AI & ML Engineer for 5G RAN & GPU-Driven Software
Light Reading, Inc., New York, NY, United States
Nokia targets €1B profit boost via mobile rejig and 5,000 more job cuts
Nokia CEO Justin Hotard is collapsing four business groups into two and slashing costs in a bid to revive the company.
Nokia's Justin Hotard (left) addresses visitors at the official opening of the company's new Oulu campus in September. (Source: Nokia)
The 13-note Nokia ringtone, snatched from an obscure classical guitar piece by nineteenth-century Spanish composer Francisco Tárrega, is rarely heard in 2025. Smothered years ago by Apple's dreadful iPhone marimba, which sounds like a child bashing a toy xylophone, it was briefly resurrected in front of a New York audience this week by Justin Hotard, Nokia's CEO, as a reminder of the Finnish company's heyday during the mobile-phone boom of the late 1990s. But it was also a reminder that mobile continues to be Hotard's number-one problem.
He was a humble engineer working on 2G mobile networks when that ringtone was first heard, Hotard told investors and analysts at Nokia's capital markets (CMD) day. Almost 30 years later, he is Nokia's first American CEO and at times has sounded like the most ambitious leader the company has had since its ignominious retreat from the handsets market. Nokia is unlikely ever to recapture the brand recognition it previously enjoyed among ordinary consumers. But in what Hotard likes to call the "AI supercycle," it could – as one of the world's biggest developers of network infrastructure – play the same kind of role that Cisco had during the Internet boom.
Its financial performance, however, has remained a disappointment, chiefly due to the weakness of the mobile networks business group that acquired its present shape under Pekka Lundmark, Nokia's previous CEO. "This is a place where we've had challenges," said Hotard on stage in New York. "It is first of all very clear that this is a business that has not delivered acceptable returns. It is ours. We own it. We know we need to fix it."
Fixing it starts with a major restructuring across the whole of Nokia that shrinks the number of business groups from the four it had under Lundmark to just two. One of them, network infrastructure (NI), already existed and is essentially unaffected by this week's move. It houses the fixed, Internet Protocol and optical units and was fattened earlier this year by Nokia's acquisition of Infinera, a US optical networks specialist whose CEO, David Heard, replaced Federico Guillén as the NI president in June.
MI or Mission Impossible?
But the changes made this week are all about the other three parts, merging them into one supergroup that Nokia calls mobile infrastructure (or MI). Hotard will run it on an interim basis until a full-time president is found. Tommi Uitto, the former president of mobile networks, is to leave Nokia's group leadership team on December 31.
From a sales perspective, the biggest component of MI is what Nokia currently refers to as the radio unit, which formed the bulk of the now-deceased mobile networks business group. In the last year, it has generated about €7.5 billion (US$8.7 billion) of Nokia's sales, approximately 40% of company revenues in 2024. Added to that, with annual revenues of about €2.5 billion ($2.9 billion), are Nokia's core network assets, formerly part of cloud and network services. But most of the profits will come from the third "standards" unit, or what was originally known as Nokia Technologies. A licensor of the company's intellectual property, it made an operating profit of €1.1 billion ($1.3 billion) on revenues of €1.4 billion ($1.6 billion) in the last year.
The effect of the rejig will be to create a group with beefier margins, compared with the earlier mobile networks business. It would theoretically allow Nokia to fund radio activities with licensing profits, although this would obviously hurt those margins. The restructuring will also obscure the performance and profitability of the radio part. So far this year, mobile networks has not looked pretty, with an operating loss of €64 million ($74 million) on sales of €5.3 billion ($6.1 billion) for the first nine months. The market for 5G radio access network (RAN) products has been in decline, and Nokia has struggled to cover its costs after the loss of important contracts with AT&T and Verizon since 2020 in the lucrative US market.
Hotard's turnaround strategy for radio is based heavily on Nokia's recently announced AI-RAN partnership with Nvidia. For a 3% stake, the chips giant has invested $1 billion in the Finnish company, which is using those funds to develop future 5G and 6G products that will run on Nvidia's graphics processing units (GPUs). That allows Nokia to cut research and development spending on custom silicon and reallocate funds to Nvidia-compatible software.
