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Nokia's new CEO has a mobile mountain to climb

Mike Butcher

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Mike Butcher is the European Editor for TechCrunch. A former grunge rock drummer, he became a long time journalist, and has since written for UK national newspapers and magazines including The Financial Times, The Guardian, The Times, The Daily Telegraph and The New Statesman. Mike is also a co-founder and shareholder of TechHub, a co-working space/service/community with several locations... → Learn More

Friday, September 10th, 2010
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Nokia is replacing Chief Executive Olli-Pekka Kallasvuo, who proved unable to address the phone-maker’s loss of the smartphone crown in the last few years, with Stephen Elop, formerly of Microsoft Corp. Nokia has two main issues to address: a steep loss in earnings and a market share in leading edge mobiles that is being assaulted by iPhone/Android/RIM. Its share price is consequently taking a beating. And let’s not forget the ongoing nightmares of leaked of protoypes, loss of its fanboys, and its CTO.

But at least Elop is sounding a realistic tone: “My role as leader of Nokia is to lead this team through the period of change, take the organization through this period of disruption…to meet the needs of its customers, while delivering superior financial performance,” Elop said at a news conference in Helsinki, reports the WSJ.

Mr. Elop was formerly the head of Microsoft’s business division. He starts on September 21, at a tricky time – Nokia World (the firm’s annual talkfest London) is only next week so he will be unable to make a Steve-jobs-like entrance onto the stage and set a new tone for the organization.

Prior to Microsoft, he was chief operating officer at network company Juniper Networks Inc. and president of Adobe. So, no hard-core mobile experience then but plenty of smarts about the North American market.

Elop is a Canadian and the first non-Finn to run the company, ever. I’d love a ring-side seat when he takes his first meeting with a management team that has been in place for 20 years or so.

Perhaps the Canadian connection helps in a different manner, in that the Finnish press criticized the company for looking for an American CEO. So that might play well to the board. But is that really what Nokia needs right now? Surely better to have a product obsessive like Steve Jobs.

Nokia has made a mountain of mistakes, from arrogantly thinking the U.S. public would switch from CDMA to GSM a few years ago (so ignoring CDMA phones), to the launch of the iPhone and the rise of Android.

In July Nokia announced that net sales in the second quarter of 2010 topped 10 billion euros (that’s a little over $12.8 billion) across units, and that it has shipped more than 111 million mobile devices, up 8% from Q3 2009. However, net income fell to 227 million euros, down from 380 million euros a year earlier. That’s a steep 40% drop in net profits.

It is now clitching at the launch of the N8, it’s Symbian 3 ‘feature smartphone’ and Meego, a partnership with Intel to create high-end devices like smartphones and tablets.

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  • http://9pt.de Oliver Müller-Marc

    It is true, Nokia’s new CEO has a very high mobile mountain to climb. Years ago, no one got Nokia produkt strategy. They missed the touchscreen smartphone market and it seems that Nokia has never understood future trends and the synergy of phone, PIM and Internet.
    As a result, Nokia lost a large amount of its market value and is now in the shit.
    Good luck and all the best to you Mr. Stephen Elop, you will need it!

    Oliver Müller-Marc, CEO
    9pt Unternehmensberatung Management Consulting

    • http://9pt.de Oliver Mueller-Marc

      As a replay to some comments below:

      It is not enough for Nokia just to offer smartphones with the Android OS. That would be too easy.
      Nokia desperately needs a good vision and a long term product strategy that brings innovative and succesful products to the market.

      Oliver Müller-Marc, CEO
      9pt Unternehmensberatung München

    • http://9pt.de Oliver Mueller-Marc

      As a reply to some comments below:

      It is not enough for Nokia just to offer smartphones with the Android OS. That would be too easy.
      Nokia desperately needs a good vision and a long term product strategy that brings innovative and succesful products to the market.

      Oliver Müller-Marc, CEO
      9pt Unternehmensberatung München

    • http://9pt.de Oliver Mueller-Marc

      Rory-Cellan Jones (BBC) thinks that Stephen Elop’s background in computer software is seen as useful, as phones have increasingly become mobile computers.
      http://www.bbc.co.uk/news/business-11268747

      What do you think? Is Elop the right CEO for Nokia?

      Oliver Müller-Marc
      9pt Unternehmensberatung

    • MojoJojo

      I think they would do well to just copy the iPhone like Samsung and other Android manufacturers are doing.

      • http://9pt.de Oliver Mueller-Marc

        MojoJojo, I don’t think that just making an iPhone clone will help Nokia in long term.
        As already written Nokia needs a better vision and a long term product strategy that brings innovative and succesful products to the market.

