I just learned a few hours ago, via Kauppalehti in Finland, that there is now a buzz around the Finnish shareholders association, to consider getting signatures to get Elop fired (special shareholders meeting and all that). I had not in any way thought about writing any Nokiastuff today, but just reading some of the discussion at Kauppalehti's forum had me instantly motivated, that I should say something. Not to my regular readers who on this blog know my views very well - I was one of the first to demand Elop be fired, that is no surprise. But the honest discussion and debate that the Kauppalehti forum had in Finnish, among shareholders, with legitimate concerns. Is this Elop's fault, would removing him resolve anything, etc. So I instantly dived into writing from my heart, an Open Letter to Finnish Nokia shareholders, in Finnish, why I think yes, Elop should be fired and why it actually could result in reasonably rapid improvement in Nokia's predicament.
I am definitely not going to attempt a verbatim literal translation. That blog was written in Finnish, the first time I've done that on this blog for a whole article - and I am pretty sure, most who would read that article are not regular readers of this blog, so many points I felt I should be very clear on exactly what it is (and what it is not) about.
So let me more just summarize on this English version, as most who would read THIS version, will tend to be my regular readers and you are probably more than tired of my tirades against Elop by now. So here goes, the abbreviated version of my open letter
OPEN LETTER TO NOKIA SHAREHOLDERS
I have been very vocal about Nokia CEO mismanagement of Nokia and already called for him to be fired a year ago. As there now is a growing interest in removing Elop from office, I would like to offer a few pertinent comments.
WHAT THIS IS NOT ABOUT
Nokia had severe problems already before Elop joined, he did not create them all. Symbian is not the issue either, Nokia had decided to transition away from Symbian well before Elop joined the company. Also the selection of Windows is not the issue here, that was a decision blessed by Nokia's Board.
NOKIA DESPAIR STARTED LAST YEAR FEBRUARY
Elop caused personally the transition for Nokia from profitable business to loss-making business, and he did this in February 2011. Nokia's smartphone business which generated 40% of Nokia's profits and had reported growing sales revenues, growing unit sales, and most importantly, strongly growing profits, was instantly plungedinto declining sales in units and revenues, and became loss-making. The unit has not recovered since and the latest quarter its loss-making worsened. This was the Elop Effect, where Elop combined the fatal communication error of the Ratner Effect, with the fatal communication error of the Osborne Effect. I call this never-before-tested suicide concoction, the Elop Effect. That is where Nokia's current despair originates from. Before that point, Nokia's profit engine, its smarpthone unit, was reporting strongly increasing profits, now ever worsening losses. Elop at least partially admits this was damaging (he admitted to Nokia shareholders meeting that yes, his memo did damage Nokia smartphone sales). Since then he has acted to try to recover the smartphone unit to profits, and has been unable to do so. Since this is a self-induced disaster by the CEO, and in 18 months since he has not been able to fix the costliest communication error in corporate governance, he is clearly unfit to manage Nokia and should be fired now.
That is not the extent of why. Since then Elop has continued to mismanage Nokia. I have listed on this blog huge strategic blunders and miniscule management mis-steps, but let me only mention two giant errors here. First about the N9. Nokia's N9 the new smartphone running Nokia's new MeeGo OS, was not launched by Nokia into all countries. But the German weekly newsmagazine Der Stern reviewed the N9 to incredibly glowing ratings, with the astonishing endorsement, that the magazine recommended its readers travel to another country like Switzerland or Austria to buy the N9. Understand, this is not a technology magazine, Der Stern is a general weekly newsmagazine like Time in the USA, yet it chose to review a smarpthone not even sold in Germany and so loved it, recommended readers fly to other countries to go get one. You can hardly ask for a better review ever and this may be the best review of any Nokia smartphone ever given by a mainstream non-technical magazine in any country of all time. Nonetheless, Elop refused to let the N9 be sold in Germany!
Any CEO with the slightest amount of sense would understand this is a rare opporunity and if the N9 is so highly thought of by one of Germany's largest papers, Nokia should jump through every hoop to capitalize on this, including having contests whose winners will be flown to Austria or Switzerland to pick up their N9s and of course the smart CEO rushes to launch the N9 in Germany immediately - this was Nokia's most expensive and most profitable smartphone at the time. Only a complete moron would refuse to let the N9 be sold under such incredibly stong reception - while Nokia's smarpthone unit is generating a loss!!! So Elop has decided he rather force Nokia shareholders suffer for bigger losses than let his decision be overturned by the love of Nokia by the German market - mind you, Germany is Europe's biggest handset market by a wide margin.
