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UPDATE 2-Nokia to cut production as phone market dives

 * To cut production at Salo plant in Finland
 * To cut 410 jobs
 
 (Adds details, background, wraps separate POLL)
 HELSINKI, Feb 11 (Reuters) - Cellphone maker Nokia
NOK1V.HE said on Wednesday it would cut production at its key
Salo plant in Finland as demand for handsets has dropped.
 Cellphone sales are set to dive this year, affected by
consumers' reluctance to spend on new gadgets in the midst of
the economic recession and large inventories built up by phone
sellers at the end of last year.
 Nokia, which plans to slash annual costs at its key handset
unit by more than 700 million euros ($905 million), said it
would continue to seek savings in operational expenses, looking
at all areas and activities.
 At the Salo plant, a cornerstone of the company's rise to
become the world's top mobile phone maker in 1998, it will
temporarily lay off the whole staff of 2,500 on a rotational
basis, with between 20 percent and 30 percent of staff idle at a
time.
 "With these plans, we aim to scale down Salo production to
reflect reduced market demand, while operations in the factory
continue uninterrupted," Juha Putkiranta, a senior official at
Nokia, said in a statement.
 The Salo plant -- the last major handset factory in Western
Europe after Nokia closed its Bochum, Germany site last year --
has traditionally focused on making more advanced phone models.
 Analysts and the industry in general expect the smartphone
market -- where Nokia has lost market share to Apple AAPL.O
and Research in Motion RIM.TO -- to grow some 10 percent to 20
percent this year, despite a fall in the overall market.
  However, Nomura forecast on Feb. 10 for no growth in
smartphone market in 2009, saying industry growth views were
unrealistic in the economic environment. [ID:nLB189039]
 "I find that the industry view that there will be good
growth in smartphones in 2009 to be fundamentally flawed,"
Nomura technology specialist Richard Windsor said in a note.
 "I fear that come the end of June, we will be staring down
the barrel of further cuts to estimates for smartphones."
 Nokia also said it would close a research site employing 320
people in the Finnish town of Jyvaskyla. It said it will also
look to cut 90 jobs elsewhere.
 Analysts expect handset market volumes to fall some 18
percent in the January-March quarter, while Nokia is expected to
report its weakest quarterly earnings in more than seven years,
a Reuters poll showed on Wednesday. [ID:nLS41117] [ID:nLB117216]
 On average, Nokia's earnings per share is expected to fall
to 0.08 euros, the weakest level since the third quarter of
2001, when all vendors sold a total of 94 million phones -- less
than Nokia is set to sell alone this quarter.
 Turnover at Nokia's key phone unit is expected to slump 31
percent, hurting group profits, with underlying operating profit
seen plunging 65 percent from a year ago.
 By 1000 GMT, Nokia shares were flat at 9.79 euros, against a
weaker Dow Jones Stoxx European Technology index .SX8P.
(Reporting by Tarmo Virki; Editing by Andrew Macdonald)


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