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Nokia Admits Giving Misleading Information About Elop's Compensation

ihsw 13y ago
> Nokia admits giving every incentive to drive the company in the ground. This should be the headline, especially since it's far more insightful than the fact that it was a simple oversight. Driving Nokia off a cliff or flushing Nokia down the toilet would also be acceptable. One has to wonder where the line gets drawn between ignorance and malice.
- pekk 13y ago
  That line is drawn by conflict of interest
vosper 13y ago
> Should this unlikely chain of events ever occur, Elop would be entitled to an accelerated, $25M payoff. It seems awfully strange that Nokia's board would incentivise the decline of their own company, but I disagree that the sequence of events that played out was unlikely: Nokia was way behind Apple and Android when Elop joined, and the devastating fall in market-share and share price, followed by acquisition, is more-or-less the same thing that's played out with Blackberry.
- apalmer 13y ago
  Perhaps the board was unable to attract a quality CEO because it was generally accepted that the downfall of Nokia (a la RIM) was unavoidable, so they attempted to make it attractive? i mean i dont really understand it just trying to come up with a logical rational
- speeder 13y ago
  How way behind? In brics Nokia had like 60% of smartphone market in 2011... They only lost that market because they made no new cheap smartphones, opening the door for Chinese crap
  - HelloMcFly 13y ago
    Nokia did not have 60% of the smartphone market in 2011. That's absurd. In US: [1] http://www.businessinsider.com/android-versus-iphone-smartphone-share-2011-4 http://www.businessinsider.com/android-versus-iphone-smartph... Global: [2] http://bgr.com/2011/05/19/android-grabs-53-of-global-smartphone-market-share-ios-50-of-application-revenues/ http://bgr.com/2011/05/19/android-grabs-53-of-global-smartph...
    - cwoods 13y ago
      "BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa." http://en.wikipedia.org/wiki/BRICS http://en.wikipedia.org/wiki/BRICS
      - HelloMcFly 13y ago
        I skipped over the BRICS part, but it doesn't change the equation. Anyway meaningful way you slice it Nokia was "way behind", even if they still had a legacy in a few markets that primarily used dumb phones (or "feature phones"). I couldn't find BRICS-specific numbers or I would post them too, but I'd like to see any reputable source that they had anything close to a 60% marketshare in a non-dumbphone category. Edit: Found this link for China. Hard to believe the the other countries would swing the shift so dramatically. http://www.phonearena.com/news/In-China-Android-is-blowing-away-iOS-Symbian-leads-Apple-as-of-the-end-of-last-year_id29137 http://www.phonearena.com/news/In-China-Android-is-blowing-a...
        speeder 13y ago
        I could not find all my numbers again. Also remember that mid-2011 Symbian manufacturing stopped (thus all new sales at the end of the year were of old phones already shipped). Yet from your own link, it states that Symbian still was ahead of iOS. Anyway, I DO have numbers from Brazil: http://techcrunch.com/2012/09/03/android-smartphone-sales-led-by-big-screens-are-growing-everywhere-except-in-the-u-s-kantar/ http://techcrunch.com/2012/09/03/android-smartphone-sales-le... (some other numbers I had were also from Kantar, unfortunately their site is TERRIBLE) Note that in 2012 Brazil STILL HAD 22% of new Smartphones being Symbian. Also, several other countries in 2011 still had some good Symbian numbers (like first or second place). Suddenly stopping selling Symbian to switch to WP7 made no sense, even worse when claimed it was to make it different (when other manufacturers ALSO made WP7 phones). I just wish I could find the 2010 and 2011 numbers for all the BRICS again, but today that is seemly very hard :(
- lanaius 13y ago
  I read the "unlikely" as sarcasm implying that the events were potentially quite likely, particularly given the structuring of the contract.
iamshs 13y ago
Why would the board include such a clause? Wow. It undermines MS's Windows Phone, if Nokia fails WP fails, being its only partner. But Lumia's are slowly gaining ground, even if its 520 one and Nokia has only ramped up the line since they debuted the first one. The snarky tone of the author is getting in the way of the message, it is obvious he is a Finn and is emotionally invested in Nokia. Please do some analysis for us, you are writing on Forbes, rather than regurgitating original article, 1) what was the share price drop, 2) How was it accomplished, 3)How the share bounced back and how was it accomplished. It would make the collusion of quid pro quo more obvious. Right now, it can be a mere coincidence too.
