Analysis: Is Nokia's leadership fit for purpose?

By Graeme Burton
03 Jul 2012 View Comments
stephen-elop-ceo-of-nokia

When Stephen Elop was appointed CEO of Nokia in October 2010, it raised more than a few eyebrows. Not only was the well-travelled executive the first non-Finn to head up the mobile technology company, but he was also an ex-Microsoft employee.

Further reading

Finns ain't what they used to be

In the 1990s and early years of this century, Nokia phones were synonymous with user-friendly interface design and mass popularity. When Elop took over, Apple and Android mobile devices had begun chipping away at Nokia’s lead, but it remained the global market leader in smartphones, as well as cheaper "feature phones".

Just 18 months later, Elop had presided over a 28 per cent fall in revenues, seen the company’s credit rating slashed from investment grade to junk status, and instigated two restructurings that will see the company’s workforce slashed by 24,500 by the end of 2013 – a reduction of some 36 per cent since he took over.

The company has also been burning cash at such a rate that its entire balances might be gone by the end of 2013, jeopardising its ability to repay or rollover maturing corporate bonds.

And to top it all, it cannot even rely on its new partner Microsoft. Just as Nokia phones based on Windows Phone 7 were starting to appear in volume, Microsoft pre-announced Windows Phone 8, months before the formal launch of the new operating system.

Windows Phone 8 marks the end of Windows Phone operating systems based on the 1990s-developed Windows CE kernel. As a result, applications built for Windows Phone 8 will not run on Windows Phone 7, while existing devices will not be upgradeable to the new operating system.

Nokia’s new Lumia range of smartphones, therefore, is effectively obsolete. And it might be six months – two potentially catastrophic financial quarters – before Windows Phone 8 Lumias start appearing in volume.

The deal that was supposed to rescue Nokia from its “burning platform” (a phrase used by Elop in February 2011 to describe Nokia’s predicament) might yet arrive too late to save the company.

Shareholder pain

While some of Nokia’s US shareholders have responded in time-honoured fashion to its downturn in fortunes by suing the company, its Finnish shareholders have been more philosophical – even though the lay-offs will devastate a number of communities in Finland.

“You can’t blame one person,” said Ari Rikkilä, a Nokia shareholder who is also CEO of Finnish software company Efecte. “Sometimes, a company has to change quite significantly. When it notices how the market is changing, then often it’s too late,” he said.

 

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