Dealing with a continued decline in handset sales, Finland-based Nokia will make additional cuts to its workforce.
Nokia plans to downsize information-technology activities in its corporate development office by cutting 450 employees globally. The reduction in employment is part of Nokia's plans to cut costs and adjust its business operations based on market demand.
"The announcement makes sense and this isn't Nokia's first announcement related to apps and service as they have been going through major restructuring," said Jeff Orr, senior analyst of mobile content at ABI Research. "This poses a bit of concern, however, in the fact that they had to come back and say we have to go deeper."
While cutting costs is one way to stay competitive, Nokia is hoping to increase its bottom line by adding a variety of third-party partners, including social networking and image sites, to its image capture and sharing features on its handsets.
"The news is that we have announced our plans to focus the strategy of our services unit to create an even better user experience across our portfolio of consumer services (maps, messaging, music, games, etc), to allow us to accelerate the development of a common platform and therefore increase the opportunities for third parties," said Laurie Armstrong, a Nokia spokesperson.
Nokia is going to make its mobile games available through the Ovi Store in addition to its existing channels. "This will create a more simplified experience for Nokia's millions of consumers, while bringing more publishing opportunities for smaller and independent games publishers in the Nokia ecosystem," Armstrong said.
Tuesday's announcement was expected, according to Orr. "They were already on this path and had announced several services through Ovi, including branded e-mail accounts, app storefront in several markets, branded maps."
Nokia has had several rounds of layoffs in the past year. In January the company said it would cut 1,000 positions through a voluntary resignation program. In March, Nokia announced an additional 700 job cuts, blaming weakening demand.
"This shift is an ongoing trend we are seeing from the company and it makes sense during this time," Orr said. "Fundamentally, it is a shift from acquisition to partnership and it is a good time for the company to examine its core competency and be pragmatic to pare back its core offering and what essentially Nokia does best and make alliances with other organizations that can add value."
Handset vendors shipped 258 million handsets by the end of the quarter, an 11 percent year-over-year decline, according to ABI Research.
Nokia was beaten out by Sony Ericsson for the largest contractions, according to ABI analysts, who also said Nokia will breathe a sigh of relief once its latest smartphone, the N97, enters the market sometime this year.
Until now, Nokia has had a fair amount of success with the E71, but needs to beef up its touchscreen product lines, according to ABI.
"In addition to the obvious business and consumer benefits, these changes will enable us to realize further cost efficiencies as we will be able to streamline some operations in various entities of the services organization and continue our focused investments for future offerings," Armstrong said.