- apalmer 13y ago
  The author really doesn't have enough information to provide that level of evidence
- camus 13y ago
  "Lumia's are slowly gaining ground" WP is a disaster, Nokia is dead, Ballmer is forced out, yet you still believe it is "gaining ground" ? Of course WP ramped up,from 0 ,any product can ramp up. Let's stop the whole PR, WP is a failure, it is time for anybody who invested in WP eco system to acknowledge that fact. This whole enterprise was designed to fail, because nobody wants Windows on his phone.
  - cwoods 13y ago
    Well, atleast gaining marketshare is better than going into a death spiral of losses like Blackberry seems to be doing. From http://www.wpcentral.com/kantar-windows-phone-hitting-8-percent-europe-progress-still-slow-us http://www.wpcentral.com/kantar-windows-phone-hitting-8-perc... Kantar Worldpanel - July 2013 Windows Phone Share by country Germany: 8.8% (+2.6% YoY) GB: 9.2% (+5% YoY) France: 11% (+7.4% YoY) Italy: 7.8% (-0.5% YoY) Spain: 1.8% (+0.1% YoY) USA: 3.5% (+0.5% YoY) China: 2.4% (-2.2% YoY) Australia: 7.4% (+2.4% YoY) Mexico: 12.5% (+10.5% YoY) >The biggest and most impressive individual gains were seen in Mexico (12.5%) and France (11%) where double digit Windows Phone sales figures were finally reached.
apalmer 13y ago
I would like some clarification, to me it seems very obvious that this Elop's tenure at Nokia accomplished exactly what it was intended to accomplish, and further it seems clear that the Board of Directors were in line with this plan. What exactly is the benefit of this plan for the Board of Directors? Is it literally the assumption that they were paid far in excess of the money they (I assumed) lost due to the stock tanking. And finally in a well run market, what is supposed to keep this kind of thing from happening? It seems like having the Board of Directors essentially scuttle a company for their own payoffs is not in the markets best interest, so i assume some mechanism is in place to try to reduce the likelihood of this occurrance.
- glesica 13y ago
  Whoever said anything about there being a "well run market"? I think it's pretty clear that, at least in the US, the incentives CEOs and boards face are almost laughably perverse.
  - apalmer 13y ago
    Understood, but thats not really what I am asking. I want to know what is SUPPOSED to stop this kinda thing from happening in a well run market, regardless of whether the US is or isnt a well run market.
    - CodeCube 13y ago
      What's supposed to hedge this for the market is competition. There's nothing anyone can do to stop a dedicated board from tanking a company (for whatever benefit they get from doing so). But what that does is open up an opportunity for a competitor to step up and take the marketshare of the company that is going down.
      - apalmer 13y ago
        If I am understanding competition doesnt help the victim in a case like this. the victim isn't the consumer of the products produced, its the stock holders who own the company who are being fleeced. I guess it seems to me one can buy a company not for the price of the valuation, but for the price of the board of directors.
jessaustin 13y ago
I knew somebody had been paying Elop to sacrifice Nokia for the (apparently slight) benefit of Windows Mobile, but I had reckoned it was M$: they could have just "forgotten" to take him off the payroll. Very strange behavior from the Nokia board of directors.
- freehunter 13y ago
  Are we still doing the M$ thing? I thought the 90's was more than a decade ago.
  - samspenc 13y ago
    Luckily, I haven't seen anyone mention "Windoze" recently on HN... ;)
  - jessaustin 13y ago
    For me it's simply an unambiguous 2LA. Apologies to anyone who gets annoyed.
Zigurd 13y ago
The author of the article goes a step too far in saying Nokia was deliberately run into the ground, but the result is indistinguishable. The real villain is Windows Phone. Had Nokia kept options open and had tried other OSs, they would have, at least, seen different levels of market acceptance among the OS choices. The argument that they had to "focus" is specious. No other OEM ever harmed their results by hedging their OS bets.
