs by about $905 million by the end of 2010. Kallasvuo also acknowledged that the cost cutting would likely result in job cuts.

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