The Finnish company had been the leading cell phone maker for 14 years and just last year was the leader in smartphones. Competition from rival companies, especially in the smartphone sector, has been a driving downward force for Nokia.
"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," Ben Wood, head of research at CCS Insight, told Reuters.
Prior to this announcement Nokia stock had taken a beating, down more than 50% in the past three months and has been down more than 15% today.
The stock's performance looks even worse going back three years. In June 2009 it traded around $15 a share, and has now fallen below $2.40.
Nokia's CEO Stephen Elop hopes these cuts can turnaround the company's prospects as many investors worry about Nokia's ability to stay afloat amid their cash problems.
"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Elop said in a statement.
With the cost of Nokia's debt rising, the most bearish of analysts in a Reuters poll last month said the company could be at risk of default if it fails to minimize its cash burn.
In just the past five quarters Nokia has gone through 2.1 billion euros in cash, a rate that would dry up the 4.9 billion cash reserve Nokia still has left.
Investors had hoped for signs of improvement from Nokia in its earnings expectations for this year after partnering with Microsoft Corp. (Nasdaq: MSFT) in 2011. The Lumia, which incorporates new Microsoft software, was anticipated to be a catalyst in Nokia's comeback plan but sales have been much worse than expected.
The recent layoffs will close the only remaining plant Nokia has in its home country of Finland and will bring the total job cuts to 40,000 since Elop took over as CEO in 2010.
Bernstein analyst Pierre Ferragu said the amount of cash that will be drained as Nokia restructures will weigh on the share price.
"We therefore see continued potential downside to the recent stock price and maintain our underperform rating," Ferragu told Reuters.
The Kroger Co. (NYSE: KR) boasts upside potential: For some positive news, Kroger announced better than expected financial results Thursday morning and its stock is up more than 4% as of 1 p.m.
Kroger reported that its first-quarter earnings rose 1.6% and it had a 5.8% revenue increase, 4.3% excluding fuel sales. Same-store sales rose 4.2% excluding fuel sales.
Kroger, the biggest supermarket chain in the United States., expects its fiscal year earnings which end Jan. 31 to be $2.40, up from the previously forecast $2.38. Kroger also said its board approved a new $1 billion share buyback program, replacing an authorization that ended on June 12.
Kroger stock is down more than 8% this year amid stiffer competition from membership stores such as Costco Corp. (Nasdaq: COST), discount retailers such as Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT), and even organic food chain Whole Foods Market Inc. (Nasdaq: WFM).
But Kroger has managed to rise above its traditional grocery-store competition. Kroger has increased customer traffic in recent quarters while others suffered losses. In the most recent quarter, Kroger's identical-store sales for those open more than 15 months rose 4.2%.
Wall Street's one-year price target for KR is $26.28, a 23% premium to its Wednesday closing price of $21.29.
The Dow Jones Industrial Average by 1 p.m. today was up almost 1% to 12,617.58.
Related Articles and News:
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- Money Morning:
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- The Wall Street Journal:
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