A similar management mistake from Britain. The D&AD awards are the 'Oscars' or 'Olympics' or 'Nobel prizes' for technology design. And yes, the N9 won the D&AD awards to prize this year, in Britain, beating out not just other Nokia Lumia devices but get this, the Apple iPad 2 !!! Who beats Apple at design? This is a rare moment of Nokia handset design heroism. Any high school graduate would understand to instantly celebrate this massively in all major markets - Nokia beat Apple for goodness sake, in design of all things - and then launch the N9 in Britain immediately! You don't need to be a company desperately making losses, any profit-making company would jump at this opportunity - but far more so should Nokia, whose smartphone unit dives deeper into losses. The most profitable smartphone in Nokia's portfolio beats Apple in the UK and for some uncomprehensible reason the CEO refuses to let the N9 be sold in the UK. He is making decisions that clearly are not in Nokia's best interest. He must be fired for this.
Lets take my second example since the Elop Effect, this is from now just a few weeks ago, when Nokia gave its latest profit warning. Nokia ended its Meltemi project. Meltemi was an OS for low-cost smartphones. Deloitte tells us that this year over 300 million smartphone with an end-user unsubsidised price of under 100 dollars (no contract) will be sold. Windows Phone will never fit this price range but here is where most of Nokia's current Symbian based are sold. This is where Nokia's actual mass market customer base exists. And this market will also include the transition from top-end 'featurephones' now and into this decade. As Mary McDowell talked so often, this was Nokia's next billion customers, and the smartphones for them. No competitor to Windows Phone, and equally, a price point where Windows Phone cannot be made now or in the foreseeable future, If Nokia is to have a mass market position, Nokia needed Meltemi. Elop just killed it. Here is the rough part - the Meltemi project was at most only 2 months from - some say as little as 2 weeks from - launch !!! He killed Nokia's future, that was within weeks of ready. Why? There is no conceivable reason for this and it destroys essentially the whole Nokia strategy for the Emerging World markets where 5 out of 6 humans of the planet live, and where Nokia's smartphone market share still last year was around 50%
Stephen Elop pushed Nokia from a healthy growing-profits profit-making growing company into a loss-making shrinking company. Since then he has tried but not been able to fix that problem he personally caused. But he has since made a long series of mistakes to make Nokia's situation far worse, like the N9 and Meltemi examples I showed here. There is no question Elop is a horrid CEO who is damaging Nokia continuously. He has to be fired if for no other reason, for the sake of Nokia employee morale.
WHAT WOULD HAPPEN
Would changing the CEO matter at this point. Actually yes. For all its current problems, there is one overarching problem that Nokia has. Look at Elop's statements at Nokia profit warnign last year in the spring, and Nokia Q2 results, and Nokia Q3 results, and Nokia Q4 results, and Nokia Q1 results, and Nokia's shareholder meeting, and Nokia's new profit warning, and Nokia's Q2 results. What has Elop said every single time is a huge problem (often its the first problem he mentions)? the problem with Nokia sales channel and its lack of support of Nokia sales and/or the carrier/operator lack of support to Nokia sales. Its not a problem that competitors have crated superphones with antigravity levitation and time travel. Its not production problems that have Nokia batteries exploding or causing cancer in pussycats. Its not problems by natural disasters like floods or fires or whatever. No, time and again, Elop says his problem with Nokia is the sales problem.
Nokia used to have by far the best sales channel support and best carrier support in the handset industry, the envy of all rivals, a source of competitive advantage cherished in business papers. Nokia sales was legendary. And it suddenly vanished what? When? On February 11, 2011. The Elop Effect caused the sales crisis. And Élop has now tried and tried and tried to fix it. He's fired his sales staff, he's brought in new guys (from Microsoft). He's intervened personally and brought in Microsoft's Ballmer too, into those delicate carrier negotiations to try to restore sales. And what do we hear from every single major financial statement form Elop? The problems with sales and/or carriers. He has tried and he has spectacularly failed, in fixing this problem. A problem that will kill Nokia. If your sales channel refuses to sell your product, you die, its that simple. This is not open to any kind of debate. Elop states it very cleary this is the biggest problem Nokia faces and 18 months since he caused it, he has not been able to solve it. In fact, he's only made it worse.
Don't take my word for it. Did you see what S&P, Moody's and Fitch have written about Nokia? Just before the Elop Effect they so loved the new CEO and his management of Nokia, that Nokia's rating was by each of the three ratings agencies one notch below perfect! This right as we emerged from the deepest economic crisis of our lifetimes. But since then each of the three have issued only one type of update on Nokia - downgrades. Nokia is now so poisonous for them, that all three rate Nokia as junk. What was it they said why they downgraded Nokia? Not that Nokia had too much staff or old factories or its operating system or handsets were not modern, no. Every single time, every one of these three ratings agencies, stated that a reason - in most cases the biggest reason for the latest downgrade - was the sales problem.
