Nokia Investors Skeptical of Turnaround Plan Under New Chairman
Risto Siilasmaa, who is taking over as Nokia Oyj (NOK1V)’s chairman today, defended the Finnish mobile-phone maker’s turnaround strategy that is finding few supporters among shareholders at today’s annual meeting.
“They talked about the products a lot and not about the future of the company,” Markku Lindfors, 74, of Forssa, who said he has held Nokia for 27 years and sold most of his stake long ago, said in an interview. “They’re just asking investors to trust in the future.”
Nokia is trying to rebuild confidence as shares remain at one third of their value before the company shifted smartphone systems to Microsoft Corp. (MSFT)’s Windows Phone last year. The company hasn’t produced inexpensive smartphones that can compete with Google Inc. (GOOG)’s Android and was overtaken by Samsung Electronics Co. (005930) as the largest handset maker last quarter. The board backs the current strategy and has faith in Elop and his team, departing Chairman Jorma Ollila said.
“I don’t think any new change is required as we are going through a transformation period already,” Siilasmaa, 45, said at a press briefing before the meeting in Helsinki. A board member since 2008, he helped pick Chief Executive Officer Stephen Elop to drive the company’s turnaround plan.
Nokia closed down 1 percent at 2.67 euros in the Finnish capital, the lowest price since December 1996.
Elop answered questions from investors for several hours at the meeting today, without giving specifics beyond what the company has disclosed. He said sales of the new Lumia series were exceeding expectations in the U.S. and reiterated that they had lagged in some other markets such as the U.K.
“They’re not giving us details of why the Lumia sales are so low,” said Tero Leskinen, a 27-year-old engineer from Helsinki who started buying shares in 2009. “A lot of the answers were shallow. If the price of the Lumia 900 is $99 for customers in the U.S., I want to know who pays the rest, is it Nokia or Microsoft or the operators.”
Investors also questioned the company’s ability to compete with Chinese handset producers, its ability to roll out features as fast as the competition, and its plan to pay a 20-cent per- share dividend. Elop reiterated that the company will continue to seek cost cuts.
Nokia will continue with its strategy of using Windows Phone to distinguish itself from Android, the CEO said. It will continue to work on software and services hosted online as well as hardware, Elop said at the briefing. “We can’t do it all but we can pick the areas where we have unique intellectual property.”
Android is the world’s best-selling smartphone platform, with many handsets priced at $150 or less, taking share from Espoo, Finland-based Nokia’s low-end phones as well as its smartphones.
Nokia said it sold “more than 2 million” Windows Phones in the first three months of the year as the decline of its older handset lines accelerated. The cheapest Windows Phone model, the Lumia 610, was announced with a list price of 189 euros ($248).
The company had a 1.34-billion euro operating loss for the first quarter, including 772 million euros in one-time charges for Nokia Siemens Networks, the unprofitable equipment venture with Siemens AG. Two ratings agencies downgraded Nokia’s debt to junk after losses in the handset business.
Elop has announced more than 10,000 job cuts since the alliance with Microsoft in February 2011. Nokia Siemens Networks is eliminating 17,000 jobs and selling units after the parents failed to dispose of it to private equity.
The company will introduce new products including tablets, Ollila, 61, said in an interview with the Financial Times.
“Every chairman of the board hopes to hand over a thriving company,” Ollila said today. “I wish I could have done the same.”
Ollila has been chairman since 1999. Under his leadership as CEO, Nokia expanded to become the world’s largest handset maker in 1998 as rivals such as Ericsson AB stumbled. It was Europe’s biggest company at the end of 1999.
Standard & Poor’s followed Fitch Ratings last week in cutting Nokia’s debt rating to the highest non-investment grade. Moody’s Investors Service still rates it as the lowest investment grade. All three agencies have a negative outlook indicating they may downgrade the company further.
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