Nokia will axe 7,000 jobs and outsource its Symbian software development unit to cut 1 billion euros ($1.46 billion) in costs as it struggles to compete in the smartphone market.
Nokia, the world's largest phone maker by volume, on Wednesday detailed an overhaul of its phone business following its decision to start using Microsoft software instead of its own Symbian platform.
The move includes laying off 4,000 staff and transferring another 3,000 to services firm Accenture - a total of 12 percent of its phone unit workforce.
Accenture will take over Nokia's Symbian software activities and will become a primary software partner for future smartphones running on Microsoft's Windows platform. Shares in Tieto, a local services supplier to Nokia, dropped more than 3 percent.
Nokia investors welcomed the Accenture deal as a quicker and cheaper way to exit its Symbian operations than full-scale layoffs requiring big severance packages, sending Nokia shares 3.3 percent higher on the Helsinki stock exchange. In New York Nokia shares were up 4.3 percent by 1917 GMT, while Accenture was 0.3 percent firmer.
"This is about keeping focus within Nokia on Windows Phone. It helps to get rid of any doubts on where this company is going," said Gartner analyst Carolina Milanesi.
Nokia's Chief Executive Stephen Elop told Finnish national broadcaster YLE it was possible the first Nokia phone running on Windows software could reach customers this year.
Accenture said the deal gives it additional scale in mobile, an important initiative for the company, putting it "at the heart of" Nokia and Microsoft which are developing the third major mobile platform in addition to Google and Apple.
The deal does not include Symbian software code.
The job cuts and site closings let Nokia cut annual business research and development costs by 1 billion euros, or 18 percent, by 2013 from 5.65 billion in 2010.
"Restructuring had been widely expected, but Nokia will be hoping that the transfer of 3,000 of jobs to Accenture will help cushion the blow as it ramps down its Symbian investments," said Ben Wood, head of research at CCS Insight.
Nokia's market share in smartphones has fallen sharply over the past few years as it loses out to Apple and other manufacturers of high-end handsets.
"The competitive environment has changed rapidly," Elop told a news conference in Helsinki, while outlining which parts of its operations will be hit the most.
Nokia said most of the 4,000 layoffs will take place in Finland, Denmark and Britain, with all workers staying on the payroll through 2011.
Nokia hired Elop from Microsoft last year to replace Olli-Pekka Kallasvuo in a bid to compete more effectively in the smartphone market. He is the first non-Finn to run the company, which evolved from a rubber boots-to-TVs conglomerate into a global mobile phone maker in the 1990s.
In its native Finland, Nokia will cut 1,400 jobs.
"This went slightly better than expected because Nokia transfers Symbian development. These 1,400 people ... should have quite good chances to find new jobs," said Pertti Porokari, chairman of the Union of Professional Engineers in Finland.
Nokia said it would wind down its large operations in Copenhagen, cutting 950 jobs there, and close its second headquarters in White Plains, New York.
The move crushed Finnish media speculations of Nokia planning to move its headquarters to the United States.
"Finland absolutely remains in the heart of Nokia's future," Elop said.
Job cuts at Finland's flagship company are a blow to confidence in the country, already struggling with unemployment of around 8 percent.
Worries about jobs and possible cuts to social welfare helped the populist True Finns party in the country's general election earlier this month.
Nokia's telecom gear arm Nokia Siemens Networks cut about 9,000 jobs after it started operations in 2007.