Nokia Oyj (NOK1V), seeking a successor to former Chief Executive Officer Stephen Elop, is focusing on insiders including Rajeev Suri as it narrows a months-long search for a manager to set a new strategy at the wireless-technology company, according to people familiar with the matter.
Suri, the head of Nokia’s network-equipment unit, is among applicants for the job, said the people, asking not to be named because the discussions are confidential. Finance Chief Timo Ihamuotila has also been considered, said one of the people.
The new CEO will try to revive 149-year-old Nokia, whose history includes radical leaps from one industry to another and which once again faces a fresh start without a business it used to rely on. Elop helped engineer a $7.4 billion sale of Nokia’s handset unit to his former employer Microsoft Corp. and is rejoining the software maker as part of the transaction.
“Nokia selling its phone business is a historic move and crafting its future strategy and picking its next leader will be critical for its future success,” said Mika Heikkinen, who helps manage 2 billion euros ($2.7 billion) including Nokia shares at FIM Asset Management Ltd. in Helsinki. “The board has one chance to get this right.”
Nokia, based in Espoo, Finland, has also considered external candidates, the people said. The company is more likely to name a new CEO after completing the phone-division sale, they said. Microsoft and Nokia have said they expect to complete the deal this quarter, and are waiting for regulatory approval from countries including China.
As part of its new structure, Nokia will probably make the network business currently headed by 46-year-old Suri, called Nokia Solutions and Networks, central to its strategy, said Teemu Peraelae, who helps manage $24.7 billion, including Nokia stock, at Alfred Berg Asset Management in Helsinki. Excluding the phone unit, NSN accounted for 94 percent of Nokia’s third-quarter sales.
That would mean Nokia becomes mainly a manufacturer vying with Ericsson AB (ERICB) and Huawei Technologies Co. in selling network gear such as base stations and antennas to carriers. Its two remaining divisions are a digital-maps business and the advanced-technologies unit that licenses Nokia patents.
An alternative option would be to keep the three divisions -- NSN, maps and advanced technologies -- as equal units with leaders reporting to the CEO. That would give Nokia a structure akin to a holding company and signal that it seeks to be not just a network-gear maker, but a broader software-and-equipment supplier taking on companies from Qualcomm Inc. to Google Inc.
The weighting Chairman Risto Siilasmaa gives NSN in the new corporate structure will help determine which candidate is best suited for the CEO job, said Richard Windsor, an independent analyst at Radio Free Mobile.
“If Rajeev gets it, it’s a signal that Nokia becomes NSN,” Windsor said. “If Timo gets it, it’s a sign Nokia becomes a holding company.”
Ihamuotila and Suri weren’t available for an interview. James Etheridge, a Nokia spokesman, declined to comment.
Either pick would mean Nokia returning to a policy of choosing a leader from its own ranks. During Elop’s three-year tenure the stock lost half its value, and the handset unit’s sale shocked many in Finland, where the phones are a source of national pride. The shares fell 0.6 percent to close at 5.83 euros in Helsinki. Elop, who himself was an external choice, is returning to Microsoft along with the phone division and is also a candidate to become the software maker’s CEO.
Ihamuotila, 47, has been with Nokia for most of the past 20 years, including managing its treasury department and heading up mobile-phone sales. He took on the CFO role in 2009 and is responsible for finances as well as mergers and acquisitions and business improvement. He has been the interim president of Nokia since the handset divestment announcement in September.
Suri joined Nokia in 1995, eventually leading NSN’s Asian unit and services business before taking the division’s CEO job in 2009. Suri led the business through a restructuring and strategy shift, resulting in record profitability for the unit.
“Suri likely has the best contacts with operators around the world and would be in the best position to help Nokia compete with Chinese equipment vendors and Ericsson,” Peraelae said.
Suri cut more than 25,000 jobs at NSN over the past two years to bring it back to profit. Nokia in October predicted improving profitability for NSN, helped by the job reductions and a focus on more lucrative contracts.
With its market capitalization down to 22 billion euros from 300 billion euros in 2000, the challenge for Nokia is to once again find a new incarnation to revive its fortunes. Its transformations in the past have included switches from rubber boots and toilet paper to cables, computers and mobile devices.
While events such as the collapse of major customer Soviet Union prompted Nokia to previously adapt, this time it was the decline of the phone business, which brought it to global fame during the past two decades, that forced it to react.
Nokia agreed to sell the phone unit in September, after racking up losses of more than 5 billion euros over the past 10 quarters. Once the world’s largest smartphone maker with a market share topping 50 percent, Nokia now ranks outside the top five with about 3 percent share as Apple Inc.’s iPhone and Samsung Electronics Co. phones running Google software dominate.
The new CEO will have enough work even without the unprofitable handset business. Sales at NSN fell 26 percent to 2.59 billion euros in the third quarter, in part because of pulling out of less-profitable service contracts.
Sales at Nokia’s maps business slumped 20 percent and its annual income from licensing patents had an annual run rate of about 500 million euros in the third quarter. Nokia is scheduled to report fourth-quarter earnings on Jan. 23.
One advantage the new CEO is set to enjoy is liquidity. Nokia’s net cash will jump to 6.4 billion euros after it reaps 5.44 billion euros from the sale of its mobile-phone business, Kai Korschelt, an analyst at Deutsche Bank AG in London, said in a Jan. 9 note to investors.
A focus on networks would also allow Nokia to sell more businesses, Windsor said. Nokia’s intellectual property, if successfully monetized, may be worth as much as $10 billion in three years, while the maps unit, Here, could fetch up to $5 billion from the right strategic investor, he said.
“I’m inclined to think the company becomes NSN and eventually sells off the other pieces,” Windsor said.
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