Nokia turns to former Microsoft man

Nokia has struggled to compete in the smartphone market under Kallasvuo's leadership.

Nokia has removed Olli-Pekka Kallasvuo as chief executive and appointed Stephen Elop from Microsoft to replace him in a bid to raise its game against Apple and Google in the smartphone market. Mr Elop, currently head of Microsoft's business division, will take charge of the world's biggest handset maker on September 21 when Mr Kellasvuo steps down after four years in charge.
"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," said Jorma Ollila, Nokia chairman, on
Friday.
The change follows months of mounting unrest among Nokia investors over the group's plunging share price and its failure to come up with a high-end smartphone good enough to match the Apple iPhone. The company's share price has fallen by almost two-thirds since the iPhone was launched in 2007, wiping about €60bn off group's market capitalisation. On Friday morning, following the announcement of Mr Elop's appointment, Nokia's shares were up 4.7 per cent.
The appointment comes ahead of Nokia's annual product trade fair in London next week, when the group will unveil a new model, the N8, aimed at narrowing the gap with Apple and a growing range of phones based on Google's Android software.
Some investors had called for new leadership with more US experience to tackle Nokia's weakness in North America and emulate the faster innovation shown by Apple and Google in the smartphone market.
Before joining Microsoft, Mr Elop held senior positions at several US technology and media companies including Juniper Networks, Adobe Systems and Macromedia.
"The Nokia board believes that Stephen has the right industry experience and leadership skills to realise the full potential of Nokia," said Mr Ollila.
He highlighted Mr Elop's "strong software background" and "proved record in change management" as key assets as Nokia bids to accelerate its transformation from a hardware company into one more focused on software and mobile services.
"We believe that Stephen will be able to drive both innovation and efficient execution of the company strategy in order to deliver increased value to our shareholders," Mr Ollila added.
Nokia is the world's biggest maker of smartphones by volume but it has struggled to compete with devices such as the iPhone and Research in Motion's BlackBerry at the top end of the market, where profits are greatest.
This has led to a sharp drop in the operating margin of Nokia's core handset business from from 22.8 per cent in the fourth quarter of 2007 to 9.5 per cent in the three months to June 30.
John Strand, chief executive of Strand Consult, a telecoms research company, said Mr Kallasvuo's biggest failure was his poor communications with investors and consumers, in contrast to the showmanship of Apple's Steve Jobs and others.
"Elop is a communicator and a salesman. He will do a better job telling the Nokia story," said Mr Strand.
The appointment of a foreign chief executive could herald a broader shake-up of Nokia's Finnish-dominated management culture, which some analysts say has been too bureaucratic and lumbering.
Mr Elop said he was excited by the move and committed "to strengthening Nokia's position as the undisputed leader of the mobile communications industry".
Mr Kallasvuo, urged the board to end speculation over his position, will receive a severance package of €4.6m, or 18 months' gross salary, as well as the value of 100,000 Nokia shares granted to him in 2007 that are due to vest on October 1.
He will step down from the board with immediate effect but remain a non-executive board member at Nokia Siemens Networks, the group's wireless equipment joint venture.
Mr Kallasvuo joined Nokia as a company lawyer three decades ago and eventually succeeded Mr Ollila as chief executive in 2006.

"The whole board of directors joins me in thanking Olli-Pekka for his 30 years at Nokia, during which he has been deeply involved in developing the company and its operations," said Mr Ollila. "His dedication and contribution throughout the years has been exceptional."