Nokia ditches sales chief as smartphone disappoints

Apr 20, 2012 7:00 AM
Lumia device sales 'mixed'.

Nokia ditched its sales chief and promised to slash more costs, as the Finnish cellphone maker runs out of time to reinvent itself under pressure from smartphone rivals.

 

Analysts said chief executive officer Stephen Elop had until the end of the year to improve sales of the new Lumia smartphones - Nokia's main weapon in its fight against rivals Apple and Samsung Electronics - before investors started to question his strategy.

Ben Wood, head of research at CCS Insight, said on Thursday: "There needs to be a meaningful turnaround in the second half of the year or serious questions will be asked about future of Nokia and its management team."

Inderes analyst Mikael Rautanen agreed: "At the current pace, the mobile, smartphone business is generating such heavy losses and cash is burning so fast that towards the end of the year there must be a turnaround."

"They must either aggressively cut costs or get sales to rise, but at the moment the scenario of sales increase is uncertain."

Elop, who launched Nokia's turnaround plan in February 2011, said sales of the new Windows-based Lumia phones on which the company is pinning it hopes have been mixed.

"We exceeded expectations in markets including the United States, but establishing momentum in certain markets, including the UK, has been more challenging," he said.

"Clearly we are disappointed by our performance in the first quarter."

Nokia said Colin Giles, head of sales, would leave the firm in June as it restructures the team to help speed up sales. His boss, markets unit chief Niklas Savander will take on Giles' duties.

Gartner analyst Carolina Milanesi said Elop's job was safe for now. "It is too early to be talking about a new CEO. I would say Elop has until February 2013 - two years from when it all started - to prove its strategy was the right one. This timing gives him the new version of the Windows phone operating system and the holiday season," she said.

Nokia is switching to Microsoft's Windows operating system to make its phones more competitive against Apple's iPhone and Samsung's Galaxy range, which uses Google's Android software.

Nokia reported a loss of 0.08 euro per share for the first quarter on Thursday, one cent wider than a Thomson Reuters StarMine forecast. It warned last week of losses in the first two quarters of the year.

China-based Giles had worked at Nokia since 1992 and played a key role in building the company's business in Asia - a region where it now faces tough competition from lower-priced rivals. Phone sales in China fell 62 percent in the first quarter from a year earlier.

Nokia said it would announce details of the extra cost cuts soon.

(Reporting By Tarmo Virki; Writing by Ritsuko Ando; Editing by Erica Billingham)