As a Motley Fool, it's my sworn duty to take contrarian positions whenever the situation merits. Just such a situation arose recently involving cell-phone giant Nokia (NYSE: NOK), and I'm ready to push what some people might consider a questionable call even further.
Down but not out
In a previous column, I took the decidedly un-vogue position that Nokia, far from being out of the smartphone game, is actually poised to make a comeback. I made this call based on the following factors:
- The company recently brought on bold, smart leadership in the form of CEO Stephen Elop.
- The company dumped its faltering Symbian smartphone platform in favor of Microsoft's (Nasdaq: MSFT) new, and so far favorably reviewed, Windows Phone 7 operating system.
- The company has a strong enough balance sheet and enough overall market share to plausibly effect a smartphone-market turnaround. (Nokia is still the world's largest maker of mobile phones by volume.)
Now, the company has announced that it's cutting jobs and closing a factory, bolstering my faith in its future even more.
Getting down to fighting weight
According to the Financial Times, Nokia will cut 3,500 jobs and close a manufacturing plant in Romania. This is part of a plan the company announced in April to cut its operating expenses by $1.3 billion over the next three years. The company said further job cuts and manufacturing realignment might be coming next year and that any details will be announced in the first quarter of 2012.
"We must take painful, yet necessary, steps to align our workforce and operations with our path forward," CEO Stephen Elop told the Financial Times. "With these changes, we will emerge as a more dynamic, nimble, and efficient challenger."
Difficult but necessary decisions
Coming as I do from a working-class background -- and having watched my father and family reel from the effects of job losses -- it's difficult for me to ever applaud job cuts and factory closings. But sometimes, for a business to survive and to thrive, it's a necessity.
This is one of those times. Nokia let itself fall dangerously behind Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) in the smartphone game, and now it's scrambling to get back in. But Nokia knows exactly how bad of a spot it's in, and it's taking the difficult steps necessary to try to get itself out.
I think Nokia is on the right path to turn things around. Naturally, success isn't a sure thing, but the company has a much better shot at it than the investing community is giving it credit for. Trading at $5.45 a share with a P/E of 12.3, Nokia is a stock worth watching, even if you do think I'm dead wrong.
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