"Ultimately, what this means for us is we're moving away from a legacy hardware model to one that is built much more around software," said Hotard. "What may not be apparent is this also frees capital. We can shift investment into software and ultimately deliver differentiation and value where it matters – and this is the shift from proprietary to general-purpose hardware."
Yet these AI-RAN products are not expected to be commercially available until 2027, at the earliest. Amid telco concern about the expense and energy efficiency of the hardware, they represent a big gamble by Hotard on the future of radio. "We believe that the GPU-based architecture provides the greatest opportunity not only to deliver the initial capability but to deliver long-term capital efficiency for these customers," said Hotard in response to a Light Reading question. "Why? Because once they deploy a GPU, I then move into being able to enhance services without the need to upgrade the underlying hardware."
What's commonly misunderstood, he added, is that existing customers of Nokia's AirScale baseband products will be able to install GPUs without replacing the whole unit. "That's why it's designed to fit into an AirScale solution and in fact fit into the 1 million units of installed base which we have with AirScale today," said Hotard.
More cuts ahead
Until then, however, Nokia does not appear to have banked on revenue growth in mobile. It provided no sales guidance for MI at the CMD event but expects addressable market revenues from the sale of RAN products and services to be €39 billion ($45 billion) this year and the same in 2028.
Its forecast that annual operating profits will soar from about €2 billion ($2.3 billion) in the last year to between €2.7 billion ($3.1 billion) and €3.2 billion ($3.7 billion) by 2028 instead anticipates a relatively modest rate of growth at the NI group and some enthusiastic pruning of costs. Analysts were clearly disappointed by the outlook of just 6% to 8% sales growth for NI over the 2025 to 2028 period. Such conservatism likely explains why Nokia's share price fell 7% in Helsinki on November 19, eroding a big chunk of the improvement it had seen after Nvidia acquired that 3% stake.
Cuts will come largely from a further reduction in headcount as part of efficiency plans announced in 2023. Back then, Nokia was expecting to slash between 9,000 and 14,000 jobs by the end of 2026 from a workforce of about 86,000. It has now landed on the upper figure of 14,000 and reckons it has another 5,000 to go, with only 2,500 employees notified of impending redundancy so far. Curiously, however, it gave a headcount figure of 84,000 as the original starting point, 2,000 less than it cited in 2023. Nokia finished 2024 with 75,600 employees, according to its latest annual report. All this represents a dramatic downsizing for a company that employed more than 103,000 people as recently as 2018.
Various small loss-making ventures are also being hived off into a new "portfolio businesses" segment while Nokia sniffs around for prospective buyers. They include the unit that makes customer premises equipment for fixed wireless; a site implementation and outside plant business for fixed networks; the microwave radio business that previously sat in mobile networks; and, perhaps more surprisingly, the enterprise campus edge business that was part of cloud and network services. Nokia has regularly called out private 5G as a fast-growing market, but it presumably saw little success on the core network side. In total, it reports about €900 million ($1.04 billion) in annual revenues from those portfolio businesses as well as roughly €100 million ($115 million) in operating losses.
There will be much more to pick over in the days and weeks ahead. Relatively little was said in New York about the establishment of Nokia Defense, an "incubation unit" for technologies sold to the US military and other NATO countries. But this may find itself catering to one of the fastest-growing segments of the market. A firmer anti-Huawei stance by European governments could translate into a €2.5 billion ($2.9 billion) opportunity for Nokia and its politically acceptable rivals, according to Hotard. But after years of semi-tough talk and no action by European authorities, he is understandably reluctant to run Nokia in the expectation that governments will finally take steps against Chinese vendors.
The investor focus after today, though, will be on the new MI group and its likely prospects. Many others share Hotard's apparent view that RAN is too small and stagnant a market to sustain costly investments in its own custom silicon. Piggybacking on general-purpose processors, with their economies of scale and speedier upgrade cycle, makes a lot of sense, and Nvidia seems to be taking over the world. But a very small number of big telcos have shown much interest in a GPU-based RAN so far. Hotard desperately needs that to change.
