Nokia CEO Finally Walks The Plank, Replacement A Surprise

Telecom & Wireless

Published: September 10, 2010 4:23 am

Last Updated: September 10, 2010 5:43 am

Olli-Pekka Kallasvuo has finally been pushed out as Nokia’s (NYSE: NOK) CEO and will leave the company and its board on September 20. He will get a small consolation prize as he remains chairman of Nokia Siemens Networks. His demise has been a long time coming. Nokia’s performance in the smartphone market has been abysmal. Nokia’s shares have dropped from a 52-week high of $16 to $9.76.

What was unexpected about the executive transition was the succession. Steve Elop, who runs Microsoft’s (NASDAQ: MSFT) Business Division, will become the new Nokia CEO. Elop does have a tech background from Adobe (NASDAQ: ADBE) and Juniper (NASDAQ: JNPR), the telecom network equipment company, but has no experience as the operator of a handset firm.

Kallasvuo will leave with a rich severance package which includes 18 months gross base salary and target incentive which totals about 4.6 million euros.

Elop’s challenge will be tremendous, and there is no reason that he is up to the task. It would have made more sense if Nokia signed a seasoned smartphone executive from Apple Inc. (NASDAQ: AAPL), Research-In-Motion (NASDAQ: RIMM), or Samsung. Nokia’s troubles may be so severe that no one from these companies wanted the job.

Nokia maintains the share lead in the global cellphone industry with about 37% of the market. It has not had success in the high-end smartphone business, which is growing quickly and tends to have higher gross margins. Nokia’s flagship smartphone, the N8, will reach the US market later this month. The base price of the phone will be $549. It has the multimedia capabilities of most other smartphone handsets

Nokia’s chance of gaining on Apple and RIM are slim and none. Its only leverage is its relationships with the world’s largest carriers because it is such a large supplier of cellphones. But even those relationships can’t obscure the fact that Nokia does not make a smartphone that most customers want.

And, it is, after all, customers who make the difference.

Douglas A. McIntyre