I have explained on this blog many a time what various mistakes Elop has made that has angered and infuriated and enflamed those carrier relationships and the vital sales channel. He has made these worse. He is now seen as the personification of Nokia's sales and he is hated for it. The carriers have seen how Elop tries to use Microsoftian tactics from lies to deceat to bullying to threats - including the ultimate red flag waved at Nokia clients - Skype. Elop actually threatened he'd put Skype on Lumias even if the carriers said no. And this Microsoft Muppet then drags Microsoft's very own dictator-bully-in-charge, Steve Ballmer into some of those carrier meetings. And again, to rub more salt into the wounds, Elop hires ex Microsofties to push his sales to the same carriers. He is the very embodiment of poison. No carrier will now deal with him. Elop is to Nokia carrier relations what water is to fire. He is now personally the cause of carriers punishing Nokia - because the carriers have all the time in the world and they know Elop will be gone, so they now just wait it out and every week that goes by, Samsung picks up more of Nokia's loyal customer base.
So I am 100% convinced that if Elop is fired, the poisoned carrier relations that stiffle Nokia sales can start to heal. How to heal them the fastest, obviously, is to hire the next CEO not from inside Nokia or from the West Coast, but from - of course - the carrier community! One of their guys, who truly understands carrier business, to come run Nokia which serves those carriers. This is not rocket science.. And I'd add, get one from here in Asia, as half of the global market is here, obviously a current CEO and therefore, likely from one of the local operators/carriers, not a global carrier group CEO. Still a far more competent CEO level exec than what Elop was when he was hired far above his skills to take over Nokia.
If Nokia fired Elop now, immediately, and Nokia chairman Siilasmaa perhaps steps in for the interim while Nokia announce they will seek a replacement, and then Siilasmaa would call the top CEOs of hte 50 biggest carriers/groups over the follwoing week - and in every case tell them he, Siilasmaa is personally guaranteeing they will hire a CEO from a carrier/operator - it would restore the trust and faith in Nokia and the carrier sales boycott would end very fast. Not total happiness in every case, but the worst would instantly be over and Nokia would start to heal. The point is, that these current sales problems - are indeed caused by the very specific person of Elop, he is seen as the evil at Nokia by the carrier community and until he goes, Nokia will continue to be punished. The sooner Elop is fired, the sooner the healing can start to happen. (I am adding some relevant links to the deeper analysis for those who might be interested, here to the end of this blog)
So I urge all Nokia shareholders to join together to fire CEO Stephen Elop. He made massive mistakes, his management judgement cannot see the obvious best interests to Nokia and the current sales crisis cited not just by obscure bloggers such as myself but by Elop himself in every major financial position of Nokia for the past 18 months - and also by each of the three rating agencies every single time they downgraded Nokia. Elop started this mess, he has not been able to clean it up, and Nokia is only getting worse and worse into trouble. He has to be fired now.
I have always been, and always will be a big Nokia fan
Tomi T Ahonen :-)
ADDITIONAL LINKS TO RELATED ARTICLES
Full market analysis of the world smartphone situation now, Q2 of 2012 and if you need earlier data, here is world market situation in Q1 of 2012 and here is the full year analysis of smartphone market in year 2011.
A comparison of the performance of the four biggest smartphone makers, Samsung, Apple, Nokia and RIM (ie Blackberry) over the past few years, with illustrative graphics.
And here is my analysis of the preview to this year 2012 in the smartphone market share battles, where you may want to read how I previewed Nokia, Windows Phone, Symbian and MeeGo for what I expected to see..
Latest analysis of Nokia Q2 results by me including my views to the near future
Graphical illustration of how Nokia smartphone sales have collapsed from February 2011 with historical pattern showing past few years of strong growth, including comparisons to Apple iPhone and Samsung smartphones
My latest analysis why the hope that Nokia could climb back to 20% (or 19%) with Windows is not utterly completely impossible with all the latest data and facts that we know - please note, I did accept a year and a half ago, that this was possible for the Nokia-Microsoft partnership while I thought it unlikely. Now it is utterly impossbile. Read why.
Reality of all those hyped USA and China market surges powered by Windows Phone and Lumia are now revealed to be lies. The truth about Nokia Lumia and Windows Phone performance in USA, China and other markets.
ELOP AS CEO
Comprehensive (truly epic length, 30,000 word 'essay' or in fact online mini-book about the strategic blunders of Stephen Elop as Nokia CEO but before you start to read that (will take you probably an hour to read that) start with the humorous and short 'summarize Ahonen' contest winners, where that 30,000 word blog was summarized into 140 characters of one Tweet. Very funny and still factual comments there and as a bonus - there were two original cartoons created based on my blog, that are very funny in summarizing some of the biggest blunders of Elop's time as CEO. Read the Summarize Ahonen blog first.