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
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Nokia CEO Justin Hotard is collapsing four business groups into two and slashing costs in a bid to revive the company.
Nokia's Justin Hotard (left) addresses visitors at the official opening of the company's new Oulu campus in September. (Source: Nokia)
The 13-note Nokia ringtone, snatched from an obscure classical guitar piece by nineteenth-century Spanish composer Francisco Tárrega, is rarely heard in 2025. Smothered years ago by Apple's dreadful iPhone marimba, which sounds like a child bashing a toy xylophone, it was briefly resurrected in front of a New York audience this week by Justin Hotard, Nokia's CEO, as a reminder of the Finnish company's heyday during the mobile-phone boom of the late 1990s. But it was also a reminder that mobile continues to be Hotard's number-one problem.
He was a humble engineer working on 2G mobile networks when that ringtone was first heard, Hotard told investors and analysts at Nokia's capital markets (CMD) day. Almost 30 years later, he is Nokia's first American CEO and at times has sounded like the most ambitious leader the company has had since its ignominious retreat from the handsets market. Nokia is unlikely ever to recapture the brand recognition it previously enjoyed among ordinary consumers. But in what Hotard likes to call the "AI supercycle," it could – as one of the world's biggest developers of network infrastructure – play the same kind of role that Cisco had during the Internet boom.
Its financial performance, however, has remained a disappointment, chiefly due to the weakness of the mobile networks business group that acquired its present shape under Pekka Lundmark, Nokia's previous CEO. "This is a place where we've had challenges," said Hotard on stage in New York. "It is first of all very clear that this is a business that has not delivered acceptable returns. It is ours. We own it. We know we need to fix it."
Fixing it starts with a major restructuring across the whole of Nokia that shrinks the number of business groups from the four it had under Lundmark to just two. One of them, network infrastructure (NI), already existed and is essentially unaffected by this week's move. It houses the fixed, Internet Protocol and optical units and was fattened earlier this year by Nokia's acquisition of Infinera, a US optical networks specialist whose CEO, David Heard, replaced Federico Guillén as the NI president in June.
MI or Mission Impossible?
But the changes made this week are all about the other three parts, merging them into one supergroup that Nokia calls mobile infrastructure (or MI). Hotard will run it on an interim basis until a full-time president is found. Tommi Uitto, the former president of mobile networks, is to leave Nokia's group leadership team on December 31.
From a sales perspective, the biggest component of MI is what Nokia currently refers to as the radio unit, which formed the bulk of the now-deceased mobile networks business group. In the last year, it has generated about €7.5 billion (US$8.7 billion) of Nokia's sales, approximately 40% of company revenues in 2024. Added to that, with annual revenues of about €2.5 billion ($2.9 billion), are Nokia's core network assets, formerly part of cloud and network services. But most of the profits will come from the third "standards" unit, or what was originally known as Nokia Technologies. A licensor of the company's intellectual property, it made an operating profit of €1.1 billion ($1.3 billion) on revenues of €1.4 billion ($1.6 billion) in the last year.
The effect of the rejig will be to create a group with beefier margins, compared with the earlier mobile networks business. It would theoretically allow Nokia to fund radio activities with licensing profits, although this would obviously hurt those margins. The restructuring will also obscure the performance and profitability of the radio part. So far this year, mobile networks has not looked pretty, with an operating loss of €64 million ($74 million) on sales of €5.3 billion ($6.1 billion) for the first nine months. The market for 5G radio access network (RAN) products has been in decline, and Nokia has struggled to cover its costs after the loss of important contracts with AT&T and Verizon since 2020 in the lucrative US market.
Hotard's turnaround strategy for radio is based heavily on Nokia's recently announced AI-RAN partnership with Nvidia. For a 3% stake, the chips giant has invested $1 billion in the Finnish company, which is using those funds to develop future 5G and 6G products that will run on Nvidia's graphics processing units (GPUs). That allows Nokia to cut research and development spending on custom silicon and reallocate funds to Nvidia-compatible software.
