Nokia Corp’s (NYSE:NOK) shares were losing about 4 percent in morning trading in Helsinki, as well as approximately 3 percent in pre-market activity on the NYSE, after the leading Finnish telecommunications company reported a sharp drop in its third-quarter profit and revenue on Thursday amid ongoing macroeconomic challenges.

Additionally, the company maintained its financial outlook for 2023 but at the lower end of the net sales range. The company also reaffirmed its long-term comparable operating margin target of at least 14%, to be achieved by 2026.

Separately, Nokia announced a cost-reduction program, planning to cut up to 14,000 jobs to navigate the current market uncertainty. The company is streamlining its operational model by integrating sales teams into business groups.

The new cost-reduction program is designed to reduce the cost base by 800 million euros, to 1.20 billion euros on a gross basis over a three-year period. This represents a reduction of 10% to 15% in personnel expenses. Cost savings are expected to be primarily achieved in mobile networks, cloud services, and network, as well as corporate functions at Nokia.

Nokia anticipates savings of at least 400 million euros in 2024 and an additional 300 million euros in 2025. The program is expected to result in an organization with 72,000 to 77,000 employees, compared to Nokia’s current 86,000 employees.

The company emphasized that the exact scale of the program will depend on market demand evolution and that cost savings are expected to be achieved on a net basis, but the magnitude will depend on inflation rates.

Looking ahead, for the full year 2023, the telecommunications company continues to expect net sales in the range of 23.2 billion euros to 24.6 billion euros, reflecting a variation of 4% lower to 2% higher year-over-year in constant currency terms.

Comparable operating margin is expected to remain in the range of 11.5% to 13%, assuming the closing of pending deals in Nokia Technologies.

Regarding Nokia Technologies, the company remains confident that the business group will return to an annual net sales rate of 1.4 billion euros to 1.5 billion euros.

Additionally, the Board decided to distribute a dividend of 0.03 euros per share. The dividend record date is October 24, and the dividend will be paid on November 2.

Pekka Lundmark, President and CEO, commented: “Looking ahead, while our third-quarter net sales were impacted by ongoing uncertainty, we expect a more typical seasonal improvement in our network business in the fourth quarter. Based on this and assuming we resolve the pending renewals affecting Nokia Technologies, we are approaching the lower end of our net sales guidance for 2023 and the midpoint of our comparable operating margin guidance.”

In the third quarter, Nokia’s profit dropped by 69% to 133 million euros, compared to 428 million euros in the previous year. Earnings per share decreased by 75% to 0.02 euros, down from 0.08 euros in the previous year.

On a comparable basis, profit was 299 million euros or 0.05 euros per share, down from 551 million euros or 0.10 euros per share in the previous year.

Operating profit decreased by 53% to 241 million euros, and comparable operating profit declined by 36% to 424 million euros. Comparable operating margin decreased by 350 basis points compared to the previous year, to 4.8%.

In the quarter, net sales decreased by 20% to 4.98 billion euros, down from 6.24 billion euros in the previous year. Net sales decreased by 15% in constant currency, as macroeconomic uncertainty and higher interest rates continued to pressure operator spending.

Network infrastructure declined by 14% in constant currency, due to weaker spending impacting IP Networks. In Mobile Networks, net sales decreased by 19%. In Helsinki, Nokia’s shares are currently trading at 3.118 euros, a drop of 4.36%. In pre-market activity on the NYSE, shares were trading at $3.28, a decrease of 3.24%.

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