Nokia flails, announces cuts at smartphone plant

The double whammy of a rough economy and a weak product lineup is rocking Nokia's Salo plant this week. The company announced on Wednesday that it'll slow production at the last major handset factory in Europe, instituting a system of rotating idle time for staff there.

Juha Putkiranta, a senior Nokia official, said that the plan -- which includes instituting a system of rotating idle time for Salo staff -- will keep things moving there, reducing the impact on employees while addressing...the obvious. "We aim to scale down Salo production to reflect reduced market demand, while operations in the factory continue uninterrupted," Putkiranta said in a company statement.

Elsewhere at Nokia, the company will shutter its research operation in Jyvaskyla, Finland, affecting 320 employees. that concentrates Nokia's Finnish R&D efforts at its Helsinki, Salo, Oulu, and Tampere facilities.

Nokia also says it expects to eliminate 90 jobs elsewhere at the company. The latter set of cuts will affect approximately 60 employees in global support functions and 30 employees in the planned ramping down and focusing of certain development activities in the New Businesses entity in Services, the company said.

The shock isn't that a mobile-phone manufacturer is hurting; as the economic crisis deepens, even sales predictions that used to seem pessimistic are being revised downward. But Nokia's in a particularly rough spot, notes independent technology analyst and friend of Betanews Carmi Levy, because the one product category that's less decimated than others -- smartphones -- is a category in which Nokia's got no traction.

"Like every other handheld vendor on the planet," he notes, "Nokia is negotiating some seriously turbulent waters because of the global economic downturn. Nokia's second, unique vulnerability lies in its lack of compelling high-end, high-volume smartphones to go head to head with Apple's iPhone and RIM's BlackBerry."

Simply put, Nokia's not able to compete, and not for want of effort. "Nokia's history in the smartphone market is a sad one, marked by a virtually unbroken string of misfires," Levy says, noting that pre-release buzz never quite works out to bottom-line achievement for the Finnish manufacturer.

There are those who would argue that Nokia has produced great smartphones and simply flopped on promoting them. The E70, for instance, was fanatically beloved by its users, and yet the company was unable to make the case for the clever dual-keypad phone as a competitor to the iPhone.

Levy agrees. "At various times in its history, Nokia has introduced compelling devices that captured the imagination of high-end consumers," he says. "The E70 lineup is a perfect example. Pound for pound and feature for feature, there's no reason why this device shouldn't be able to go head-to-head with the average BlackBerry. However, Nokia has been a miserable failure in partnering with carriers to bring its high end offerings to market.

"The vendor has not carved out distribution channels at all levels of the smartphone market," he continues, "and as a result has relegated availability of these admittedly solid smartphones to the relatively few fans with the deep pockets and the patience to find them. They're playing in a niche market, and there's just not enough money to be made there. Nokia needs to find some way to drive their smartphones into the mainstream by reaching out to carriers just as Apple and RIM have done. Great hardware is no longer enough."

Whatever Nokia does, they're going to have to do without serious revenue support from the company's traditional bread-and-butter -- not-so-smartphones. Sales worldwide on such phones are utterly flat, with no relief in sight.

"It's a lose-lose situation for Nokia," remarks Levy, "and in the absence of groundbreaking products surrounded by ecosystems that let consumers and businesses do more with their cool new devices, the bad news will continue to flow out of Finland."