Investors are rightly exasperated with the company’s performance under
Olli-Pekka Kallasvuo: the shares have lost a quarter of their value over the
past 12 months as rivals accelerate their lead in the market for high-end
smartphones.
But it should not just throw investors a scalp in the hope they quieten down.
Before it replaces its chief, it needs to decide what it wants to be.
Nokia makes excellent phones and sells more of them than any other company.
Yet in the high-margin and fast-growing smartphone market, good hardware is
not enough.
Smartphones are sleek pieces of glass and metal but it is the operating
systems, services and apps that set them apart. Nokia’s software does not
compare with that of Apple’s and Google’s, forcing it to slash prices.
Operating margins have halved in the past two years.
Give up
So what to do about it? Nokia could give up, stop sinking 10 per cent of
revenues into research and development (Apple spends just 3 per cent), and
shift to making good phones running someone else’s software. Google’s
Android – a genuine rival for Apple used by the likes of Motorola and HTC –
is the obvious candidate.
Nokia could become a low-margin manufacturing company and Mr Kallasvuo could
run it as well as anyone.
If Nokia wants instead to really compete on software, a new chief executive
from the outside would be essential. But it would only be a start. Nokia is
a global enterprise, eight of whose 10-member executive board are Finns who
worked their way up through the company. It appears to have outgrown its
management culture.
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