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Nokia continues to chip away at its cost base in order to preserve as much as it can of its margins through the downturn in its core handset market. Having closed R&D and manufacturing facilities, it is now seeking 1,000 voluntary redundancies, but says it remains confident of avoiding compulsory lay-offs.

The company will offer its severance package to the first 1,000 applicants (except senior executives and "direct labor"), in a worldwide program that is part of "previously announced plans to increase cost efficiency and adapt to the challenging market environment", as the company statement put it yesterday. The market leader aims to reduce annual costs at its handset unit by more than €700m ($897m) this year. It is using other methods, like encouraging employees to take unpaid leave and sabbaticals this year, and to take holiday allowance rather than claiming cash in lieu. Nokia had 128,000 employees at the end of 2008.

Nokia is in "cash conservation mode", said a research note from UBS this week. The company is making a return to higher levels of cash a key priority as it faces slowing markets, and increased competition at both ends of the range. It has said it will have clearer visibility of real demand levels after this quarter, as excess inventory clears, and expects to emerge from the recession with increased market share, even at the expense of some points of revenue and margin.

UBS' Gareth Jenkins said in his note that device industry sentiment remains "extremely poor", and believes "we are likely entering the worst period of the current downturn." He sees markets with heavy device subsidies, such as many western European markets, holding up better than those without, but Korean phonemakers more buoyant than Europeans, mainly because of currency fluctuation.

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