Nokia CEO Kallasvuo resigns, to be replaced by Microsoft's Elop

Nokia (NYSE:NOK) CEO Olli-Pekka Kallasvuo is stepping down, effective Sept. 21, and will be replaced by Microsoft executive Stephen Elop, a move the struggling Finnish handset giant hopes will help it regain footing in the cut-throat smartphone market.

Microsoft executive Stephen ElopElop--who ran Microsoft's $19 billion business division and was responsible for the company's Office product suite--will be the first non-Finn to run Nokia. The Canadian Elop will bring a distinctly different sensibility to the job, but will face the urgent task of trying to strike back against the company's smartphone competitors with the launch of Nokia's MeeGo operating system as well as strengthening the company's relationships with U.S. carriers. Elop's appointment comes days ahead of the company's annual Nokia World event in London next week, where it is expected to unveil new smartphones.

While Nokia remains the global leader in handset and smartphone market share, its position, especially in smartphones, has eroded over the past several years. Nokia executives, including Kallasvuo, have openly admitted that Nokia needs to regain momentum at the high-end of the market.

"My role as leader of Nokia is to lead this team through the period of change, take the organization through this period of disruption ... to meet the needs of its customers, while delivering superior financial performance," Elop said at a news conference in Helsinki.

While significant, Kallasvuo's departure was not entirely unexpected. In July, the Wall Street Journal reported that the company was actively searching for a replacement for Kallasvuo, who had been at the helm since 2006--but came under pressure from analysts and investors alike for failing to deliver hit high-end smartphones to match Apple's (NASDAQ:AAPL) iPhone, devices running Google's Android platform and others.

During his tenure, Kallasvuo sought to transform Nokia from a handset maker into a services provider via the company's suite of Ovi-branded services, including its Comes With Music download service. However, Nokia was slow to adopt touchscreen phone technology and did little to blunt Apple's rise in the smartphone arena. Nokia also has sought to improve its relationships with U.S. carriers, particularly AT&T Mobility (NYSE:T). However, Nokia's presence in the U.S. market remains relatively anemic, and the company's latest high-end gadget, the N8, is not yet being sold through any U.S. carriers.

Thus, Elop will have his work cut out for him--and one hole in his resume is lack of a visible relationship to U.S. carriers. "In terms of question marks [about the appointment], we believe that a lack of recent wireless and carrier customer-facing experience, which we believe is important for the handset business, could present some challenges," analysts at Credit Suisse told MarketWatch.

"Nokia's board has made a safe choice when they should have made a courageous choice," Nick Jones, an analyst at Gartner, told Bloomberg. "In the current state of the market when the two main competitors, Google and Apple, are very much headed by recognizable visionaries, you need someone who is charismatic and can explain how you're driving the industry forward in new directions. Elop's an execution guy and the thing to watch now is who will he appoint to complement his skills."

Others offered a more favorable view: "On paper he is the perfect intersection hire for Nokia--understanding software and consumer electronics/technology having held senior positions at Juniper Networks, Adobe Systems and Macromedia," wrote Maynard Um with UBS in a research note. "U.S. feedback suggests he is a professional and solid individual who executes well and clearly the attraction for Nokia is his strong software background (ironically Microsoft has poor track record so far in mobile). We believe that Stephen is a good candidate for the role with solid experience."

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this MarketWatch article
- see this ZDNet article

Related Articles:
Nokia's Q2 profit sinks 40% as pressure mounts
Nokia's MeeGo to take on Android, iPhone
Handset version of MeeGo set for June 30 release
Report: Nokia is hunting for CEO Kallasvuo's replacement

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