* Plans to cut 20 pct of Salo plant staff through 2010
* Says no need for full capacity in current market
* Plans could hurt assembly companies
* Has said 2010 handset market up 10 pct, smartphones more
(Adds analysts, services providers)
By Tarmo Virki, European technology correspondent
HELSINKI, Dec 13 Nokia NOK1V.HE plans to cut
jobs through 2010 at its only Finnish plant in the town of
Salo, even though the company has forecast the handset market to rebound next
year, a spokesman said on Sunday.
The world's biggest handset maker has suffered sharply in
the economic downturn and has lost ground in the battle for smartphone customers
to Apple (AAPL.O) and RIM RIMM.O RIM.TO, prompting it to cut costs.
The spokesman said cuts lasting up to 90 days would affect
20 percent of 2,000 staff at any one time.
"In this market situation, taking into account usual
seasonality, at this point we see no need for full capacity,"
the spokesman said, adding the company would start talks with
staff about the plan on Monday.
Nokia said on Dec. 2 it expects cellphone market volumes to
grow around 10 percent next year, after this year's sharp fall,
while the smartphone market would grow even faster.
The Salo plant -- one of the nine major factories Nokia has
around the world -- is the last major handset plant in Western
Europe, and focuses on more advanced phone models.
The smartphone market has exploded since Apple introduced
the iPhone in mid-2007, and it is expected to surge also next
year, but increasing competition is expected to sharply hit the
"Nokia's furloughs at Salo are a clear symptom of the
brutal pricing environment vendors are facing," said analyst
Pablo Perez-Fernandez from MKM Partners.
"The company needs to do everything possible to protect
profit margins, and Finland is relatively expensive," he said.
Finnish media has speculated the company could also close
Salo plant, but Nokia Chief Executive Olli-Pekka Kallasvuo told
a local paper last month the company was committed to remaining
in the town where Nokia has its roots.
BUILDING FUTURE, HITTING SERVICES FIRMS
In the midst of a recession, Nokia has cut annual costs by
around 1 billion euros ($1.49 billion) at its phone unit.
Next year the company plans to also to slash its handset
portfolio, aiming to introduce fewer, more iconic, products.
"They are resizing Nokia: cutting down the business,
focusing on fewer products," said John Strand, chief executive of Strand
Consult. "When they succeed in that, when probability comes back, they can
Nokia's plans to cut production in Salo do not bode well
for manufacturing suppliers whose services Nokia dropped in
early 2009 amid recession, but who have been looking for new
orders as cellphone market recovers.
Nokia has repeatedly said it would not use manufacturing
services companies when it has idle capacity itself.
Foxconn (2038.HK), Jabil Circuit (JBL.N), China's BYD and
Finnish Elcoteq ELQAV.HE have been its main suppliers.
Research firm iSuppli forecast earlier this year Nokia's
pullback to cost subcontractors more than $5 billion.
In 2008 Nokia outsourced about 17 percent of manufacturing volume of
mobile-phone engines, which include the phone and software that enable its basic
(Reporting by Tarmo Virki, editing by Martin Golan)