Nokia is replacing chief executive Olli-Pekka Kallasvuo with Canadian Stephen Elop of Microsoft, as the world’s top maker of mobile phones aims to regain lost ground in the fiercely competitive smart phone market.
The choice of a North American executive to lead a Finnish company reflects the increasing dominance of U.S. and Canadian companies in the evolution of the phone business.
Apple’s iPhone has set the standard for today’s smartphones, while Research In Motion’s BlackBerrys are the favourite of the corporate set. More recently, Google’s Android software has emerged as the choice for phone makers that want to challenge the iPhone.
Analysts welcomed the choice of the 46-year-old Canadian, who has worked closely with Nokia at Microsoft and at Macromedia developing software for Nokia phones. He has also held top posts at Juniper Networks and Adobe Systems. At Microsoft, he headed the Business division, which makes Office software.
He will take over on Sept. 21, Nokia said Friday.
The company’s share price jumped more than six per cent on the news, but closed only about one per cent higher at 7.79 euros ($10.21) on the Helsinki Stock Exchange.
It was the first time that Nokia, considered by many to be part of the Finnish national identity, chose a non-Finn to lead the company that grew from producing rubber boots to leading the world in making handsets.
Elop, observing that Canadians and Finns both hail from northern climes, was quick to allay fears he might move company headquarters abroad. Nokia is an outsized part of the small Nordic country’s economy — and self-image.
“This is the home of Nokia, it will continue to be the home of Nokia, and I just love being in these facilities,” Elop said. “At the same time recognizing that while it is a Finnish company, it is also a global company, and there are employees and partners and customers of Nokia all over the world.”
Finnish Prime Minister Mari Kiviniemi and Finance Minister Jyrki Katainen expressed satisfaction that Nokia was not planning to move.
“We have know-how, research and product development here. We also have an integrated and stable society to offer,” Kiviniemi said.
What’s good for Finland
Nokia accounts for 1.5 per cent of the small country’s gross domestic product and provides employment, including through subsidiaries, for about 60,000 workers in the country of 5.3 million.
Katainen said it was up to the company to decide on executive matters, including location of headquarters, adding that “what’s good for Finland is that Nokia is successful.”
With Nokia stock down more than 20 per cent this year after two profit warnings, Nokia veteran Kallasvuo had come under increasing pressure.
Jorma Ollila, chairman of the board and former CEO credited with developing the Finnish company to an international leader in mobile phones, said Elop has “a strong software background and proven record in change management” to help Nokia meet new challenges.
In high-end phones, the hardware is becoming uniform, so the software is increasingly the ingredient that makes a difference.
In this, Nokia is trailing badly. It uses the Symbian operating system for its smartphones, which is older than Apple’s software and wasn’t designed from the ground up for touch-screen phones. Other manufacturers that used Symbian have mainly jumped to Android.
“The Android camp is in the process of flooding the market with relatively cheap smartphones (that) knock the socks off Nokia’s current user experience,” Nomura analyst Richard Windsor wrote recently.
Symbian phones had 41 per cent of the worldwide smartphone market in the second quarter, according to research firm Gartner, compared with 51 per cent a year ago. Android phones, meanwhile, grew to 17.2 per cent from 1.8 per cent. In the trendsetting U.S. market, Android was already the dominant operating system, according to NPD, another research firm.
Elop’s appearance at a news conference announcing the appointment was in striking contrast to Kallasvuo’s stiff press meetings made in halting English. Elop discussed ice hockey — close to both Canadian and Finnish hearts — and even jested about Finnish licorice candy he didn’t like.
“My job is to take this organization though a period of disruption,” Elop told reporters. “Nokia has many great assets in the smartphone arena. It’s about the entire experience, it’s about the platform, it’s about the applications, it’s about the services.”
Elop, 46, joined Microsoft in January 2008. Microsoft hired him away from the network equipment maker Juniper, where he served for a year as chief operating officer.
“It seems that Nokia is now ready for an international charismatic leader,” said Microsoft Finland CEO Ari Rahkonen. “He is an international leader with broad international networks, a very charismatic performer and very keen on technology.”
In 2005, Elop became CEO of Macromedia, maker of Flash software, just months before Adobe bought the company. Flash allows people to use their web browsers to watch internet video and animation, and the software is now increasingly used on mobile phones.
He is a computer engineering and management graduate from McMaster University in Hamilton, Ont., and served as a systems executive at Boston Chicken.
Elop has played a role in the growing co-operation between Nokia and Microsoft in recent years. In 2009, Nokia launched its first laptop, a netbook with a 10-inch screen that runs on Microsoft’s Windows 7 software. Previously, access to some of Microsoft’s most popular web services, such as Hotmail and instant messaging, have been built into Nokia phone models.
The 57-year-old Kallasvuo, who joined the company in 1982, will leave as president and CEO on Sept. 20. Elop will replace Kallasvuo on Nokia’s board, though Kallasvuo will continue to chair the board of the Nokia Siemens Networks unit in a non-executive capacity. Nokia Siemens Networks, Nokia’s joint venture with Siemens AG of Germany, makes networking equipment.
Investors have long been expecting something fresh from the company that once had the innovative edge in the industry. That has not happened since Kallasvuo took over in 2006. He has also been unable to tackle problems in the North American market, the company’s worst performer, despite a pledge to make it a top priority.
Nokia has predicted that while global mobile market will grow 10 per cent this year, its own growth will remain flat, and its ailing Nokia Siemens unit continues to see revenue fall.
Based in Espoo near Helsinki, Nokia employs 130,000 people worldwide.