- apalmer 13y ago
  Yes but that's kind of the whole conclusion of this arguement. Basically the behavior of a hardware manufacturer was so counter intuitive that to many people the only logical explanation is that the CEO must be trying to take the company down. I really dont know, but will say seems crazy that Nokia didn't have at least a small team dedicated to making an android OS 'port' for their devices. It seems like even if they thought it was a 1% chance of windows mobile not working out for them the hedge would have been worth it.
  - Zigurd 13y ago
    The speculation has been that since Microsoft was paying Nokia some kind of subsidy they were not permitted to market other OSs. That would explain killing their Meego phones which were selling reasonably well, as well as killing another project for a low-end Linux-based OS. Nokia could easily have tried some Android products at minimal cost. But all the terms of those contracts were never revealed. I've seen it mentioned in the press that Nokia can re-enter the handset business in 2016, that Nokia owns part of Jolla, and that Nokia ported Android to several phones, which may have had a role in inducing Microsoft to buy the handset business.
  - cwoods 13y ago
    >I really dont know, but will say seems crazy that Nokia didn't have at least a small team dedicated to making an android OS 'port' for their devices. It seems like even if they thought it was a 1% chance of windows mobile not working out for them the hedge would have been worth it. Elop did have such a team working on an Android port. http://bits.blogs.nytimes.com/2013/09/13/behind-microsoft-deal-the-specter-of-a-nokia-android-phone/?smid=tw-nytimesbits&seid=auto&_r=1 http://bits.blogs.nytimes.com/2013/09/13/behind-microsoft-de... http://www.theverge.com/2013/9/13/4728184/microsoft-surface-phone-testing-while-nokia-experimented-with-android http://www.theverge.com/2013/9/13/4728184/microsoft-surface-...
chris_wot 13y ago
Nokia is a dead company. My prediction: in 5 years time, it will be but a distant memory.
- Tichy 13y ago
  Or they'll pivot, like they've always done before.
  - sirkneeland 13y ago
    Yep. It's already begun. It'll be pretty sweet when you get to see it ;) Still there is no denying that what has happened with Nokia's phone division was a tragedy, and a completely avoidable one at that.
    - solnyshok 13y ago
      anybody thinks they have guts to take ms money and buy into Jolla? that would be bombastic turnaround :(
      - Gravityloss 13y ago
        Can it be fast enough? N9 had excellent UI (so much better than Android even now) but was infuriatingly slow and laggy. Nokia still owns the UI patents from N9.
- deleted 13y ago
  [deleted]
- dagw 13y ago
  NSN was about half the company by revenue, and doing better in terms of profit, before they sold their mobile division. I see no reason that, now that they've dumped the phone division, they won't be able to build and grow around NSN and their other technologies. Look at Nokia's history. It's not like this is the first time they've pivoted.
Tichy 13y ago
Being bought by Microsoft was already their ideal scenario when they took Elop on board.
- apalmer 13y ago
  Right I think this is a very valid point, but I don't think however the thought of the vast majority of stockholders was that the ideal was to sell to Microsoft after losing almost all of its value. I think the fundamental issue most people are having is that it seems like the board decided that the company should be sold at penny's on the dollar while they felt it could have been sold at nickles on the dollar.
bchjam 13y ago
From the moment I heard that Elop would lead Nokia I assumed that the Nokia board wanted to be acquired and were doing whatever it took to become attractive to the most likely (or highest) perceived bidder. But to say that Elop sank Nokia is to ignore the trend of the company's financial performance leading up to that point. (minor edit, redundancy)
- camus 13y ago
  Elop did sank Nokia , and he got rewarded for that. How do you call it , a win win contract? But that's the price one pays when one does business with Microsoft => Scroogled !
  - sk5t 13y ago
    Wasn't Nokia already well along a slide into irrelevance at the time Elop took the helm?
    - jamornh 13y ago
      Sure, but even if Nokia was already on the path into irrelevance, Elop greatly accelerated the pace. He did this by announcing that Nokia would abandon the Symbian OS for Windows Phone OS; a distant 3rd in terms of the OS penetration. All this while the company had NO products to introduce with the Windows Phone OS for another 6 months, leaving all Symbian smartphones they did have at the time dead in the water. (Who wants to buy a phone with an obsolete OS?) This ensures a definite and immediate share price slide.
