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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RE[3]: Comment by Nelson
by dsmogor on Tue 24th Sep 2013 16:47 UTC in reply to "RE[2]: Comment by Nelson"
dsmogor
Member since:
2005-09-01

Using your logic, Nokia shareholders would get much better off if Nokia had simply offered Samsung a takeover/merger deal in 2010/2011, than struggling alone with WP mission, after most MS partners have left the building.
Not to mention that MeeGo was much more featurefull than WP at that time and some Nokia signature features got supported only on subset of Lumias, 2+ years later.
Recall it was in hugely dominant position by then, (all of which was ruined during Elop's tenure) and any smartphone contenter would have happily paid 10x current price just to get its market share.
And no, it's not Nokia that dropped the ball here. It made everything to make WP/Lumia successful:
- put it in award winning design
- followed on with HW innovation in screen and photo departments
- put all the weight of its brand (still strong in many parts of the world) behind it despite WP missing signature features
- ditched all of it's native production capability to align with WP limitations
- agreed to lower ASP and profitability to offer wide pricing levels despite WP limitations

It's really not Nokia hw design fault that its WP devices have failed to gain traction.

Reply Parent Score: 6

RE[4]: Comment by Nelson
by mutantsushi on Tue 24th Sep 2013 22:20 in reply to "RE[3]: Comment by Nelson"
mutantsushi Member since:
2006-08-18

This is the point in terms of the potential criminal/civil liability of the Nokia boards' actions. If in 2010 they were offering Elop a bonus for selling to MS, that means at that point they wanted to get out and sell the company. Which is a perfectly valid choice to make in a shifting, competitive marketplace.

But if they made the decision to sell the phone part of the company, they are LEGALLY OBLIGATED to pursue best share-holder value. That generally is served by having several potential buyers. There is also the aspect of selling the IP separately from the then valid phone and OS business for even more money, although if the total offered for the whole package is higher it might make sense to go with that rather be compelled to go with the highest bidder for each component.

What they then actually did is destroy Symbian and MeeGo, removing (or lessening the value/interest for) buyers interested in those for their own sake. They then turned the entire non-feature phone aspect of the company into a Windows Phone shop, removing (or lessening the value/interest for) buyers not interested in Windows Phone. Anybody bidding for it in 2010 (say, Samsung) would be bidding both for the inherent value in Nokia AND the value in denying Nokia to their potential competitors, which should increase the value whoever purchases it (e.g. MS or Samsung). In 2013, there is little value in buying Nokia for anybody else besides MS, and the inherent value for MS is not high either: nothing is stopping MS from just making it's own Windows Phone division from scratch and they already have a licence to Nokia Maps.

That is the potentially criminal and civilly liable action here. If MS was interested in Nokia as Windows Phone partner in 2010, they could have bid to buy it against other companies who would not use Windows Phone with their Nokia purchase.

EDIT: And incidentally, I'd say this lessens any of Elops' own liability, if this is exactly the precise thing he was hired on to do from the beginning... Although I believe he still has legal liabilities in his role as CEO, irregardless of the policy of the board.

Edited 2013-09-24 22:36 UTC

Reply Parent Score: 2