New Nokia CEO to take on Moto

Updated: Jun 3 2006, 05:30am hrs
Olli-Pekka Kallasvuo led Nokia Oyjs Americas unit in 1998, when the worlds largest mobile-phonemaker first beat Motorola Inc. on its home turf. Now Nokia is betting he can outwit its US rival again, this time on a global basis.

Kallasvuo, 52, succeeds Jorma Ollila as CEO, at a time when Nokia is struggling to counter Motorolas best-selling phone, the half-inch thick Razr. Nokias sales growth has trailed Motorolas for four consecutive quarters, even after the Espoo, Finland-based company introduced more than 80 new models, including the 6680, 7280, N70 and E61. Motorola has more groove and funk, says Jan Lindemann,global managing director of brand valuation at London-based Interbrand. Consumers can more easily relate to products such as the Razr, whereas something like 6126 is meaningless.

Kallasvuo, Nokias CEO and the former head of its mobile-phone unit, takes over a management team that has been revamped to fend off Motorola. Executives from Coca-Cola Co, Nike Inc and Hewlett-Packard Co are now responsible for marketing, retail strategy and a new unit that makes products designed to win over buyers of Research In Motion Ltds Blackberry e-mail devices.

Nokia has started selling slimmer phones such as the 6126 and 8800, which are both three-quarters of an inch thick. The 8800, called the 8801 in the US, has stainless-steel covers and a new sliding mechanism to open the phone. The company is also adding phones with cameras and the ability to record and play music to compete with Apple Computer Incs iPod.

Nokias products are improving, but Nokia isnt quite the leader, says Jussi Hyoety, head of research at Helsinki-based FIM Securities, which has a buy rating on the stock. It needs more sensitivity in spotting these basic trends.

The company has been burned twice because it was slow to identify shifts in the mobile-phone market. It began losing market share in early 2004, when Kallasvuo was running the handset unit, because Asian phone makers such as Samsung Electronics Co. were quicker to sell phones that flip open like clamshells. Such phones became popular because they have bigger screens for taking and viewing photographs. Motorola later beat Nokia in spotting the demand for slimmer handsets.

Nokia sold 34% of all mobile phones worldwide in the first quarter, down from 35% in the previous three months, according to statistics compiled by Gartner Inc, a Stamford, Connecticut-based research firm. Motorolas share rose to 20.3%, as catchy product names such as Slvr, Pebl and Razr boosted sales.

Nokia has no plans to give its phones names instead of designating them by numbers and letters, says spokeswoman Arja Suominen. The current system lets buyers differentiate between various product groups such as Nseries phones, which have multimedia functions like cameras and music players, she says.

Nokia seems to have the same old strategy, with a bunch of phones you cant separate from each other, says Daniel Morgan, who helps manage $5.45 billion, including Nokia and Motorola shares, at Synovus Investment Advisors in St Petersburg, Florida. Does someone go into a store and say, I want a Nokia phone I dont think so.

Nokia shares have dropped 74% since reaching a high of 65 in June 2000. The stock has gained 28% in dollar terms during the past 12 months, beating the 21% gain for Motorola. Shares of Schaumburg, Illinois-based Motorola have slumped since April 18, when the company said first-quarter earnings were hurt by narrowing profit margins at the unit that sells equipment for mobile networks.

To sharpen its brand, Nokia in 2004 hired Keith Pardy from Coca-Cola, the worlds largest soft-drinks maker and most valuable brand. Pardy, 46, who was in charge of the Sprite and Fanta brands, joined Nokia as a senior VP in charge of brand management and consumer relations. Cliff Crosbie, 46, moved over from Nike last year to manage a retail strategy.

The management team has also become more international. Rick Simonson, 47, a US citizen, became CFO in 2004. Simon Beresford-Wylie, 48, an Australian, last year replaced network unit head Sari Baldauf, a 50-year-old Finn. Mary McDowell, 41, joined from Hewlett-Packard, the worlds No 2 computer maker, in 2004 to head Nokias new business-phone unit. The new management team is aggressive and willing to takerisks, Ollila told reporters on May 19 in Helsinki. The generation change is not just inevitable, its very good. Ollila, named Nokias CEO in 1992, transformed the former producer of rubber boots and toilet paper into the worlds dominant cell-phone maker.

Nokia aims to boost its share of the global market to 40%. It also plans to increase operating profit to 17% of sales within two years, from 13.6% in 2005. Operating margin peaked at 19.8% in 1999. There are signs of improvement. In 2005, sales increased for the first time in four years, rising 16% to 34.2 billion. Net income rose 13% to 3.62 billion. The figure is still less than the 3.94 billion Nokia reported in 2000.

With Jason Kelly in Atlanta