Nokia Ousts Kallasvuo; Names Microsoft’s Elop CEO

Nokia (NYSE: NOK) has hired Stephen Elop, the well-respected president of Microsoft’s business division, which includes the Office franchise, as its new president and CEO. Elop is replacing Olli-Pekka Kallasvuo, who was appointed Nokia’s CEO four years ago. In a release, included in full below, Nokia Chairman Jorma Ollila says “the time is right to accelerate the company’s renewal” and “to bring in new executive leadership with different skills and strengths.”

An executive change at Nokia seemed inevitable, considering shareholders and investors were increasingly looking for evidence that the company was committed to turning around its performance. Rumors that Kallasvuo might be replaced circulated as recently as April when investors voiced concerns about Nokia’s failure to role out a competitive mobile operating system. Its focus on developing services, like e-mail and maps, to complement its manufacturing bent, has also met mixed results. Kallasvuo will leave his current position on Sept. 20, and is still listed as a speaker at Nokia’s own Nokia World conference in London next week. Elop will start on Sept. 21.

Despite having the privilege of being the largest handset maker in the world — and the largest smartphone maker — Nokia has struggled to release a phone that comes close to appealing to consumer appetites that have shifted toward high-end devices, like the iPhone and Android. Much of that has had to do with its Symbian operating system that was not originally designed for touch screen devices. In many ways, updating the legacy system has been more difficult than starting over.

The choice of Elop for the position is striking. Many observers never thought Nokia would be interested in hiring externally for the role — or hiring a foreigner. However, Nokia has aligned itself with Microsoft (NSDQ: MSFT) on a number of occasions, including the use of Windows on netbook computers. Notably, Elop himself announced a major alliance between the two companies last summer, which involved bringing a mobile version of Office to some of its phones. Whether the hire signals Nokia’s interest in working with Microsoft more closely is unclear. Most of the top manufacturers to date have adopted Android as their primary smartphone platform for the foreseeable future. With Microsoft’s upcoming release of Windows Phone 7, which could be a strong competitive offering, we could potentially see a broader alliance with Nokia.

For Elop, the job is a return to the CEO role. He had previously been CEO of Flash and Dreamweaver developer Macromedia and oversaw that company’s sale to Adobe Systems (NSDQ: ADBE) in 2005. He subsequently was chief operating officer at Juniper Networks until he was aggressively recruited by Microsoft in 2008 to replace long-term Microsoft executive Jeff Raikes. His tenure at Microsoft was marked by the successful release of the latest version of Office this summer.

Elop’s departure leaves a major void in Microsoft’s executive ranks. Last year, the business division reported $18.6 billion in sales and $11.8 billion in operating income, putting it ahead of the company’s flagship Windows division in sales and only slightly behind in profits. He is the second of Microsoft’s five presidents to leave in recent months. Robbie Bach, the president of Microsoft’s entertainment and devices division, stepped down in May.

Microsoft has not named a replacement for Elop. In an e-mail sent to employees this evening, CEO Steve Ballmer says “Stephen leaves in place a strong business and technical leadership team … all of whom will report to me for the interim.”


The release:

Espoo, Finland -Nokia’s Board of Directors has appointed Stephen Elop President and Chief Executive Officer of Nokia as of September 21. Elop currently heads Microsoft’s Business Division. Before joining Microsoft, Elop held senior executive positions in a number of US-based public companies, including Juniper Networks, Adobe Systems Inc. and Macromedia Inc. He holds a degree in computer engineering and management from McMaster University in Hamilton, Canada, which is his home country.

“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. The Nokia Board believes that Stephen has the right industry experience and leadership skills to realize the full potential of Nokia. His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company. 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,” said Jorma Ollila, Chairman of the Nokia Board of Directors.

Elop commented on his new Nokia position: “I am extremely excited to become part of a team dedicated to strengthening Nokia’s position as the undisputed leader of the mobile communications industry, with a relentless focus on meeting the needs and expectations of customers. Nokia has a unique global position as well as a great brand upon which we can build. The company has deeply talented and dedicated people, and I am confident that together we can continue to deliver innovative products that meet the needs of consumers. The Nokia slogan clearly states our key mission: Connecting People, which will acquire new dimensions as we build our portfolio of products, solutions and services.”

Olli-Pekka Kallasvuo will leave his current position as President and CEO of Nokia on September 20, 2010 and his position on the Nokia Board of Directors with immediate effect. He will continue to chair the Board of Nokia Siemens Networks in a non-executive capacity. 

“The whole Board of Directors joins me in thanking Olli-Pekka for his thirty years at Nokia, during which he has been deeply involved in developing the company and its operations. His dedication and contribution throughout the years has been exceptional. The Board wishes him every success in his future pursuits,” says Jorma Ollila.

In accordance with the terms and conditions of his service contract, Kallasvuo is entitled to a severance payment consisting of 18 months gross base salary and target incentive which totals approximately 4.6 million euro. He will also receive as compensation the fair market value of the 100 000 restricted Nokia shares granted to him in 2007, which vest on October 1, 2010.

As of September 10, 2010, the Nokia Board will consist of the following members:  Jorma Ollila (Chairman),  Dame Marjorie Scardino (Vice Chairman), Lalita D. Gupte, Bengt Holmström, Dr. Henning Kagermann, Per Karlsson, Isabel Marey-Semper, Risto Siilasmaa, Keijo Suila.