Thursday, September 6, 2012

Can Elop become Nokia’s Dream CEO?

Can Elop become Nokia’s Dream CEO?New CEO Stephen Elop is on a mission to restore Nokia’s pride amidst many challenges. Steven Philip Warner writes on How Elop could experiment with new strategies and Pan-Fry a Panacea for the Finn
 
When Stephen Elop, the erstwhile President of Microsoft’s Business Systems division, showed up for one of his job interviews at Nokia early this year, he had an iPhone 3GS and a BlackBerry Bold clipped to his belt and a Windows Mobile device tucked in his jacket. Then, he showed little love for a Nokia gadget. He cannot afford to do so now. On September 10, 2010, it was announced that he would carry on the gig to save Nokia, the world’s largest cellphone maker, as its new President & CEO. His climb is rather an uphill one, as complexions of Nokia’s recent popular blueprints have appeared rather swarthy.

It is ironical that sceptics talk about saving a company that is still the world no.1 in terms of handset sales, with a global market share of 34.2% (as of Q2, 2010). But take a look at its stock performance in the past decade and you realise that the market is not all pleased with the Finnish giant. It takes some heart for long-term investors to bear the pain of an 85.33% erosion in Mcap in a dozen years, worse than even the most criticised Microsoft, which lost a lower 23.28% during the same period. Nokia’s shareholders have undergone that agony. At the same time, its market share is on a constant course of descent, having lost as much as 2.6% in just a matter of four quarters (market share figure for Q2, 2010, as per Gartner)! Elop is out to save a ship whose sides are being chiseled away by the sharp edged icebergs of misfortune. While speaking to B&E from Colorado, Rick Sturm, CEO of Enterprise Management Associates Inc. (EMA), explains Nokia’s performance at the bourses as thus, “As CEO Elop’s predecessor (Olli-Pekka Kallasvuo) has to take the blame for the dramatic decline in Nokia’s stock prices. The company’s Mcap is a reflection of investors’ collective assessment of the future performance of the business. If their assessment of Nokia’s prospects for future performance is to change, they must have some basis to lead to that shift. Revenue growth, increased margins, better market share, successful penetration of new markets, new technologies et al, are all key to recovering Nokia’s market value.”

In the past four years, total quarterly sales of Nokia have increased by 43.33% to touch 111.47 million units (figures for Q2, 2010). Considering that this growth came despite the slowdown and the first iPhone bomb, it deserves a congratulatory pat in the back. [But if it were so, why was Kallasvuo booted-out?] However, the fashion in which its competitors have danced to its wrong chords, have also been memorable sights. Here’s a comparison: in contrast to Nokia’s 43.33% rise in sales, the current world #2 Samsung (which holds a 20.1% market share) grew volume sales by 153.6% during the past four years, while the #3 LG (market share of 9.0%) saw a 100.6% rise. And what about Blackberry (RIM) and iPhone (Apple)? The duo managed some magic and grew their global unit sales by 3,202.4% and 4,024.3% respectively. And they have a lesson for Nokia too – innovate or wilt away. While speaking to B&E from Hong Kong, Gavin Byrne, IT Analyst, Informa Telecoms & Media says, “Nokia’s weaknesses in recent years have been innovation and then the execution of that innovation, i.e., bringing it to market in appealing consumer oriented products. The company has not really had a market leading smartphone since the launch of the N95, and that was quickly eclipsed by the iPhone.” Even Sturm of EMA doubles up saying, “Innovate. Innovate. Innovate! It is the key to protect Nokia’s market share.” 
 

Source : IIPM Editorial, 2012.
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