        Oliver Müller-Marc, CEO
        9pt Unternehmensberatung München

  • ian

    They need to jump on the Android bandwagon ASAP, if they are really going to break into the smartphone elite.
    Nokia do make good phones, but they are hurting themselves by ignoring Android, imho

    • http://www.scred.com/ Kristoffer Lawson

      I don’t get comments claiming Nokia should go Android. Why? Nokia was a leader in mobile UI design and operating systems for years. Sure, they missed a few boats, but there is loads of unlocked talent within the company in precisely that area. They’ve worked with Maemo and touch screens for long before the iPhone came out. It’s only a lack of top-level vision which failed to utilise that potential.

      Nokia has always had vertically integrated solutions. To jump on the Android bandwagon, only to satisfy fanboys, is hardly going to lead to the innovative market-leading products that people used to equate with Nokia. I can’t see that strategy going anywhere.

      I don’t know whether or not Stephen Elop is the guy to inspire that inner talent onwards, and to bring forth killer products, but I can’t see how becoming a run-of-the-mill Android manufacturer could be a good long-term solution for a company which is, after all, still the market leader by a large margin.

    • Mark

      Every time I see a comment that Nokia should embrace Android I realise that the person making that comment has no fucking idea what they’re talking about.

      • Anonymous

        I’m still waiting for a long-term strategy from Nokia that actually makes sense.
        Meego for high-end only and Symbian for low-end only… seriously?

      • Rdx

        Wow, what a cogent argument. Anyone who disagrees doesnt have a clue.

      • Mark

        Well OK, cowboy.

        Tell me the advantages of moving to Android. Go on then. Oh wait, that’s right – there aren’t any.

        Like I said. Complete fucking idiots.

    • Mark

      Hey did I miss something and someone else sold more phones than Nokia?

      No. Thought not. They’re still the market leader by a long, long way.

      • Rurik Bradbury

        But look at the average selling price (< 100 Euros) and the disastrous profit margins. Apple stole all its profits by making much more desirable devices. Unless Nokia comes out with some genuinely popular 300+ Euro smartphones it will be in big trouble.

        Perhaps MS could buy Nokia — its market cap is only about 40 bn and they could almost pay in cash. Could be a formidable partnership.

      • Jaska

        Market leader by what measure? Sure, Nokia moves more units than anyone else, but if you take a look at their average selling prices or general financial performance, you see the slow suicide they are committing. ASP must bounce up and quickly.

        After all, Russia is mightier than Germany, both by land area and by population. On the other hand, if you measure GDP/capita, life expentancy and things like that…

  • http://www.toshl.com andraz

    Some comments

    1. symbian 3 and devices coming with this OS should not be viewed as poor man’s smart phones. The OS is polished, it is still very phone oriented, but is less battery hungry, fully multitasking, has very nice dev env QT and is in general very promising. Perhaps not the most flashy thing for the western world, but extremely potent for emerging markets and westerns that need better battery life and better phone all together (as phone, not touchscreen PC) with pretty damn sweet hardware and price.

    2. Nokia still holds first position in smart and feature phone market. Regardless of how you view their smart phones, they are still no.1. And share has not been dropping that much

    3. Nokia holds numerous patents and workflows that make their phones as good as they are. And they are good if not great. For 80 % of the world population at least. And all this knowledge and IP is far from lost.

    IMHO, what they need to do is invest more into OVI, probably refresh OVI roadmap, find alternative billing ways that could bypass the carriers, invest heavily in India and China and generally do more on the software side. And of course, define OS roadmaps for good. So that we dont get another Maemo story. Or n97 fail.

    Nokia has been and still is a fantastic company. With hiccups, no doubt.

    • amy wilsch

      1) too bloated and not innovative enough
      2) too many silos in the company working within their own “methods” and not enough cross pollination (of anything, including communication with other departments)
      3) MASSIVE inventory management which leads to db problems and enormous amounts of money/time sink into managing it (do you know how many phones/parts Nokia has??)
      4) no model recognition (quick, name a Nokia phone! most can’t, but they all know iphone)
      5) antiquated system for dealing with issues and fixes (seriously a buddy of mine gets a spreadsheet from a colleague via email & that is their issue tracker).

    • http://www.broadstuff.com alanp

      1. Symbian is not fit for purpose for the high end smartphone market and to play in the commodity sector is risky as developing world companies will make it theirs in the next few years

      2. Depends what you mean by smartphone, Nokia is a low show in post iPhone devices. Another problem they have is low interoperability between variou of their devices. With iPhone or android you know the app will work across devices

      3. The market shifted with the iPhone so many of their patents are probably valueless now.

      It’s very simile. Before the iPhone web browsing or app uasge was a difficult and frustrating experience on a mobile. Now it isn’t. Nokia made it hard, aplle made it easy, if Nokia can’t become a fast follower into fit for purpose smart phones they are toast.