      - jacquesm 13y ago
        Elop's initial announcement made me wonder if he had not heard about the Osborne.
        rbanffy 13y ago
        There is a limit to stupidity before you consider malice. Only extensive brain damage could explain Elop's stupidity.
abalone 13y ago
The author is clearly bitter about Nokia's decline and looking for someone to blame. But the conspiratorial tone is a bit much. He tries to frame the decline of Nokia, its sale, and the market responding positively to that sale, as an "unusual" sequence of events. And therefore explainable only by an internal conspiracy, not the failure of Nokia's business. But when you factor out the ominous tone, there's really nothing unusual about that sequence. Nokia was already in trouble when they brought on board Elop. He was their hatchet man. It shouldn't be that surprising that they incentivized him to handle the sale of the company well if it came to that.
- zobzu 13y ago
  its still true that elop planned this all along tho. he added the specific clause. theres just no denying it. heck, most people would do the same for $25M...
  - rbanffy 13y ago
    Honest people wouldn't.
    - zobzu 13y ago
      $25M makes many of the "honest people" not so honest. ;)
- Shamanmuni 13y ago
  It's not about unusual sequences of events, he's saying that Elop had an important incentive to accelerate the landslide of Nokia into irrelevance in order for it to be bought cheaply by his former employer. Things like publicly bashing your company (that well-known memo), abruptly stopping a successful (though declining) line like the Symbian cheap phones and spending a whole year to launch a new line with an unproven and unpopular OS (in mobile). Even before all of that enthusiasts had hacked the N900 and made it run Android (look at NITDroid), so it could hardly be argued that it was difficult task for them to swiftly move to Android and differentiate themselves like Samsung does. He wasn't responsible for Nokia's difficulties in 2010, but it was far from an impossible situation. Seriously, these events are things many of us saw as soon as he put a foot on Nokia. We have been calling him a Trojan Horse since then, and with Nokia bought and Elop back at Microsoft as Head of Devices with a juicy check who can say we were mistaken? I even bought a Nokia N9 last year considering it my farewell to a once great company destined to be a part of Microsoft. And I'm hardly a clairvoyant.
g123g 13y ago
If there was a case for a thorough investigation of a company affairs then I think it is Nokia. There has to be much more that went behind the scenes that brought Nokia to this state. In many parts of the world Nokia was synonomous with the mobile phone. They could have played a vital part in bringing the emerging economies online. Today that company has been destroyed and MS and its ambassador has played a dubious role in this.
- runn1ng 13y ago
  I just wonder why Nokia didn't went with Maemo-based devices. They had a headstart with smartphone-like OS. But other than N900, they didn't really use it anywhere.
  - stonemetal 13y ago
    I haven't seen Maemo so I couldn't talk to its quality vs win phone, but there is more to the argument than product quality. With win phone they got reduced dev costs since they didn't have to support the OS, and reduced marketing costs since MS was promoting win phone so heavily. Add on top of that a larger App ecosystem(sure MS' is pathetic but it beats starting from scratch) without having to run a developer program and you have a strong argument. The only question then is why win instead of android? I think that is easily answered by his background and how well non Samsung android manufactures are doing.
curiousDog 13y ago
This seems more like a benefit in the offer package to Elop. It's like the board was saying to Elop: "hey we know our company is in hard times. Try your best but if you fail, that's ok, we'll pay you for your trouble. But make sure you sell it off to a buyer" I think the new Blackberry CEO had a similar offer. In case of a buyout, he ges paid.
ffrryuu 13y ago
Laying off thousands to pay the executives a few million dollar more!
deleted 13y ago
[deleted]
jre 13y ago
This makes me wonder about the legality of all this. Isn't the CEO supposed to act in the company's best interest ? By giving him a bonus for selling the company at a low price, isn't the board somehow betraying the shareholders ? Did Nokia's shareholders agree to this ?
brudgers 13y ago
The board was a party to the negotiation of Elop's contract. If such terms are in the, it is only by consent of the board. If they are incentives toward a particular outcome, then that outcome was deemed acceptable by the board at the time the contract was executed. There is nothing unusual in it other than the emotions sparked by the names of the companies involved in the planned sale.
