Nokia brings in Microsoft exec to replace CEO

Nokia's new Chief Executive Stephen Elop speaks during a news conference in Espoo September 10, 2010.

HELSINKI/LONDON (Reuters) - Nokia has hired Stephen Elop, a Canadian Microsoft executive with Silicon Valley credentials, to replace its embattled chief executive and renew its drive to compete with Apple.

The world's top cellphone maker said Olli-Pekka Kallasvuo, who presided over a halving in Nokia's market value to about $37 billion during his four years in charge, would hand over to Elop on September 21. Nokia shares rose as much as 6.9 percent.

Elop, 46, has risen rapidly over the past five years from chief executive of San Francisco Web software maker Macromedia to chief operating officer of Juniper Networks to head of Microsoft's Business Division, which makes Office software.

Chairman Jorma Ollila, who led Nokia's transformation from a rubber boots-to-TVs conglomerate into a mobile-phone giant in the 1990s, said he would also resign as soon as possible after the transition, underlining the scale of change at the Finnish company.

Under Kallasvuo, who will get a severance payment of 4.6 million euros ($5.8 million), Nokia has struggled to keep up with rivals such as Apple and Google in smartphones, the most profitable and fastest-growing part of the market.

At a Helsinki news conference, Elop said it was too early to say what he planned to change. He said: "My job is ... to ensure that we are meeting the needs of our customers, while delivering superior financial results."

The conference was broadcast live on Finland's main television and radio channels, demonstrating the strength of national interest in the 145-year-old company, which dominates the Nordic nation's economy.

Elop's appointment is a major shift for Nokia; he will be the first non-Finn to run the company, and eight of the current 10 executive board members are Finns.

Investors and pundits had urged Nokia to bring in an outsider, ideally an American, to help the company regain a reputation for "cool" it has largely lost to Apple's iPhone and a host of other phones built around Google's Android software.

The Finnish company has lacked a hit smartphone model since its N95 model launched in 2006, has failed to ignite much excitement around its new Web services and has performed particularly weakly in the United States.

DAUNTING TASK

Elop told the news conference North America was a critically important market and would be "an area of emphasis."

Ollila said of Elop: "His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company."

Nokia shares rose almost 7 percent but later lost most of their gains to trade up 1.9 percent at 7.89 euros by 1405 GMT (10:05 a.m. EDT). The European technology index was flat.

"They have had problems for a long time and have been behind the curve on trends for the past few years. I think it could be good to get new influences, thoughts and ideas," said Inge Heydorn, fund manager at Sentat Asset Management.

"Elop faces a daunting task. Nokia has lost its leadership in high-tier phones and has struggled with the rise of Internet-led services," said Ben Wood, head of research at UK-based telecoms analyst firm CCS Insight.

DESIGN PRINCIPLES

Elop should bring to Nokia an understanding of the design principles that have driven Apple's success, as well as of the telecoms network industry in which Nokia's troubled Nokia Siemens Networks plays.

Before joining Microsoft, he spent several years in Silicon Valley, rising to become chief executive during seven years at Macromedia, a San Francisco software maker whose graphics and Web development tools were favored by Apple developers.

Macromedia made the Flash video and Dreamweaver software, which were retained by Adobe as key products when it bought Macromedia for $3.4 billion in 2005.

At Microsoft, Elop helped steer the company toward online versions of programs such as Word, Outlook and Excel that users could access from anywhere and even use on mobile devices, a major step for a company founded on installed software.

He was also credited with successfully managing the launch of Microsoft's Office 2010 suite earlier this year.

Microsoft and Nokia are long-time collaborators, and in August last year formed an alliance to bring Office applications such as Outlook e-mail to Nokia devices.

Microsoft's Business Division has traditionally been one of its two biggest and most profitable units, along with the Windows division. Last fiscal year it made $18.6 billion in sales, almost 30 percent of the company's total.

Elop will now find himself in charge of a company with sales of 41 billion euros and 124,000 employees worldwide.

(Additional reporting by Olaf Swahnberg in Stockholm, Bill Rigby in Seattle and Terhi Kinnunen in Helsinki; Editing by Dan Lalor, Hans Peters and Will Waterman)

($1 = 0.7882 euro)