  • jim donohue

    fail! choosing elop just continues to prove that nokia has no idea what they are doing. elop was an ineffective leader and manager at msft, jnpr, and adbe. time to short the stock

  • kent

    I think Nokia is suffering under a mountain of suck and a decades long decomposition to where the corpse is slowly eroding. Reminds me of Palm 5 years ago. Could Elop have been hired to sell Nokia to Microsoft? That would certainly benefit shareholders more than trying to resuscitate this corpse. Hmmm…..

  • Jani

    Next is Windows Phone 7 buddy!

  • http://peep.ly Ernie Graham

    I think I’ve heard this story before and it’s a classic. Called OS/2 v. Windows. IBM took the technology elitist train and lost. Was OS/2 technically better, yes. Was IBM pc hardware technically better, yes. Did it matter, NO.

    Not so ironically, Android represents the “Windows” of the mobile generation. It will command 90% market share and lower margins while Apple makes tons of profit with less than 10% market share.

    Nokia will end up irrelevant as Lenovo or some second rate Android compatible phone manufactuer in 3 years if it’s not careful here. Learn from history, swallow your pride, and go Android before its too late.

    • http://www.scred.com/ Kristoffer Lawson

      Sorry but this is bollocks. OS/2 never, at any point in its history, commanded a large market share, never mind being top dog (quite unlike Microsoft). Nokia is not in that position, Nokia is the world’s #1 mobile phone company.

      That doesn’t mean Nokia might not lose that position, and that it doesn’t have to innovate like crazy. But it does mean Nokia has the resources and the capability to do so, if it takes the right strategic steps.

      It’s not as if Android devices are that stupendous anyway.

      • Rurik Bradbury

        Yes, but look deeper. The basic mobile phone market is dying. And among smartphones, if you separate out the *real* smartphones at Nokia from the basic Symbian devices, they have no more share than OS/2 did. By ‘real’ I mean large capacitative touchscreen, app-centric, data-heavy devices — the post-iPhone paradigm.

        Sure, they still shift tons of devices, but at a very low ASP and with minimal user engagement (compare Apple’s vibrant store with Ovi’s deserted city). Things have to change quickly or Symbian/Meego will indeed become OS/2.

      • http://www.scred.com/ Kristoffer Lawson

        We agree things must happen quickly and that there’s a huge task. But it is still wrong to imply Nokia vs Apple/Google is the same as OS/2 vs Windows. OS/2 was a new player in the market.

      • Rurik Bradbury

        @Kristoffer But I don’t think the OS/2 analogy is so off. Together, iOS/Android have 90% or higher share in the ‘true smartphone’ market today.

        While Nokia dominates the old-gen market (dumbphones and ‘semi-smartphones’) the battlefield shifted to ‘true smartphones’.

        Here, Nokia is a distinct underdog with the same issues as OS/2: low share; low developer engagement; late to arrive.

      • http://www.scred.com/ Kristoffer Lawson

        @Rurik, I’m not even sure of that “90%” and what ‘true’ smartphone, and what isn’t. Of course if you define ‘true’ as only iPhone type touchphones then you might be right, but I’m not sure if that is an interesting metric. It’s like saying Nokia owns 90% of the Symbian market.

        The important difference here is that IBM had no market share whatsoever, in any relevant product line. There was nothing to stand on. This is not the case at all with Nokia. They have ready distribution, a huge existing client base, good manufacturing and a lot of international leverage. IBM really had none of those in the consumer OS market. It’s a totally different situation.

        That’s not to say they won’t fail if they are unable to more aggressively tug their heads out of their rear ends and focus on building a tight portfolio of super products.

        On a sidenote, the X3 Touch, or whatever the hell they called it, looks like a really sweet product, for that price point. Now they just need to cut away most of the flack and continue to be more focused. Should be S40 and MeeGo, and that’s it. Possibly a single business-oriented Symbian job, but I’m not even convinced about that.

  • plebus

    The guy has done nothing at Microsoft other than getting others to write W15 vision documents for him…

    Also, if you look at the org chart, he runs nothing at Microsoft after Kurt took over Office from him.

  • Javier

    Too little, too late.
    Nokia hast lost it, and it will never get it back. I remember the days when people kept asking Nokia about touch phones. Their invariable reply? “we’re not really interested in that segment of the market”, which basically defines their philosophy of embracing the past and not welcoming the future. How the hell can you say that?? you guys were the absolute leaders, and your attitude was so bloody backward!!
    That SEGMENT is now the big pie, it’s everything! So, yeah, you’ve got what you deserve. Android is gonna rule the world. And Iphone too, I suppose.
    I was a nokia die-hard, all my mobiles were nokia, no exception. Then I got sick of their backward thinking, their lack of flexibility, their pig-headed “no, we want to continue developing symbian”. I don’t know who was responsible for those decissions, but they destroyed one of the most successful european companies ever, and they’ll never get back to the place they were before.
    With all my respect for the ex-microsoft CEO, but having worked for Microsoft is not exactly a very good background to compete in the mobile market, is it??
    Quite shocked to read this news…
    Anyway, I wish Nokia could come back, but their phones are so boring nowadays. If only they were willing to use android on some of their models. But no, that would be being versatile, open minded, flexible, adaptable, in tune with the new times. Yes, “adaptable”. They should read Darwin, it would help them… they’re going extinct…

  • http://www.brianshall.com Brian S Hall

    Is ‘clitching’ a word?

