Microsoft Job Cuts Prompt Finnish Demands as Recession Hurts

Jul 18, 2014 9:02 am ET

(Updates with industry group comment starting in 13th paragraph.)

July 18 (Bloomberg) -- Finland said Microsoft Corp. has an obligation to ensure that workers in the Nordic country affected by its mass job cuts are offered adequate support to prevent further shocks to its labor market.

The U.S. software-maker plans to reduce as many as 1,100 jobs in Finland as part of 18,000 global job terminations. About 12,500 of the cuts relate to integrating the unit it bought from Nokia Oyj in April. Labor Minister Lauri Ihalainen said the “least” Microsoft can now do is to ensure the Finns it puts out of work are provided some sort of assistance.

“The impact here will be quite significant,” Casper von Koskull, who heads wholesale banking at Nordea Bank AB, said in an interview in the Finnish town of Pori. “We’re a faraway land, and so for companies to invest here, it needs to be more attractive than elsewhere, as the threshold is higher.”

Finland’s economy is contracting for a third consecutive year, in part dragged down by Nokia, which sold its handset business to Microsoft after losing the smart-phone battle to Apple Inc. and Samsung Electronics Co. The government has so far struggled in vain to fight unemployment, which rose to 10.7 percent in May. Microsoft has about 4,700 workers in Finland.

“Microsoft’s intention to reduce jobs also in Finland is the bad news we feared,” Ihalainen said. “The least that can be now expected is that it creates a credible support package to those it lets go, similar to what was done with those let go from Nokia.”

Support Measures

Microsoft remains committed to Finland and the country will be a key focus area in the future, it said in an e-mailed statement.

“As a responsible company, we strive to do our best to ensure that employees affected by the potential cuts are offered a variety of support measures and advice, including in finding new work,” the company said.

The sale of Nokia’s handset business, announced in September last year, sent shock waves through Finland, where the phones were a source of national pride and at one point were carried by 90 percent of Finns. After introducing its first handsets three decades ago, Nokia emerged as Finland’s first major global corporation and symbolized the country’s transformation into a technology-driven economy.

Data Centers

The value created by Finland’s industry has fallen by 25 percent, or more than 10 billion euros ($13.5 billion), versus 2007 after demand for its consumer electronics vanished and sales from its paper industry also suffered, the Economy Ministry said in May. It’s now trying to attract data centers to old paper mills, touting an electricity grid that suffered downtime only once in 30 years.

Microsoft said Sept. 3 it will invest about 250 million euros in a new data center in Finland. The data center will open next month, Microsoft said.

Finance Minister Antti Rinne said yesterday that Microsoft will need to stick to that plan to compensate for job cuts.

“I’m a little disappointed in Microsoft, which said at the time of the Nokia deal that it’s committed to Finland,” Rinne said, according to newspaper Helsingin Sanomat. “This isn’t commitment. Microsoft must fulfill the promise of building a data center in Finland.”

Valuable Talent

The best way to help would be to offer assistance in creating new businesses, said Ilpo Kokkila, chairman of the board at the Confederation of Finnish Industries.

“Hopefully we as a country are able to hold on to the very valuable talent at Microsoft and create the kind of environment where they can move on, start businesses and find new work,” Kokkila said in an interview in Pori today.

The government expected no immediate impact on employment after Nokia had outsourced and terminated thousands of workers in the country since 2011.

“Restructuring is a fact of life but it should be done in a socially responsible way,” European Union Employment Commissioner Laszlo Andor said in a statement. The EU may be able to provide help to national authorities for training workers who lose their jobs, he said.

Prime Minister Alexander Stubb, who took over as premier last month, said on Twitter news of the job cuts was “sad.”