Nokia replaces CEO Kallasvuo with Microsoft exec Stephen Elop as it struggles with competition

By Matti Huuhtanen, AP
Friday, September 10, 2010

Nokia’s Kallsvuo replaced by Microsoft exec

HELSINKI — Nokia Corp. will replace CEO Olli-Pekka Kallasvuo with top Microsoft executive Stephen Elop as the world’s largest mobile phone maker struggles to keep pace with smaller and more innovative rivals, particularly in the smartphone market.

Elop, head of Microsoft’s business division, has held top posts at Juniper Networks Inc., Adobe Systems Inc., Macromedia Inc., and, as a systems executive, Boston Chicken Inc.

He takes over Sept. 21, the company said Friday.

With Nokia stock down more than 20 percent this year due to two profit warnings, the Nokia veteran Kallasvuo had come under increasing pressure amid speculation he would be ousted.

Investors welcomed the news, and sent the company’s share price up some 5 percent to euro8.11 ($10.31) in Helsinki.

“The time is right to accelerate the company’s renewal — to bring in new executive leadership with different skills and strengths in order to drive company success,” chairman of the board and former CEO Jorma Ollila said in a statement.

Ollila said that Elop, age 46, has a “strong software background and proven record in change management (which) will be valuable assets as we press harder to complete the transformation of the company.”

A Canadian, Elop is a computer engineering and management graduate from McMaster University in Hamilton, Ontario. He became CEO of Macromedia, Inc., maker of Flash software, in 2005 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.

The 57-year-old Kallasvuo, who joined the company in 1982, will leave as president and CEO on Sept. 20 and give up his seat on the board of directors with immediate effect and be replaced by Elop, who heads Microsoft’s business division.

Kallasvuo will continue to chair the board of the Nokia Siemens Networks unit in a non-executive capacity, the company said.

Although it is still the world leader in handset sales — with a 33 percent market share — Nokia has been slow at detecting new trends, like folding clamshell models and touch screen handsets.

Markets have been expecting something fresh and new from the company that once had the innovative edge in the industry but 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 percent this year its own growth will remain flat and its ailing network sector, Nokia Siemens Networks — a joint venture between Nokia Corp. and Siemens AG of Germany — continues to see revenue fall.

Kallasvuo’s departure was hinted at as early as July. When announcing the company’s second-quarter earnings report, he conceded that rumors that he might be replaced were “not good for Nokia, and in one way or other we should be able to solve the problem to end the speculation.”

As cell phone markets have become saturated, Nokia increasingly has turned to providing more services, such as music and video downloads, navigational maps and games, in a global online market it estimates will reach euro100 billion this year, with some 300 million active users by 2011.

The appointment of Elop thus fits well into the pattern of closer ties between the world’s top handset maker and the software giant, which have grown 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, like Hotmail and Windows Live Messenger, have been built into Nokia phone models.

Nokia, based in Espoo near Helsinki, employs 130,000 people worldwide.



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