Linked by Thom Holwerda on Tue 24th Sep 2013 11:44 UTC
PDAs, Cellphones, Wireless

Finland is boiling with rage this weekend over the $25 M bonus payment the CEO Stephen Elop is set to receive as he leaves Nokia after his two-year tenure. Questions are now being raised by the oddest aspect of the bonus: the board of Nokia seems to have given Elop a $25 M incentive to sell the handset unit cheaply to Microsoft way back in in 2010. This effectively means that the board hired a man who was given a giant carrot to drive down Nokia's overall valuation and phone volumes while preparing a sale to Microsoft. What could possibly be a reason to structure Elop's original contract in this manner? Did the board in fact end up promising Elop more compensation in case he sells the phone division than if he runs it with modest success?

Vindication. We were right all along.

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A prize for lowering Nokia's value?
by oper on Tue 24th Sep 2013 12:46 UTC
oper
Member since:
2012-08-30

As Tomi Ahonen wrote in http://communities-dominate.blogs.com/brands/2013/09/the-do-it-your...

[...] Elop can be evaluated as Nokia CEO, for Nokia Corporate total results during his tenure. Or, because Nokia just now sold its total handset unit to Microsoft, it can be useful to see what results did Elop achieve at that handset unit (this includes both smartphones and featurephones). And lastly, since Elop did make a major change to Nokia's largest and most profitable division, the smartphone unit, it is a detail worth considering. No more analysis, just the facts...

NOKIA CORPORATION UNDER ELOP

First 6 months - Corporate quarterly revenues up 26% from 10.0B Euro to 12.6B Euro
Next 2.5 years - Corporate quarterly revenues down 55% from 12.6B Euro to 5.6B Euro

First 6 months - Corporate quarterly profit up 200% from 295M Euro to 884M Euro
Next 2.5 years - Corporate quarterly profit of 884M Euro turned into loss of -115M Euro

During first 6 months - Standard & Poor's rating for Nokia A, Moody's rating A2, Fitch's rating A
On last day of office - Standard & Poor's rating for Nokia junk, Moody's rating junk, Fitch's rating junk

On day before Elop announced as new CEO - Nokia share price $9.70
On day before Elop released his Burning Platforms memo - Nokia share price $11.28 (up 16%)
On day before Nokia announces Elop to step down as CEO - Nokia share price $3.90 (down 65%)


NOKIA HANDSET UNIT PERFORMANCE UNDER ELOP

First 6 months - Handset quarterly revenues up 25% from 6.8B Euro to 8.5B Euro
Next 2.5 years - Handset quarterly revenues down 69% from 8.5B Euro to 2.6B Euro

First 6 months - Total handsets profit first 6 months 1.8B Euro
Next 2.5 years - Total handsets loss next 2.5 years 361M Euro

First 6 months - North America quarterly handset volume flat from 2.6M units to 2.6M units
Next 2.5 years - North America quarterly handset volume down 80% from 2.6M units to 0.5M units

First 6 months - China quarterly handset volume up 13% from 19.3M units to 21.9M units
Next 2.5 years - China quarterly handset volume down 81% from 21.9M units to 4.1M units

Nokia handset market share when Elop started - 33%
Nokia handset market share when Elop departed - 14%

Nokia ranking handsets when Elop started - 1st
Nokia ranking handsets when Elop departed - 2nd

Gap to leader when Elop started - Nokia 50% bigger than number 2 (Samsung)
Gap to leader when Elop departed - Samsung 30% bigger than Nokia

This handset unit has now been sold (plus patents and mapping licences) for 5.3B Euro to Microsoft


NOKIA SMARTPHONE DIVISION PERFORMANCE UNDER ELOP

First 6 months - Smartphone quarterly revenues up 29% from 3.4B Euro to 4.4B Euro
Next 2.5 years - Smartphone quarterly revenues down 73% from 4.4B Euro to 1.2B Euro

First 6 months - Smartphone quarterly profit up 94% from 283M Euro to 548M Euro
Next 2.5 years - Smartphone quarterly profit of 548M Euro turned into loss of -168M Euro

First 6 months - Smartphone quarterly volume up 18% from 24.0M units to 28.3M units
Next 2.5 years - Smartphone quarterly volume down 74% from 28.3M units to 7.4M units

Nokia smartphone market share when Elop started - 35%
Nokia smartphone market share when Elop departed - 3%

Nokia ranking smartphones when Elop started - 1st
Nokia ranking smartphones when Elop departed - 9th

Gap to leader when Elop started - twice as big as number 2 (RIM) or number 3 (Apple)
Gap to leader when Elop departed - Samsung smartphones is 12x bigger than Nokia smartphones


Worst CEO ever? You make the call. Was Nokia smartphone unit truly in catastrophic trouble before the Burning Platforms memo? You make the call. Did the Elop Effect turn strong growth into collapse? You make the call.

Reply Score: 19

M.Onty Member since:
2009-10-23

Ah, but don't forget the recent double digit increase in market share for mid-range Lumias in Brazil, Westphalia & Milton Keynes.

Reply Parent Score: 4

Vanders Member since:
2005-07-06

I understand Nokia have 100% market share for phones with the name "Lumia" in them.

Reply Parent Score: 13

Rehdon Member since:
2005-07-06

Thanks for the recap, I find it pretty damning.

Reply Parent Score: 2

acobar Member since:
2005-11-15

Wow! That speaks clear and loud. Actually, it screams. I can not see how such catastrophic tenure can be defended if not by selfish interest.

Reply Parent Score: 1

Vanders Member since:
2005-07-06

So the real questions are:

1) Would the outcome have been better or worse for Nokia if they had not signed on with Microsoft?
2) Do we think this is a good outcome for Nokia, overall, and how much responsibility do we think Elop has for it?
3) Would someone have been able to stabilise and grow Nokia better than Elop did using a different strategy?

So personally, I think Nokia are in a better position than they would have been if they hadn't signed up with Microsoft, but at the same time I don't believe a sale to Microsoft is a good result: in reality it's been quite a sad end.

Could someone have done a better job than Elop? Now that's a key question, and I'm honestly not sure about the answer to that.

Reply Parent Score: 3