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Nokia Needs New CEO, New Smartphone Strategy Too

Nokia's CEO Has to GoIt's hard to believe that Nokia, the world's largest wireless handset maker with a dominant 35 percent market share, is on the ropes and in need of a turnaround. Well, believe it. The Finnish company's board of directors certainly does; they're reportedly interviewing CEO candidates.

And you know, I believe it too. The only one who doesn't seem to believe it is Nokia's current CEO, Olli-Pekka Kallasvuo. If he does, he's not saying. And what he is saying is that he's optimistic about the company's future. Also that the speculation that he's about to get fired is hurting the company.

If that seems at all like a giant disconnect - and an awkward one, at that - you're not alone. It seems like that to me too. And I've got some advice for Kallasvuo and his board, but we'll come back to that in a minute.

Right now, let's talk about how the dominant player in a $100 billion-plus market somehow finds itself in deep crap. The problem for Nokia is that the high-end of the market, where all the profits are, is in the midst of a global shift to smartphones. And Nokia's management team, led by Kallasvuo since 2006, has inexplicably and completely missed the transition. I know, that doesn't even seem possible. Well, believe it.

And now, in the mother of all disconnects, Kallasvuo is on the PR trail voicing optimism about the company's smartphone strategy:

"We believe that the Nokia N8, the first of our Symbian 3 devices, will have a user experience superior to that of any smartphone Nokia has created," Kallasvuo said. "The Nokia N8 will be followed soon thereafter by further Symbian 3 smartphones that we are confident will give the platform broader appeal and reach, and kick-start Nokia's fightback at the higher end of the market."
The disconnect is that absolutely nobody else agrees with Kallasvuo. For example, a Wall Street Journal story indicates that Nokia's smartphone roadmap won't even be competitive with current Apple iPhone and Google Droid phones:
Nokia said its next marquee smartphone, the N8, will be available in some markets late this summer. It will have to compete with the new iPhone 4 [and] a new line of Google-powered phones from Samsung [and others].

Carolina Milanesi, a mobile devices analyst at research firm Gartner, said the N8 may be better than any previous Symbian phone, but its user interface is already inferior to that of the iPhone and Google-powered phones.

So what's so bad about missing the smartphone transition? A lot. Smartphones have taken over both the high-growth and high-margin segments of the wireless handset market. The result of Nokia's staggering lack of vision and strategic planning is flatlining revenues and plunging profits.

Yesterday the company announced that profits had dropped 40 percent from the year ago quarter. What it didn't say is that profits have been plummeting steadily for three solid years, taking the share price along with it. Investors have lost $75 billion in market valuation over the past 18 months.

So, what now? Well, Kallasvuo is clearly responsible for critical missteps that brought Nokia to this point. In fact, before he became CEO he was president and COO and, before that, he ran the company's mobile phone business. No matter how you look at it, this happened on his watch. He needs to go.

The board now needs to do three things, and pronto:

  1. Agree on and announce a CEO transition plan and timetable. Kallasvuo is right about one thing: the speculation is hurting the company.
  2. Kallasvuo should stay until a new CEO is found. In the mean time, some cost-cutting and perhaps a Droid strategy would be a good idea.
  3. Hire an experienced turnaround executive. Think Lou Gerstner, Mark Hurd, that sort of thing. Sooner is better than later.
Image of CEO Olli-Pekka Kallasvuo Courtesy Nokia
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