* Elop hired in 2010 to revive Nokia
* Flurry of product launches show Nokia moving faster
* Q2 results show Lumia sales still weak
By Ritsuko Ando
HELSINKI, July 22 Nokia CEO Stephen Elop recalls
a meeting in August 2011 in which the company's leadership
struggled to decide on the name of its new smartphone, the first
using Windows Phone software.
"We almost fell into the trap that had often befallen Nokia,
which was... let them work on it a bit longer because we
couldn't quite reach agreement," Elop said. Instead, he demanded
a decision that day.
"Why wait til tomorrow or next week? We could make the
decision today. And we did." Lumia was the result.
Senior Nokia employees say Elop, hired in 2010 to revive the
once-undisputed leader in mobile phones, has forced them to make
faster decisions, which has sped up everything from
restructuring to the development of new handsets.
There is no time to waste. Nokia's ability to compete in the
global smartphone market is increasingly questioned; its market
share is stands at around three percent, far behind Samsung
and Apple which control around 50 percent
Second-quarter Lumia sales missed market estimates, and with
cash reserves falling, some investors worry how much time Elop
has left to validate his decision to adopt Microsoft's
untested Windows Phone software. The transition to Windows,
which he said would take two years, is now in its third.
Nokia has picked up the pace of product launches this year,
including the July 11 unveiling of its Lumia 1020 with a
Elop reckoned the company spent 22 months on the N8, which
used the now-obsolete Symbian operating system and was launched
shortly after he joined the company.
"A number of our Windows Phone products are on six to eight
month delivery cycles. We are moving so much faster," he said.
Apple has been launching a new iPhone around once a year,
and analysts have said it may need to speed its cycle up to
compete with the frequency and variety of Samsung product
launches. The South Korean company has close to 40 versions on
the market compared with around 20 for Nokia.
Nokia's 1020 is the most advanced of its Lumia smartphones,
and followed the 925 and 928 launches in May. In February, it
introduced the more basic Lumia 520 and 521 models.
Also this year, it announced a 15-euro phone, its cheapest
phone ever. It has also upgraded its line of feature phones with
the Asha 210 and 310, as well as the more powerful 501 with
built-in social media applications.
Elop said the older Nokia prioritised quality and features
but was less disciplined about the time it took to deliver.
"There was a pattern in the past where, with Symbian and
everything, lots and lots and lots and lots of things got added
and it took a long time to get the quality up to the right
level," he said.
It has cut one in three jobs under Elop, and some employees
say the leaner structure means things get done faster.
Samuli Hanninen, who was in charge of building the imaging
software for Lumia 1020 and had returned from its launch event
in New York several days earlier, said he was enjoying the same
kind of buzz he felt in his early days at Nokia a decade ago.
"We had a culture where we never gave up, we were always
working very late, you could call guys at any point of the day
to say this needs to be fixed," he said. "We somehow lost it.
The process became more important than the product and
Elop, a Canadian and former Microsoft executive, replaced
Olli Pekka Kallasvuo, who led the company from 2006 and was
criticised for being complacent about the rise of smartphones.
Elop was the first non-Finn to become CEO of the
148-year-old company, which started as a paper mill and at one
point made rubber boots. Many initially wondered whether he
could fit in.
His enthusiasm quickly endeared him to staff. In person, he
is quick to laugh and to offer jokes, with a down-to-earth style
that has little in common with the Microsoft's Steve Ballmer or
Apple's former CEO Steve Jobs.
He can also be blunt. In a now-famous 2011 email to staff,
he compared Symbian to a "burning platform" that needed to be
abandoned. The switch to Windows was a shock, but many said Elop
won support with his frankness.
Carolina Milanesi, an analyst at Gartner who has followed
the industry for over a decade, said the switch was the right
choice and one that could only have been made by an outsider.
"You needed someone who wasn't personally invested, who
could take a harsher look," she said. "If you'd been there,
you'd obviously have been part of what the problem was."
DON'T BE ARROGANT
The problem, Elop says, was a stubbornness that came from
years of being at the top. He says he has encouraged employees
to adopt a "challenger mindset".
"What I really mean is, don't be arrogant," he said.
"There's a number of examples over the last six, seven years,
where Nokia heard trends but decided to ignore those trends
because it felt that it somehow knew better... And that hurt the
company badly for many years."
Alf Noto, head of Nokia's customer care division, said that
approach was reflected in the way it now deals with customers.
Elop answers around 10-20 customer emails each day, he said.
Others say Nokia has also become more humble towards its
partners, including carriers and retailers who sell handsets, as
well as developers who create the apps for phones.
"He took a lot of the arrogance out. For a while we were
behaving like a market leader and we weren't," said Christof
Hellmis, an executive at Nokia's Here navigation business.
Elop, however, has yet to prove he was right to switch to
Windows, with Google's Android and Apple's iOS running
around 90 percent of smartphones sold today.
He was speaking to Reuters the day before it announced it
sold 7.4 million Lumia phones in the second quarter, a 32
percent improvement from the first quarter but fewer than the
market's consensus forecast of 8.1 million units.
It chose not to predict future Lumia sales and some,
including Pierre Ferragu at Bernstein Research, are sceptical
about Nokia's ability to compete in smartphones.
Nokia shares, now around 3 euros, are a fraction of their
2000 peak of 65 euros, and its bonds have junk ratings.
Chris Weber, executive vice president in charge of global
sales and marketing, said its expanded product line, as well as
a joint marketing push with Microsoft and AT&T for the Lumia
1020, should help boost sales ahead.
Gartner's Milanesi was also optimistic.
"They're now behaving the way they should, fighting and
thinking differently," she said. "Things don't change
overnight... But I think the 1020 is going to be the spark to
get customers to pay attention to Nokia."