Nokia CEO Stephen Elop: After One Year on the Job, Not Much to Celebrate Former Microsoft (MSFT) executive Stephen Elop may be thrilled to have his first year as CEO of Nokia (NOK) out of the way.

After all, in the past 12 months, the struggling mobile-phone maker has seen its share price plummet roughly 40% while the broader markets have risen. And the bad news just keeps coming:

  • Nokia's U.S. market share with users 13 and older fell to 5.3% in July, down from a 7.8% market share a year earlier, according to market researcher comScore (SCOR).
  • Just a few weeks ago, the company announced another major round of 3,500 layoffs as part of its cost-cutting moves -- and that's in addition to its announcement earlier this year of 4,000 job cuts.

Investors may be loath to break out the bubbly to celebrate Elop's first year on the job. Not so fast, say some Wall Street soothsayers. Here are some of their high-level takeaways on his first-year performance.

Elop's No Flop -- At Least Not Yet

"He inherited a tough situation, and you can't blame him for not having made enough impact in his first year," says Mark McKechnie, an analyst with ThinkEquity Research. "He's done a good job at assessing Nokia's situation and did a bold move in committing to Microsoft's Windows Phone 7. He had to do something bold, and he did. But did he make the right bold move is up in the air."

Elop's bold move entailed announcing plans to scrap the company's longtime mobile operating system, Symbian, in favor of Microsoft's Windows Phone 7 OS. Symbian has been taking a beating against smartphones loaded with Google's (GOOG) Android operating system and Apple's (AAPL) iPhone iOS. Earlier this year, Android kicked Nokia's Symbian from its longtime No. 1 spot, and Apple's iOS iPhone later moved ahead of Symbian to take the No. 2 position, according to Canalys.

McKechnie, however, says Elop may have bet on the wrong horse with Windows Phone 7. (The company is expected to unveil its first Windows Phone 7 in late October.) Android is further along in the market and already has an ecosystem of developers writing apps it. And Microsoft is suffering from a branding issue among smartphone buyers.

Jonathan Goldberg, a Deutsche Bank analyst, says it'll take roughly another year to know whether Elop is worth his weight in gold as a Nokia CEO, and whether he made the right choice with Microsoft. Nokia's Windows Phone 7 will be designed by a third party. However, early next year, Goldberg expects Nokia to announce its internally designed Windows Phone 7 smartphone and start shipping the devices toward the end of next September.

Goldberg gives Elop a "B" grade for his first year at Nokia, but said the CEO and company may soon find themselves broadsided by cheap $100 Android smartphones from companies such as Huawei Technologies. The impact of those devices could derail Elop's plans of turning around the company, particularly in markets outside the United States and Europe.

"For the same price point of $100, why would a customer pick a Nokia feature phone when they could get a smartphone for the same price?" Goldberg asks. Feature phones account for approximately 80% of Nokia's business; while high-end smartphones account for about 20% of its revenues. "It's not easy to develop an [operating system] for a feature phone, and time is not on their side."

The decision to forgo a two-pronged attack in simultaneously developing a Windows Phone 7 and a response to a cheap Android phone with a souped-up feature-phone operating system may eventually lead to a much lower grade for Elop when his second anniversary rolls around.

Motley Fool contributor Dawn Kawamoto owns no shares in any of the companies listed. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Google, as well as creating bull call spread positions in Apple and Microsoft.





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shark

But Nokia are developing an OS for cheap feature phones separate from Windows Phone, so Huawai and the rest do have competition from them. Whether Nokia succeed is still up in the air, but they are certainly doing their best to turn things around and cover the bases.

I don't understand why this article says their Windows Phone is being made by a third party, it's their N9 converted to WP7 (plus from what the rumours say at least two other phones).

Overall, a misleading article. Elop is doing the right thing for Nokia, but he needs to do it a little faster and then promote the hell out of their new phones when they launch. They need a brand name as big as the "iPhone" asap.

Talking of brand, Microsoft should rename Windows Phone to something fresher sounding, cos it's not really got all that much to do with Windows and a lot of people percieve the name badly these days. Even the Zune Phone would've been better in some ways. Or Metro Phone given it uses the Metro UI.

October 11 2011 at 1:09 PM Report abuse rate up rate down Reply
Don Farmer

As I spend time on the Windows Phone site looking at Mango, I feel like I'm seeing exactly what myself and others (42% according to SlashGear) desire in a smartphone OS. If I have 8-20 apps I'm fine. I used to have an Apple and found 95% of the apps I downloaded I later took off. With the Mango OS system it's replacing the need for many apps to do what now the Mango OS does. If you had a Nokia hardware phone in your hand and before your face you will understand why people will choose Nokia over Samsung, HTC ,etc. The reason now is because there are no Nokia Mango's in front of anyone's face at the carriers. The smartphone's are just beautiful. I think Elop is doing exactly what Nokia has needed for a long time, cutting jobs, moving plants, improving chanels and getting the phones in front of the American people by going through the carriers in 1st quareter 2012. In other countries, just like in the U.S., the move to the smartphones will continue and Windows has the power to be the choice. I do not believe that there are any comments we can make that hold water until the switch from symbian to Windows Mango has been completed and on the market through 2012. They announced what 12 new Nokia phone models for 2012? The iphone looks old except to the Apple cult and the Android OS is too unorganized to hold their owners if Windows in the limelight.

October 11 2011 at 12:58 PM Report abuse rate up rate down Reply