Nokia Cuts Production, Reorganizes as Phone Market Dives

Cell phone maker Nokia said today it would reorganize its research and development operations and cut production at its key plant in its native Finland as demand for handsets has dropped.

The Finnish company said it will slash annual costs at its key handset unit by more than $905 million and close down its site in Jyvaeskylae by the end of this year.

At the Salo plant, a cornerstone of the company's rise in 1998, Nokia plans to temporarily lay off about 2,500 rotational staff.

Last month, Nokia announced sharply shrinking profits due to falling handset prices and sales, and said it would launch a cost cutting program that would include job cuts.

"The planned closure of the Jyvaeskylae site is an unfortunate, yet unavoidable measure," said Peter Roepke, Senior Vice President at Nokia's Devices Research and Development. "We must adjust our resources to reflect reduced market demand in order to maintain our competitiveness also in the future."

Nokia will focus its Finnish research and development operations to the Helsinki region, Tampere, Oulu and Salo.