Nokia to Split Mobile Biz, Rejig Management After Mobile Boss Quits
Nokia will split its mobile networks business into separate product and global service units after revealing that Samih Elhage is to quit his role as mobile networks president.
The Finnish vendor has also announced plans for a three-way carve-up of its innovation and operating unit, saying it will create an entirely new division to look after all operating activities. Innovation will then become the responsibility of the chief technology officer, while the company's chief strategy officer will be tasked with nurturing new business opportunities.
The latest overhaul seems aimed partly at helping Nokia Corp. (NYSE: NOK) to pursue the strategy it unveiled at its capital markets day last November, when CEO Rajeev Suri said Nokia would target growth in a number of enterprise markets "adjacent" to its main telecom business. (See Nokia to Create Standalone Software Biz, Target New Verticals.)
Another goal of the restructuring is to bolster efficiency at Nokia, which last year reported a 10% drop in sales, to €23.9 billion ($25.8 billion, at today's exchange rate), and a 25% fall in operating profit, to about €2.2 billion ($2.4 billion). (See Nokia Upbeat on Turnaround Despite Sales Decline.)
Like Sweden's Ericsson AB (Nasdaq: ERIC), Nokia has complained about a slowdown in the market for mobile network infrastructure and continues to face tough competition from Chinese rivals Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).
It also last year finished integrating the Alcatel-Lucent (NYSE: ALU) business with its own organization after completing a €15.6 billion ($16.8 billion) takeover of the company in January 2016.
Suri is trying to realize cost savings of about €1.2 billion ($1.3 billion) in 2018, compared with the combined operating costs of Nokia and Alcatel-Lucent in 2015 (excluding the small Nokia Technologies business, which made about €1.1 billion ($1.2 billion) in sales last year).
"These changes are designed to accelerate the execution of our strategy," he said in a company statement released earlier today. "They will strengthen our ability to deliver strong financial performance, drive growth in services, meet changing customer demands in mobile networks, achieve our cost saving and ongoing transformation goals and enable strategic innovation across our networks business."
Marc Rouanne, currently Nokia's chief operating and innovation officer, will become the new president of the mobile networks business minus its global services operation.
Elhage is leaving the company at the end of this month to pursue "new opportunities," said Nokia, but will continue to work as an advisor to the organization until the end of May.
The new global services business unit will comprise the services organization that currently sits within mobile networks as well as "company-wide managed services." Igor Leprince, the current executive vice president of global services, is to become its president.
Last year's financials indicate that Nokia made about €21.8 billion ($23.5 billion) at its networks business in 2016, with about €8.4 billion ($9.1 billion) of that coming from services.
Last September, Leprince told Light Reading that he expected growth in Nokia's services business to come from three key areas in future -- systems integration, network planning and optimization, and managed services -- as well as new market opportunities. (See Nokia's Leprince Wants to Be King of Enterprise.)
"We want to expand beyond these three areas," he said during a meeting with reporters in London. "Very clearly that means the Internet of Things and the new vertical markets that we want to develop -- that is obviously outside where we are today."
Nokia reckons its main addressable market, worth about €113 billion ($122 billion) in 2016, will grow at a compound annual growth rate (CAGR) of just 1% over the next five years. It hopes to flourish by focusing on a range of vertical markets worth €18 billion ($19 billion) last year but expected to grow at a five-year CAGR of 13%.
Other restructuring means that Monika Maurer, the chief operating officer of fixed networks, will become chief operating officer for the entire business, while Marcus Weldon, the chief technology officer, will retain his current role but take up a position in Nokia's global leadership team, reporting directly to Suri.
Chief Strategy Officer Kathrin Buvac gets additional responsibilities for what Nokia calls the "incubation" of new business opportunities.
— Iain Morris, , News Editor, Light Reading