  • James

    Big correction needed in this article. This is not the first non-finnish CEO. Björn Westerlund, was the CEO of Nokia from 1967 to 1977, he was German and the guy who put Nokia into telecommunication business.
    Another important correction, was not Nokia that ignored North America, the operator cartel formed to put Nokia out of business that did it. For many years USA was restricted to get the hands on top technology. All this smartphones, OS and app crap was a reality in Europe and Asia since early 2000′s, leaving a virgin market for Apple when they launched Iphone in 2007.

    • http://www.scred.com/ Kristoffer Lawson

      You’re mistaken. Björn Westerlund may have been born in Germany, but was born a Finnish citizen, to a Finnish father. He was educated and lived his life in Finland.

  • http://www.naslovi.net mileusna

    They should do what Android has. White board and start new platform from scratch. Symbian on steroids and QT will not save the Nokia. I is not development friendly environment.

    • Rurik Bradbury

      Am curious: what don’t you like about QT? It usually gets good feedback.

  • Manish

    Hope this guy can put the fear of failure into hearts & minds of Nokia employees to get them to act. I still see Nokia people at industry events talking about how iPhone shipments are a rounding error on the number of phones that Nokia ships – sure – but selling mountains of crap at low margin does not equate to selling fewer marquee devices at high margins.

    Plus never, ever try to substitute selling quality in North American for quantity in Asia – as soon as they can, every teenager in Asia will want what is hot in the US

  • WulfCry

    Nokia is not going to fail I feel that in my guts.
    With the N8 Nokia probably going to make smart phones for each specific user group something unique that was always their status quo all along.
    improvements in symbian 3 should make it all possible their was allot of thinking going before in the Nseries which was quiet nice, its always a maybe certainly now with a though market.

    • GQB

      Right…
      Fragmentation works SO well.

  • elop

    i hate to say it, but having worked for Elop in the past, he’s not a very good Leader; he’s certainly not the kind of guy you want to work hard for. no vision. very robotic. not very personable. more likely to be the guy that takes over your company and sells it off piece by piece. just my opinion as a former employee. Nokia, this is just your next big mistake.

  • Orbots

    Of course, the other alternative is that he was chosen as the place holder interim CEO, while Microsoft prepares the ground for their acquisition of Nokia.

    It’s been rumored that MS has been looking to get into the phone hardware game, like Apple, so this could be the starting salvo.

    • http://www.scred.com/ Kristoffer Lawson

      I can’t see an acquisition like that working. Nokia has invested heavily into Linux based OS development and Qt, which is not really Microsoft’s thing.

      • Orbots

        If Ballmer took over Nokia, the whole point would be to totally ditch Linux and open source and slap Windows Phone 7 on everything.

      • http://www.scred.com/ Kristoffer Lawson

        Of course that would be the case, but that would deconstruct all the skills, history and knowledge Nokia currently has. Basically you’d be left not buying very much, so I can’t see what benefit there even would be for Microsoft. Distribution channels, maybe, but it would pretty much kill the company.

  • http://trends.site11.com/nokia%e2%80%99s-new-ceo-has-a-mobile-mountain-to-climb/ Nokia’s new CEO has a mobile mountain to climb — News Tweets Gone Viral

    [...] unable to address the phone-maker’s loss of the smartphone crown in the last few … Link – Trackbacks Share and [...]

  • http://www.reverselookphone.com Reverse Look Phone

    Nokia should remain as simple as possible, because its simplicity with rigidity which symbolises NOKIA after all..

  • http://www.computer-netbook.com/nokias-kallasvuo-replaced-by-microsoft-exec.html Nokia’s Kallasvuo replaced by Microsoft exec

    [...] Nokia's new CEO has a mobile mountain to climb [...]

  • Palerma

    Elop seems to be same kind guy like OP Kallasvuo. Definetly not leader who could take drastic actions to move course of this sinking ship.

    Good follower, but leader is still missing.

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  • http://www.alterwave.com Etienne

    I agree with Kristoffer Lawson.
    I have a Nokia 7700 in 2004, touchscreen and handwritten recognition, based on Symbian. And is was stunning. I never understood why they waited another 4 years to release the 5800.

    To me they should go for Maemo at full throttle. I don’t understand when S40 and S60 are competing each other, they should ditch S60 and keep S40 for low end & Maemo for high end.

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