Clearly the number of phones Nokia has sold hasn't dropped that much. What has changed though is that Nokia were selling a higher percentage of smart phones which have far higher margins. The major volume of Nokia phones is made up of the bottom end 1100/1200 family devices where Nokia makes very little money.

These bottom end commodity phones have reduced feature sets and don't need significant development staff either. Functionality has hardly changed in these devices in the last 10 years. All that has really happened is the engineering to keep abreast with silicon and telecom trends (new networks, cost reduction etc). It is getting easier and easier to just buy in new designs from a design shop like Ericsson Mobile Platforms or likely equivalents springing up in China and elsewhere. Result: reduced in house development needs and quicker time to market.