Nokia Corp.’s longtime Chief Executive Jorma Ollila announced he will step down next year, paving the way for the head of the company’s mobile-phone operations to take the wheel. The move represents a significant marker in Nokia’s stellar rise to the top of the world’s mobile-phone industry, but also comes as the company is facing some of its fiercest competition yet.
Olli-Pekka Kallasvuo, head of Nokia’s mobile-phone business, will become the company’s president and chief operating officer in January. Kallasvuo, 52, will replace Nokia’s president, Pekka Ala-Pietila, who is leaving the company. In June, Kallasvuo will take over the CEO role. Ollila will stay on as the company’s nonexecutive chairman.
The changeup had been expected; Ollila’s 13-year stint as CEO is one of the longest tenures in wireless. Under his watchful eye, Nokia sprouted from a small Finnish manufacturer of rubber boots, paper goods and other items into the world’s largest and most efficient handset maker, not to mention a major wireless infrastructure player. The company’s evolution is that much more astounding considering the complexities of wireless-arguably the most complicated and fast-paced sector of the electronics industry.
Despite its top position, Nokia today faces a range of challenges. Companies like LG Electronics Co. Ltd. and Samsung Electronics Co. Ltd. are digging into the space with sleek clamshell-style phones built to operator predilections. Meanwhile, a revitalized Motorola Inc. is taking aim at Nokia’s main area of expertise-low-end phones in emerging markets.
Thus, some had hoped Nokia would look outside its own halls for a chief executive, someone who would bring a fresh eye to the company’s operations. Motorola’s board took that track with the appointment of former Sun Microsystems Inc. President and COO Ed Zander. Motorola’s new CEO is credited with much of the company’s renewed zest.
“Perhaps someone with new blood would also be useful,” said Ittai Kidron with CIBC World Markets. The firm makes a market in Nokia securities. “It has its pluses and it has its minuses.”
Kidron said an outside CEO could have helped stimulate Nokia’s business. Indeed, some investors had hoped for such a move since Nokia’s market share has been relatively stagnant and its results in the second quarter were below some expectations. However, Kidron said some lose sight of the fact that Nokia is a cash-making machine-the company scored $1 billion in operating profit in the second quarter and has better margins than most of its mobile-phone rivals.
“Nokia is just doing much better than anyone else, by the way,” Kidron said. “From a perception standpoint, the only way they can go is down.”
Consequently, a chief executive culled from Nokia’s internal ranks could make for a smooth transition. And Kallasvuo is the consummate Nokia insider.
Kallasvuo joined Nokia in 1980 as corporate counsel. In 1987, he was appointed assistant vice president for the company’s legal department, and in 1988, he became the assistant vice president of finance. By 1990, he was promoted to senior vice president of finance.
In 1992, Kallasvuo ascended to the company’s senior ranks as chief financial officer. Then, from 1997 to 1998, he got a taste of the business end of things as corporate executive vice president of Nokia’s Americas operations. He returned to CFO in 1999, then moved to the top of Nokia’s phone business last year.
“I don’t necessarily expect any major changes in strategy” under Kallasvuo’s direction, Kidron said.
One item up in the air is who will take over Kallasvuo’s position as head of Nokia’s phone business. The same issue presents itself: Will it be a Nokia executive or someone new? Nokia in the past has brought in outside talent-the company recently appointed former Hewlett-Packard Co. executive Mary McDowell to head its enterprise business.
Nokia plans to name a new leader to its mobile phone business in the next few weeks, according to reports.
As for Ollila, it seems he doesn’t plan to spend his days polishing his tennis game (he is an avid player). Oil company Royal Dutch Shell plc announced Ollila will replace Aad Jacobs as its nonexecutive chairman next year.
