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Nokia to Fight Class Action Lawsuit

By atesmeh | February 8, 2010

Nokia started the week by responding to a class action lawsuit accusing it of securities fraud and separately announced the layoff of almost 300 employees at a Finnish manufacturing plant.

In a statement, Nokia called the lawsuit “without merit” and said it intends to “vigorously” defend itself against the complaint.

The complaint alleges that Nokia’s positive statements about new product launches in 2008 were “without reasonable basis” given shortages of device components and manufacturing problems it was then encountering at some of its plants.

The lawsuit also accuses the company of failing to disclose that it had “dramatically slashed” its average selling price on handsets to maintain its market share due to severe price competition.

As a result, Nokia then issued a lower-than-expected outlook for market share for the third quarter of 2008. During a conference call, Nokia then said a production glitch with a mid-range device and aggressive price cuts by some of its rivals, particularly at the low end of the market, were to blame for its lowered forecast.

The price of Nokia American Depository Shares (ADS) then dropped about 8 percent, to $20.62. The suit was filed by is on behalf of investors who bought Nokia ADS between Jan. 24 and Sept. 5, 2008.

The lawsuit was filed Friday by the law firm of Coughlin Stoia Geller Rudman & Robbins in a New York U.S. District Court on behalf of an institutional investor for the Roseville, N.Y., employee’s retirement system.

In addition to defending itself against the lawsuit, Nokia announced that it would be cutting 285 jobs at its Salo, Finland, plant as part of a move to switch the factory to high-end smartphones. The cuts will be mainly in production.

Nokia said it would try to find new positions at Nokia for as many employees as possible and hold discussions for voluntary severance packages. It also said it plans to stop currently ongoing rotational temporary layoffs at the Salo plant by the end of June 2010. 

“Salo is a crucial part of Nokia’s global manufacturing network. Plans involving changes to employees are always painful, and they are set in motion only after thorough consideration. However, with these plans our aim is to ensure the plant’s future competitiveness and its special role as one best suited to the production of high value mobile devices,” said Nokia Senior Vice President of Markets Juha Putkiranta in a statement.

Nokia cut 550 jobs at research and development centers in Japan, Denmark and Finland in November 2008. The latest layoffs are part of its efforts to “to further increase production speed and efficiency for a growing smartphone market.”

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