Nokia board backs strategy, shareholders cry foul

HELSINKI Thu May 6, 2010 2:51pm EDT

A man rests near a Nokia display at the Mobile World Congress in Barcelona February 17, 2010 file photo. REUTERS/Albert Gea

A man rests near a Nokia display at the Mobile World Congress in Barcelona February 17, 2010 file photo.

Credit: Reuters/Albert Gea

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HELSINKI (Reuters) - Nokia's chairman said the board fully supported management's current strategy, while small shareholders in the world's top cellphone maker criticised management at the annual meeting.

Nokia has started to build a new business by offering Internet services ranging from music downloads to e-mail, but these have gained little traction so far.

"We support management in this," Chairman Jorma Ollila told shareholders on Thursday.

Nokia has 82.7 million users for its Internet services, and aims to generate revenues of 2 billion euros ($2.68 billion) from services in 2011. Most of this will be paid by phone business, which has to pay for installing services into phones.

"It's a bit like a dog eating its own tail," said John Strand, chief executive of telecoms consultancy Strand Consult.

Chief Executive Olli-Pekka Kallasvuo, who has been with the company more than half of his life, has been under increasing criticism from analysts and shareholders as Nokia's share price has missed the market's recovery.

At the end of his speech he thanked shareholders for continuing support, and sighed deeply.

"The numbers are shocking; the sales fall, the operating profit crash. I wouldn't say operating profit was catastrophic, but the direction clearly was," shareholder Pekka Jaakkola said at the meeting.

Nokia's revenues fell 19 percent last year, while operating profit dropped 76 percent. The value of company's brand -- one of its key assets -- dropped 58 percent in just one year, according to a global study by Millward Brown.

The company will also be one of the few to miss profit growth in 2010, the year of economic recovery, and software problems continue to haunt its smartphones.

"In a few years our shares' value has dropped 60 percent, our pain threshold has been breached," said shareholder Kari Vainio.

Last month, Nokia delayed the rollout of phones using Symbian 3, its software platform revamp seen as a first step to making its smartphones competitive again, triggering a sell-off in its shares.

Kallasvuo said Nokia expected its new generation of devices to significantly close the gap with the competition in high-end smartphones.

Nokia has not been able to make a serious challenge to Apple's iPhone in the three years since it was introduced. Its last hit smartphone model, the N95, was unveiled in 2006, the year Kallasvuo, a long-time company lawyer, took over at the helm of the Finnish company.

Nokia's board chose Jorma Ollila, its long-time chief executive, to continue as its chairman.

Nokia shares closed 1.6 percent lower in Helsinki, lagging a 1 percent softer European technology shares index. In New York Nokia ADRs were 2 percent lower at 1730 GMT.

For a TIMELINE-Nokia's shift to services from hardware, click on ($1=.7453 Euro)

(Reporting by Tarmo Virki; Editing by Dan Lalor and Jon Loades-Carter)

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Comments (3)
ulludapattha wrote:
Factbox: Ex- Nokia CEO and present Chairman of the Board at Nokia Jorma Ollila handpicked Olli_-Pekka Kallasvuo to be his successor in 2006.
So, it is not conceivable, that Ollila would fire Kallasvuo no matter what happened or no matter what investors or experts say. The only viable scenario in which CEO Kallasvuo would step down would be, if and when Ollila ceases to be the Chairman of the Board. That possibility is not in sight. Unless, of course, if the negative market reaction forces the Nokia Board to take some stern action to placate investors, who have lost patience by waiting for Nokia’s often promised turnaround for the past three years.

When will that promised turnaround take place is anybody’s guess? If Nokia CEO’s repetitive promises of the past three years is some guideline, then the chances of a swift turnaround seem really very remote.

May 06, 2010 10:47am EDT  --  Report as abuse
knut wrote:
“”It’s a bit like a dog eating its own tail,” said John Strand, chief executive of telecoms consultancy Strand Consult.” – we know his qualifications..

N95 is not a Smartphone, E90 is. Nokia has led this market for 10 years alone, and Apple has just helped it grow.

Your business analysts knows little about telecommunication, and how to generate revenue here. The same with Apple. The “investors” may destroy Nokia being “besserwissers”. Nokia has been very successful at selling to the operators (US: “Carriers”) a handset that enables them to deliver services that creates a revenue and their profit. As long as Vodafone and T-Mobile loves Nokia, they have little to fear and the ungrateful investors should be careful raising concerns.
Nokia also delivers their networks, and know how easy it is to stop the advertising financing and create havoc for “special arrangements” that the iPhone relies on. Your market analysts fail to see the risk. So the “turn-around” must be planned and staged with extreme caution – or they face as some of the others to be stuck with their own tail in their mouth.

May 06, 2010 6:28pm EDT  --  Report as abuse
ulludapattha wrote:
In his very well written report about Nokia’s AGM on May 6, 2010 Reuters Tarmo Virki concentrates on:
1. proceedings of the AGM
2. the rather surprising and unconditional support given by Chairman Jorma Ollila to CEO Kallasvuo in a situation, where Nokia has clearly been on a downward slide ever since Kallasvuo took over at the helm of the Finnish company in 2006.
3. Tarmo Virki also describes the sentiments of frustrated shareholders, who have every reason to be dissatisfied with the present situation.
4. Tarmo Virki also gives the salient details about Nokia’s previous attempts to catch up with not only Apple but also the other players in the US market.

Therefore, it is not a question of frustrated investors or “nasty analysts”, who are bent upon destroying Nokia’s position. The gist of the whole story is about Nokia’s CEO Kallasvuo, and his failure for the past three years to catch up with the competition despite repeated promises to launch Nokia’s “iPhone Killer” soon.

In such a bleak situation at Nokia, it really surprises to hear that Jorma Ollila “fully supports Nokia’s present management and its strategy”.

Question to Jorma Ollila and the Nokia Board:
The Soviet Union was the largest country in size but it disappeared 20 years ago, because its politbyro leaders failed to see the changes that had taken place around them. Is Nokia destined to suffer from the same fate, since its Board headed by chairman Jorma Ollila seems to ignore the changes that have taken place on the marketplace since Ollila was Nokia’s CEO from the early 90s till 2006?

Darwin’s theory of evolution seems to be very much valid even here. It is basically a question of survival of the fittest. The survivor may not necessarily be the biggest or the largest mobile phone company.

May 07, 2010 1:33am EDT  --  Report as abuse
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