Report: Nokia's Elop has only months to turn around company's fortunes

Analysts have turned against Nokia CEO Stephen Elop, saying he has until early 2013 to demonstrate he can rejuvenate the ailing company through its partnership with Microsoft.

Nokia CEO Stephen Elop


Nokia is in the middle of its turnaround strategy and is restructuring by cutting 10,000 jobs. The Finnish handset giant is also launching its first smartphones running Microsoft's Windows Phone 8 software this fall. However, Nokia has not said when its Lumia 920 and 820 phones will go on sale, how much they will cost or which carriers will support them, leading to more anxiousness from analysts and investors.

Nokia sold 4 million Lumia smartphones in the second quarter, double what it sold in the first, and Elop has predicted that the third quarter will also be challenging as Nokia continues to transition from Symbian to Windows Phone as its primary smartphone platform. "While Q3 will remain difficult, it is a critical priority to return our Devices & Services business to positive operating cash flow as quickly as possible," Elop said in July.

"Elop has not been able to attract customers and that is what counts," Magnus Rehle, a partner in Greenwich Consulting told Reuters. "You can say that he has not had enough time, but he has been there for two years. Time is up."

Sentiment has hardened against Nokia following the lacklustre launch of its Lumia 920 smartphone earlier this month, a handset that was flagged to take the fight to Apple's iPhone 5. The company's shares fell heavily during the launch event after the Lumia 920 appeared to be not much more than an upgrade of a previous model, the Lumia 900. The new smartphone does have Nokia's "PureView" camera technology, which produces clearer photos and video.

The new Lumia 920 and 820 handsets will ship prior to the Christmas buying season, but industry watchers believe these smartphones will struggle to compete against the iPhone 5 and other new devices. Apple has said it took 2 million pre-orders for the iPhone 5 within 24 hours, double what it reported last year for the iPhone 4S.

"The Christmas season is a lost cause. For Nokia, if there is any chance, it will be spring," Juha Varis, who holds Nokia shares as part of the Danske Invest Finnish Equity Fund, told Reuters.

Nokia's challenge is now complicated by the fact that HTC and Microsoft are joining forces for a joint marketing campaign on HTC's newest Windows Phones, the high-end Windows Phone 8X and the mid-range Windows Phone 8S.

However, others are more forgiving of Elop's predicament. "His starting point was really weak and it's hard to say someone else would have done a better job," commented Nordea analyst Sami Sarkamies. "He has been making some brave decisions and courage is something this company has lacked for a long time before Elop joined."

But even this support was hedged by the analysts, claiming that Elop has until the end of the first or second quarter of 2013 to show his strategy can work. "The beginning of next year may be the final judgment," Varis said. "I think that maybe the end of the first quarter is the marking point."

Greenwich's Rehle and Danske's Varis have called upon Elop to switch the company's product strategy away from the high-end and focus more towards the cheaper end of the smartphone market.

Both analysts believe Android-based smartphones costing under $100 could attract millions of buyers in emerging markets who place value on the Nokia brand.

However, Varis admits this move of focusing on Android instead of Windows would mean admitting defeat for Elop's Microsoft strategy. "He's totally a Microsoft guy, so it is natural that he would have to step down then," he told Reuters.

For more:
- see this Reuters article

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