My view to the latest changes Elop has announced about Nokia's strategy now and into the near future.
The 'final analysis' on the true effect of the Burning Platforms memo and how it wiped out 13 Billion dollars of Nokia revenues and destroyed 4 Billion dollars in Nokia profits, indeed the costliest memo ever written.
Here is Stephen Elop himself admitting to the Nokia annual shareholders meeting that yes, the memo did damage Nokia smartphone sales.
My 'last' blog to discuss what was wrong before Elop took over at Nokia and specifically what was not wrong, with all the evidence, graphics and facts, showing that Elop decided to fix something that was not broken (and broke it while doing so)
Elop's infamous world record - he has achieved a true world record in destroying market share of a global market leader in just 12 months, not just in mobile handsets, mind you, in any industry ever, cars, TVs, PCs, airplanes, anything. A true world record in management failure. Here my blog recognizing this Stephen Elop achievement in world record in market share destruction.
And what of the very latest strategy we heard about at Q2 results a few weeks ago? This will only make Nokia's situation worse, not better. This is a strategy that even Apple ran away from and Samsung would never be dumb enough to try, yet Elop is now embracing in desperation.
NOKIA RETAIL PROBLEM
My latest big article outlining the Nokia retail problem and explaining it in great detail, how this is strangling Nokia and that Elop's actions are making things worse.
My latest blog updating Nokia's retail problem and how Elop is making things worse, not better (the retail specific part is last in the blog)
And for those who can't believe this is such a big deal - here is the analysis of the ratings agencies, S&P, Fitch and Moody's in each of their downgrades of Nokia and why they did so (every time, it is because of sales channel problems).
And I have not invented this massive problem, as its verified by the CEO himself. Here are Stephen Elop's comments to the Nokia shareholders meeting verifying retail problem is true is here.
MICROSOFT VIEW TO NOKIA
The view from Microsoft's side, first, here is how Microsoft lost its mobile future now with Windows Phone and Nokia its last attempt, that also has failed.
And here is the very latest on that angle, with graphics, showing why Microsoft 'threw Nokia under the bus' abandoning Nokia Lumia with no upgrade path to Windows 8.
Then on the Lumia line specifically. Here is my definitive analysis of why the Lumia line is failing and cannot succeed even in the US market, from marketing to product design: 13 reasons why Lumia failing.
To add to that, here is my latest analysis of why Lumia is failing, with links to the infamous '101 faults in Windows Phone' (With more Windows! See, now upgraded to 121 faults!)
The blog discussing how poorly Lumia received, cannot even sustain 1-to-1 conversion of existing Nokia smartphone customer base
Here is my latest analysis of the Lumia troubles in the US market specifically.
SKYPE AND CARRIERS
I have often mentioned Skype as a cause of friction between Nokia sales and the carrier relations. Here is the big picture article explaining why carriers oppose Skype specifically, even more than other OTT services like Blackberry Messenger or Apple's iMessage or Whatsapp etc.
And this too, that carriers hate Skype, is something Nokia's CEO Stephen Elop himself has fully openly admitted such as to the Nokia annual shareholders meeting (with links not just to his transcript but to his video from the shareholders meeting)
My blog is not a 'hate blog' about Nokia. I tell the truth here, when things are bad - and they are really bad for Nokia, I do call it. But I have also been critical here of other companies in trouble from Motorola to Palm to Sprint. And I am also of course happy when things are good for Nokia. Here is for example my very positive blog story about the 808 Pureview earlier this year.
If you'd like a more theoretical 'big picture' view to the industry and Nokia's troubles, in the context of other mobile handset industry giants who collapsed like Motorola, Siemens and Palm, you may want to read this essay on The Cliff Theory.
Also some have said Nokia is like Kodak. That sounds nice but is not a strong analogy. Kodak is like Motorola, and Nokia's nearest analogy is IBM.
I have from time to time given my views of how to 'save Nokia' or earlier when the situation was not so bad but still Nokia had problems like under previous CEO Kallasvuo, how to 'fix Nokia'. I do not have such a blog out now, that is current, but here is my latest from April of this year. If you read that article honestly, and imagine it was followed in April, you probably will agree with me, that today Nokia would already be far more healthy than it is under Elop's continued management. My April 2012 solution to how to save Nokia (which is partly no longer valid today)
And there are some rumors that Nokia might be bought, we heard a few weeks ago about possible Lenovo or Samsung interest. I speculated who might be interested to buy Nokia and what parts of Nokia might be valuable to whom, if Nokia were to be split by the new buyer.