Nokia is reportedly searching for a new CEO to replace Olli-Pekka Kallasvuo at the Espoo, Finland-based company. Kallasvuo has held the CEO position for the past four years, during which time Nokia’s smartphone market share has declined from 68.5 percent in mid-2007 to 44.3 percent by the first quarter of 2010. Nokia has considered at least two U.S. executives from technology companies to replace Kallasvuo, according to unnamed Wall Street Journal sources.
The vehicle — the smartphone, that is — fueling growth for companies like Apple, Google and Research in Motion during Kallasvuo’s tenure may be the very reason Nokia is looking for a CEO change. In 2006, Nokia battled in this space against RIM, Palm and Microsoft. But in 2007 and 2008, the iPhone and Android platforms arrived. By the time Nokia realized it had new competitors, the company was losing market share because it couldn’t adjust quickly enough. Indeed, just 3.5 years after entering the handset market, Apple shot past Nokia as the world’s most profitable handset vendor.
We can debate which company offers the best handset platform, hardware or services, but it’s the sales, earnings and profits that the shareholders care about. And since Apple first began to sell its iPhone, Nokia’s stock has dropped by 68 percent, while Apple shareholders have seen a doubling of their investment. Clearly, both companies earn or lose money on other products and services, but Nokia’s stock price on Kallasvuo’s watch reflects the overall issues that Nokia faces.
To say Nokia hasn’t tried to adjust and better compete under Kallasvuo wouldn’t be fair. But the strategy to combat its newer and nimble competitors hasn’t been effective, fast, nor focused — for a recent history, see my timeline on the transition since 2007. Nokia’s response to iPhone and Android has mainly been with an aging S60 interface atop the Symbian operating system. It was only recently that the company broke out with devices powered by Maemo and Symbian^3. But even those are transitioning; this past February, Nokia merged Maemo with Intel’s Moblin platform to create yet another operating system in MeeGo. And although Symbian^3 looks promising on the new N8 handset, Nokia has decided that MeeGo will power high-end handsets in the future.
Such perceived indecision on the part of Nokia for the right smartphone strategy going forward doesn’t install confidence. Indeed, two months ago, Nokia announced its fourth reorganization in as many years. Nokia followed up that action last month by reducing net sales expectations to the “lower end of, or slightly below” the prior expected range of 6.7 to 7.2 billion euros in the second quarter of 2010. While I admire Kallasvuo for the empowerment that Nokia devices bring to emerging markets, shareholders only admire profits and competitive products — both of which Nokia lacks at the high end.
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