"Ultimately, what this means for us is we're moving away from a legacy hardware model to one that is built much more around software," said Hotard. "What may not be apparent is this also frees capital. We can shift investment into software and ultimately deliver differentiation and value where it matters – and this is the shift from proprietary to general-purpose hardware."
Yet these AI-RAN products are not expected to be commercially available until 2027, at the earliest. Amid telco concern about the expense and energy efficiency of the hardware, they represent a big gamble by Hotard on the future of radio. "We believe that the GPU-based architecture provides the greatest opportunity not only to deliver the initial capability but to deliver long-term capital efficiency for these customers," said Hotard in response to a Light Reading question. "Why? Because once they deploy a GPU, I then move into being able to enhance services without the need to upgrade the underlying hardware."
What's commonly misunderstood, he added, is that existing customers of Nokia's AirScale baseband products will be able to install GPUs without replacing the whole unit. "That's why it's designed to fit into an AirScale solution and in fact fit into the 1 million units of installed base which we have with AirScale today," said Hotard.
More cuts ahead
Until then, however, Nokia does not appear to have banked on revenue growth in mobile. It provided no sales guidance for MI at the CMD event but expects addressable market revenues from the sale of RAN products and services to be €39 billion ($45 billion) this year and the same in 2028.
Its forecast that annual operating profits will soar from about €2 billion ($2.3 billion) in the last year to between €2.7 billion ($3.1 billion) and €3.2 billion ($3.7 billion) by 2028 instead anticipates a relatively modest rate of growth at the NI group and some enthusiastic pruning of costs. Analysts were clearly disappointed by the outlook of just 6% to 8% sales growth for NI over the 2025 to 2028 period. Such conservatism likely explains why Nokia's share price fell 7% in Helsinki on November 19, eroding a big chunk of the improvement it had seen after Nvidia acquired that 3% stake.
Cuts will come largely from a further reduction in headcount as part of efficiency plans announced in 2023. Back then, Nokia was expecting to slash between 9,000 and 14,000 jobs by the end of 2026 from a workforce of about 86,000. It has now landed on the upper figure of 14,000 and reckons it has another 5,000 to go, with only 2,500 employees notified of impending redundancy so far. Curiously, however, it gave a headcount figure of 84,000 as the original starting point, 2,000 less than it cited in 2023. Nokia finished 2024 with 75,600 employees, according to its latest annual report. All this represents a dramatic downsizing for a company that employed more than 103,000 people as recently as 2018.
Various small loss-making ventures are also being hived off into a new "portfolio businesses" segment while Nokia sniffs around for prospective buyers. They include the unit that makes customer premises equipment for fixed wireless; a site implementation and outside plant business for fixed networks; the microwave radio business that previously sat in mobile networks; and, perhaps more surprisingly, the enterprise campus edge business that was part of cloud and network services. Nokia has regularly called out private 5G as a fast-growing market, but it presumably saw little success on the core network side. In total, it reports about €900 million ($1.04 billion) in annual revenues from those portfolio businesses as well as roughly €100 million ($115 million) in operating losses.
There will be much more to pick over in the days and weeks ahead. Relatively little was said in New York about the establishment of Nokia Defense, an "incubation unit" for technologies sold to the US military and other NATO countries. But this may find itself catering to one of the fastest-growing segments of the market. A firmer anti-Huawei stance by European governments could translate into a €2.5 billion ($2.9 billion) opportunity for Nokia and its politically acceptable rivals, according to Hotard. But after years of semi-tough talk and no action by European authorities, he is understandably reluctant to run Nokia in the expectation that governments will finally take steps against Chinese vendors.
The investor focus after today, though, will be on the new MI group and its likely prospects. Many others share Hotard's apparent view that RAN is too small and stagnant a market to sustain costly investments in its own custom silicon. Piggybacking on general-purpose processors, with their economies of scale and speedier upgrade cycle, makes a lot of sense, and Nvidia seems to be taking over the world. But a very small number of big telcos have shown much interest in a GPU-based RAN so far. Hotard desperately needs that to change.
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.
Börje Ekholm, Ericsson's CEO, thinks it is too early to pick a winner in the market for RAN silicon.
#J-18808-Ljbffr