Microsoft’s Elop to be Nokia CEO

Microsoft’s Elop to be Nokia CEO

Helsinki: Nokia, the world’s top cellphone maker, brought in Microsoft’s Stephen Elop to replace its embattled chief executive and lead a renewed effort to compete in the smartphone market.

Canadian Elop, the head of Microsoft’s business division, will take over from Olli-Pekka Kallasvuo, whom Nokia has been looking to replace for several months, on 21 September.

Nokia shares were up 5% to 8.13 euros at 0810 GMT. The stock has roughly halved since Kallasvuo took the helm in June 2006.

“It is good that something is happening," said Inge Heydorn, fund manager at Sentat Asset Management.

“They have had problems for a long time and have been behind the curve on trends for the past few years. I think it could be good to get new influences, thoughts and ideas," Heydorn said.

Hiring Elop is a major shift at the top of the company -- he is the first non-Finn to run the company in its 145-year history. Also, eight of the current 10 executive board members are Finns.

“His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company," chairman Jorma Ollila said on Friday.

Under Kallasvuo, who has spent more than half of his life at the company, Nokia has struggled to keep up with new rivals like Apple and Google in the smartphone market.

Nokia said Kallasvuo would get a severance payment of €4.6 million ($5.8 million).

When Kallasvuo took over in 2006 from long-time CEO Jorma Ollila, who is now chairman of the board, he promised to fix company’s position in the US market and started a strategic move into Internet services.

So far there is little evidence of success in either.

“Elop faces a daunting task. Nokia has lost its leadership in high tier phones and has struggled with the rise of Internet-led services. All eyes will be on what strategy he adopts to address this," said Ben Wood, head of research at CCS Insight.

Microsoft and Nokia are long-time collaborators, and in August last year formed an alliance to bring Office applications such as Outlook e-mail to Nokia devices.

The Finnish company has lacked a hit smartphone model since its 2006 launch of the N95, and has lost out in the top end of the market to Apple’s iPhone.

“Nokia has a communication problem. There is no doubt that Stephen Elop is a better communicator than Kallasvuo," said John Strand, head of telecoms consultancy Strand Consult.

Some analysts warned the move -- just a few days before company’s key smartphone launch -- could be a sign of deeper than expected problems at the company.

“We would recommend to take the opportunity of the positive reaction of the market today to lower positions ahead of a likely difficult time for the company -- and possibly some kitchen sink in the very near term," Bernstein analyst Pierre Ferragu said in a research note.

Design Pedigree

The 46-year old Elop, who joined Microsoft in 2008 from Juniper Networks, was credited with successfully managing the launch of Microsoft’s Office 2010 suite of applications earlier this year.

Elop helped steer Microsoft toward online versions of programs such as Word, Outlook and Excel which users could access from anywhere and even use on mobile devices, a major step for Microsoft, whose fortune has been founded on installed software.

Microsoft’s Business Division has traditionally been one of two biggest and most profitable units, along with the Windows division. Last fiscal year, it was Microsoft’s biggest-selling unit, generating $18.6 billion in sales, almost 30% of the company’s total sales.

Elop should bring to Nokia an understanding of the design principles that have driven Apple’s success, as well as of the telecoms network industry in which Nokia’s troubled Nokia Siemens Networks plays.

Before joining Microsoft from Juniper, he spent several years in Silicon Valley, rising to become chief executive during seven years at Macromedia, a San Francisco software maker whose graphics and Web development tools were favoured by Apple developers.

Macromedia made the Flash video and Dreamweaver software that are near ubiquitous on the Web, and were retained by Adobe as key products when Adobe bought Macromedia for $3.4 billion in 2005.

Elop is no stranger to steep promotions: At the time of its acquisition by Adobe, Macromedia had about 1,500 employees and annual revenue of $422 million. At Juniper, he became an executive of a company with $3.3 billion sales and 7.200 staff.

His Canadian upbringing may also mean he is less daunted by Finland’s forbidding long and harsh winters than others might have been.