Behind the seemingly mild-mannered, Finnish face of Nokia Corp. lies the heart of a crafty predator.
The company has seen the markets of the future and it plans to be more nimble to pounce on opportunity as it arises, or as its innovations and forward momentum create an opening. In essence, that means providing the world with handsets and then delivering Internet-based content and services via those devices.
Nokia is making changes in its executive lineup and operational business structure at a time when it has solid market leadership in the mobile handset industry. Thus the company appears intent on stretching to realize its ambitions, despite the inherent risks. And the reorganization comes at a time when its next closest rival, Motorola Inc., will need as much as a year to recover its footing.
In short, Nokia is regrouping from a position of strength, not out of necessity. The outcome, of course, is anything but certain. But one analyst, Tero Kuittinen of Avian Securities L.L.C., said that the company has been focused for some time on the transition from handsets to content and services and that last week’s announcement was a product of that sharpened, forward-looking focus.
“The cool thing about this company,” Kuittinen said, “is that it makes changes when it’s doing well. Other companies only act under duress.”
Reason for change
Kuittinen said the changes in business units and executive responsibilities could reflect two basic emphases: operational efficiencies in its handset business and moving forward on its reach into Internet-based content and services. Accomplishing both would be complementary, if difficult to achieve, the analyst said.
“We don’t know which is the main driver,” Kuittinen said.
Kuittinen said that a number of Nokia’s past initiatives in content and services have failed, but that “this is a very tenacious company and will not give up on being successful in reaching its goals.”
“It’s ‘do-able,'” Kuittinen said of the company’s dual focus on devices and content. “It’s exceptionally difficult, but if you pull it off, the profits could be amazing.”
Striking a balance
Of course, Nokia’s grand ambitions run counter to the interests of its network operator partners, who also seek a big slice of the content-and-services pie. How Nokia approaches its ongoing partnerships, critical to its continued success-while flexing its muscles in Internet-based services-will be fascinating to watch, Kuittinen said.
One fresh example: Nokia spokespeople apparently have recently switched from discussing its development of “alternative channels”-those outside operator-controlled retail channels-to discussing “complementary channels.” While accurate in a sense, the change in language also appeared to reflect Nokia’s diplomatic approach to a delicate situation.
The restructuring announcement last week brought a momentary bump in the company’s stock value, but Kuittinen said the stock’s value had already enjoyed a steady run-up from about $20 to about $28, thus the impact of last week’s news was light.
Nokia spokeswoman Laurie Armstrong said that, strategically, CEO Olli-Pekka Kallasvuo is focused on corporate renewal and the concept of “change for positive growth.”
“These changes do come at a time when we’re doing well and we’re looking at the future, which includes convergence (of mobility and the Internet),” Armstrong said. “It’s a good time to look at renewal. This does reflect our aspirations to become more of an Internet-based company, though it doesn’t signal any change in our overall strategy. ”
The changes
Last week’s news, in brief:
Nokia announced it will create three main units in its device business: devices, services and software, and markets. The services and software unit reflects Nokia’s growing focus on Internet-based services as well as enterprise solutions, while the markets unit will focus on supply chains, sales channels and marketing, according to the company. Beginning Jan. 1 Nokia will report its financials under two segments: Devices and Services and Nokia Siemens Networks.
The company said that the devices unit will be led by Kai Oistamo, who currently leads Nokia’s mobile phones business group. Niklas Savander, now head of technology platforms, will lead the services and software unit. Anssi Vanjoki, currently leader of Nokia’s multimedia business group, will lead the new markets unit. Mary McDowell, leader of the enterprise solutions business group, will become chief development officer at the company. Tero Ojanpera, currently the company’s CTO, will undertake “business responsibility” for entertainment and communities services in services and software.
While the new roles are well-defined at some level, how they are applied to current and developing responsibilities will take time to gel and, thus, to describe publicly in detail, according to Armstrong. She noted that Nokia’s announcement mentioned a six-month period to make the stated changes.
Though the human penchant for grasping the changes in terms of “who’s up and who’s down” at the company is natural, both analyst Kuittinen and Armstrong said that Nokia corporate culture has a tradition of matching talent with specific needs, apart from the hierarchal structure that typically governs American corporate culture.
Thus Ojanpera’s reassignment from CTO to other, narrower duties, for example, may well reflect that match between talent and need, Armstrong said. Nokia also has a tradition of seasoning its top management by placing executives in a wide variety of roles during their careers, which is not unusual for major corporations.
CEO Kallasvuo could be said to have taken such a path to his current position. And his one-year tenure as CEO has been marked by decisive turns in operational tactics, such as last year’s cancellation of a joint venture with Sanyo Corp. to produce CDMA handsets.
The reorganization also was touted by Nokia as an improvement to the company’s efficiency and time to market. Whether the restructuring will in fact bring Nokia the business it avidly seeks remains to be seen-and likely will be parsed in days to come for what it means for competitors.
