Nokia to replace CEO after struggling to make 5G headway

Mr Pekka Lundmark (above) will take over from Suri at the start of Sept 2020.
Mr Pekka Lundmark (above) will take over from Suri at the start of Sept 2020.PHOTO: REUTERS

HELSINKI (BLOOMBERG, AFP) - Nokia will replace chief executive officer Rajeev Suri after the Finnish maker of telecommunications gear lost ground to rivals including Huawei Technologies Co. in the race for 5G networks.

Mr Pekka Lundmark, the CEO of Fortum, will take over from Suri at the start of September.

Nokia is also set to elect Ms Sari Baldauf as its new chairman in April, replacing Mr Risto Siilasmaa.

Mr Suri, 52, struggled during his half-decade tenure as chief to gain a foothold in the all-important market for fifth-generation mobile equipment.

“After 25 years at Nokia, I have wanted to do something different,” he said.

The company said he had “indicated earlier to the board that he was considering stepping down from his role at some point in the future, provided a solid succession plan was in place.”

The stock bounced as much as 4.2 per cent early Monday (March 2) on news of his pending departure.

"We see the CEO change as positive because in the current situation Nokia needs a bigger change, and that starts from the renewal of management," wrote Inderes analyst Mikael Rautanen.

Nokia fell behind rivals Ericsson AB and China's Huawei just as the Finnish company was on the cusp of large-scale 5G rollouts.

After problems developing proprietary chip-sets, Nokia was forced to buy more expensive alternatives, adding to its costs and eroding profits.

Even United States President Donald Trump's campaign against Huawei has failed to reverse its fortunes.

In the face of fierce competition, Nokia has begun exploring strategic options, including potential asset sales or mergers, Bloomberg News reported last week, citing people close to the deliberations.

Mr Suri has repeatedly asked shareholders for patience with the company's 5G implementation. Investors will now have another six-month wait before new management is in place.

 
 
 

In October, Nokia angered investors when it suspended its dividend to conserve cash for 5G investments and cut its earnings guidance, wiping 23 per cent off the share price in a day.

It's also faced headwinds in integrating Alcatel-Lucent, which it acquired in 2016, and staff have complained internal politics are distracting managers.

"Markets have been very skeptical of whether Suri can continue in his role since the guidance cut last year," analyst Kimmo Stenvall of OP Group in Helsinki said by phone.

"He hasn't been able to deliver and add value to the company, especially in the 5G era, which is what he was expected to do."

Mr Suri, who has been at Nokia for 25 years, became CEO after running the Nokia Siemens Networks joint venture. He will leave his current position on Aug 31 and continue to serve as an adviser to the Nokia board until the end of this year, Nokia said.

"The process looks exceptional because it seems that the current CEO has been involved in searching for the replacement," Mr Stenvall said.

"Replacing a CEO is always a lengthy process and given that Lundmark's name has already been announced indicates that this change has been in the works for a long time now."

In Mr Lundmark, 57, Nokia is getting a CEO who has "consistently delivered robust total shareholder returns, successfully renewed the company's strategy, and positioned it to be a strong player in the transforming global energy sector," the company said on Monday.

Mr Lundmark, previously CEO of crane-maker Konecranes Oyj, spent a decade early in his career at Nokia in various executive positions.

He also has a track record of doing large deals, having engineered Fortum's US$6.9 billion (S$9.6 billion)acquisition of German utility Uniper with the help of investors Elliott Management Corp. and Knight Vinke Asset Management. The deal is seen closing this quarter.