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How Nokia Plans to Cut Overhead Costs

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Nokia to automate financial reporting

Nokia (NOK) plans to automate certain tasks in its finance department in a bid to cut costs and improve efficiency, the company’s CFO, Kristian Pullola, told the Wall Street Journal recently. The company is looking to automate financial forecasting and reporting tasks, a measure that will allow it to reduce its head count and subsequently cut costs.

Nokia employs ~100,000 people globally. The company has not disclosed how many jobs it may shed by automating the above-mentioned finance tasks.

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Nokia absorbed $1.9 billion in expenses

Nokia incurred $1.9 billion in operating expenses in the second quarter. The company is undergoing a cost-cutting program, under which it’s aiming to eliminate $1.4 billion in costs by the end of 2018. The planned automation of financial tasks and expected head count reduction are part of the efforts the company is making to achieve its cost-cutting goal.

Nokia operates in a challenging market

The need to cut jobs to improve efficiency at Nokia can be linked to the challenging market in which telecommunications equipment vendors operate. Spending on 4G (fourth-generation) systems has peaked, and new spending on 5G (fifth-generation) systems still isn’t high enough to make up for the weak demand for 4G systems.

Nokia’s revenue fell 5.5% YoY (year-over-year) in the second quarter, weighed down by the Networks division, in which revenue fell 6.0% YoY. Ericsson’s (ERIC) revenue fell ~1.0% in the second quarter. Samsung’s (SSNLF) revenue fell 4.1% YoY in the period.

Sony (SNE) and Cisco Systems (CSCO) grew their revenues 5.1% and 5.9%, respectively, YoY in the second quarter.

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