Nokia Cleans Executive House
9/13/2010 by: Anshel Sag
Nokia[NYSE: NOK] has been moving in a varied series of directions in the last few years and has struggled to find a solid grip on where the company is really going. They have been successful in capturing emerging markets and delivering devices to a global market rather than just to North America and EMEA.
The real struggle that Nokia has to deal with is their complete lack of hardware and software coherency. They seem not to be sure where they want to go with their mobile devices. They have gotten the cheap and affordable phone design down to a science, but they continue to struggle with the mid-range and high-end phones. Their Symbian, Maemo, and Meego operating systems are seriously lacking the developer support that Apple's iOS and Google Android are getting. This is due in part because Nokia has not established a top down type of operating system that allows interoperability between device generations and hardware. If we look at Android and iOS we can see that developers can for the most part design an application in general for the iOS and continually port it to newer versions as needed which allows them maximum exposure across all levels of the market. Something happens when a developer knows that their application can easily work or be ported to an iPhone 2G, 3G, 3GS, 4 and all corresponding iPod touches along with the iPad; confidence. When developers are confident that their market will only continue to grow and that Apple will improve support [like Apple’s recent announcement], they make more and better quality applications. This is what Nokia seriously lacks right now, a unified operating platform. Their competitors that have built their own operating systems like RIM's Blackberry OS and Apple have already unified all of their devices under one operating system.
This leads us to the current predicament regarding the depature of Nokia’s CEO, Olli-Pekka Kallasvuo, this Friday followed by Executive VP Anssi Vanjoki today. While we are unsure of Mr. Vanjoki’s future beyond the next six months, we know for a fact that Mr. Kallasvuo’s involvement with Nokia will not end as he will remain present on the board of Nokia Siemens Networks. The worrying part, though, is that Mr. Vanjoki was the head of Nokia’s Mobile Solutions unit which indicates that the board is prepared to take drastic measures. Secondly, Nokia Siemens Networks desperately needs a strong leader to stop bleeding money, as that business unit continuously makes trouble for the Nokia's bottom line.
Nokia’s CEO Olli-Pekka Kallasvuo will be replaced by a Mr. Stephen Elop - a Canadian and former head of Microsoft’s Business Division. Before working at Microsoft, he also worked for companies like Macromedia and Adobe Systems. His experience inside of those companies should be extremely valuable in improving Nokia’s profitability and direction.
The biggest reason for these drastic measures is that Nokia has become a visibly stagnant behemoth that does not understand its own size. They are losing market share in the developed markets, while gaining ground in the developing ones. This is further shown by their reduction of revenue in trends going from 2007 to 2009. In the fiscal year 2007, Nokia had revenue of $51 Billion and a net income of $7 Billion. Fast forward to 2008, and you see Nokia take a slight dip to $50B while taking a hard hit to net income falling to $4 Billion. While we can definitely attribute this to the recession, we also have to look at the difference between 2008 and 2009. Nokia took a $10 Billion hit to revenue and shaved off another $3 Billion in net income to the point where they only reported $891 Million of net income. This could definitely be attributable to the down economy, except for the fact that their competitors Research In Motion [NASDAQ: RIMM] and Apple [NASDAQ: AAPL], etc. have only been growing as they’ve been shrinking.
Nokia is losing market share in the most important markets and their executive can’t seem to understand why. The tech sector took a hit from the recession, but it was also the quickest to rebound and the mobile device makers have been leading that charge. This is, of course, with the exception of Nokia. What really needs to happen is that the company needs to shake up more than just the two executives that have resigned; they need to re-think their entire company’s plans and goals and possibly redirect their midrange and high-end device offerings to cater more to what Europe and North America want since they are hurting most in those markets.
From what it seems, things are changing inside of Nokia but we want to see the new guys pushing for drastic changes. We are talking about the kinds of changes that will propel Nokia into an era where people actually recognize them as a high-end device manufacturer and not a dumb phone manufacturer. I cannot stress this point enough. There have been too many times in the past few months where I have gotten confused responses when telling people about the Nokia N900. They simply don’t know that Nokia made high-end devices... and that needs to change.
Nokia, Anssi Vanjoki, Olli-Pekka Kallasvuo, Android, iOS, Apple, Blackberry, RIMM, Research In Motion, Microsoft, Meego, Symbian, Profit, Net Income, iPhone, iPad, Stephen Elop
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