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Leaked Elop Memo Hints at Major Changes for Nokia
Leaked Elop Memo Hints at Major Changes for Nokia

By Jennifer LeClaire
February 9, 2011 11:07AM

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A major transformation for Nokia is hinted in a leaked memo from CEO Stephen Elop, formerly of Microsoft. Elop described Nokia as cornered by competitors as its market shrinks, and he is expected to lay out a new strategy on Friday. A management shake-up seems likely as Elop cited Nokia's failure to counter Android and Apple's iPhone.

Nokia CEO Stephen Elop is preparing to share his turnaround plans for the troubled cell-phone maker. But before he had a chance to express his strategy, an internal memo he wrote made its way into The Wall Street Journal.

According to the Journal, the memo describes Nokia as cornered by competitors and in need of a major transformation. Elop compared Nokia to a man standing on a burning oil platform who jumps into icy waters to escape the flames, the Journal reported.

Nokia still leads in global handset sales, but its smartphone market is slipping, according to a new report from IDC. Nokia's market share for 2010 fell to 33.1 percent from 39 percent in 2009. With devices using the MeeGo operating system nowhere to be seen yet and North America resisting Nokia's charm, IDC said the Finnish company is not doing too well.

A Burning Platform

"Nokia, our platform is burning," Elop writes in the memo reviewed by the Journal. "It will be a huge effort to transform our company." Nokia couldn't be immediately reached for comment, but it has declined comment to other news media.

The Elop memo is intended to prepare Nokia employees for what is likely to be a major shift in strategic direction, according to Avi Greengart, an analyst at Current Analysis. Exactly what that shift is remains to be seen. Greengart, among many others, will be paying close attention Friday to see where the former Microsoft executive plans to take the company.

In fact, the Journal is reporting that Elop is holding his strategy so close to the vest that not even the executives who surround him know exactly what to expect on Friday. Many anticipate Elop's announcement will start with a major management shake-up. Rumors are swirling that senior members of the executive board are going to leave the company.

Apple Comparisons

"What was also very interesting about that memo is that while everyone seems to be focusing on Nokia's chances in the smartphone market, (Elop) actually talks quite a bit about how they are losing shares at the low end," Greengart said.

"It's going to be at least as interesting to see how he intends to address that market segment -- which clearly makes up the bulk of Nokia's volumes -- as much as whether they are going to continue with Symbian, MeeGo or move to catalyze a different ecosystem," Greengart added.

By Elop's estimates, Nokia will only have one MeeGo product available this year at its current pace. He also made a direct comparison to the iPhone.

Elope wrote, "The first iPhone shipping [was] in 2007, and we still don't have a product that is close to that experience. Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable." Elop closed the memo by suggesting that Nokia needs to "take a bold and brave step into an uncertain future."

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