GrinningFool 13y ago
Not to disrupt the hate, but let me propose an alternative scenario: * The board approached Elop to take on a risky position: a failing company losing marketshare. * Elop says, "Well - I'm willing to give it a shot, but this is pretty bad. I need something in the contract that will allow me to actually make some money in the event that all else fails, and sale is the only option." The CEO in this kind of structure does not unilaterally make major business decisions. He is advised by the board - in fact he serves at the whim of the board - and they generally can stop anything they don't agree with. Now if we had a scenario where every board member had asimilar clause, then the idea that he deliberately drove the company into the ground would have more merit. But to me it just seems like a clause that any reasonable person would want before taking the helm of a sinking ship.
- auctiontheory 13y ago
  (1) The board should not give an incoming CEO a $25 million dollar incentive to destroy and sell the company. (2) A candidate with so little confidence in the company (as you describe) probably should not be hired for the job.
- rhizome 13y ago
  Elop says, "Well - I'm willing to give it a shot, but this is pretty bad. I need something in the contract that will allow me to actually make some money in the event that all else fails, and sale is the only option." If he's being hired to fix the company and has a clause that guarantees compensation if he fails, that would seem to create a perverse incentive. Why does he get paid extra for doing a bad job?
  - GrinningFool 13y ago
    Do you know what his incentives were for turning it around? Might have been considerably higher. (That's only somewhat a rhetorical question - I believe it's a matter of record with the SEC if anyone cares to look it up. )
qwerta 13y ago
Microsoft is next...
iMark 13y ago
What about the flip side - did Elop stand to gain more or less if Nokia had succeeded during his tenure?

ihsw 13y ago

> Nokia admits giving every incentive to drive the company in the ground. This should be the headline, especially since it's far more insightful than the fact that it was a simple oversight. Driving Nokia off a cliff or flushing Nokia down the toilet would also be acceptable. One has to wonder where the line gets drawn between ignorance and malice.

pekk 13y ago
That line is drawn by conflict of interest

vosper 13y ago

> Should this unlikely chain of events ever occur, Elop would be entitled to an accelerated, $25M payoff. It seems awfully strange that Nokia's board would incentivise the decline of their own company, but I disagree that the sequence of events that played out was unlikely: Nokia was way behind Apple and Android when Elop joined, and the devastating fall in market-share and share price, followed by acquisition, is more-or-less the same thing that's played out with Blackberry.

apalmer 13y ago
Perhaps the board was unable to attract a quality CEO because it was generally accepted that the downfall of Nokia (a la RIM) was unavoidable, so they attempted to make it attractive? i mean i dont really understand it just trying to come up with a logical rational
speeder 13y ago
How way behind? In brics Nokia had like 60% of smartphone market in 2011... They only lost that market because they made no new cheap smartphones, opening the door for Chinese crap
- HelloMcFly 13y ago
  Nokia did not have 60% of the smartphone market in 2011. That's absurd. In US: [1] http://www.businessinsider.com/android-versus-iphone-smartphone-share-2011-4 http://www.businessinsider.com/android-versus-iphone-smartph... Global: [2] http://bgr.com/2011/05/19/android-grabs-53-of-global-smartphone-market-share-ios-50-of-application-revenues/ http://bgr.com/2011/05/19/android-grabs-53-of-global-smartph...
  - cwoods 13y ago
    "BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa." http://en.wikipedia.org/wiki/BRICS http://en.wikipedia.org/wiki/BRICS
    - HelloMcFly 13y ago
      I skipped over the BRICS part, but it doesn't change the equation. Anyway meaningful way you slice it Nokia was "way behind", even if they still had a legacy in a few markets that primarily used dumb phones (or "feature phones"). I couldn't find BRICS-specific numbers or I would post them too, but I'd like to see any reputable source that they had anything close to a 60% marketshare in a non-dumbphone category. Edit: Found this link for China. Hard to believe the the other countries would swing the shift so dramatically. http://www.phonearena.com/news/In-China-Android-is-blowing-away-iOS-Symbian-leads-Apple-as-of-the-end-of-last-year_id29137 http://www.phonearena.com/news/In-China-Android-is-blowing-a...
      - speeder 13y ago
        I could not find all my numbers again. Also remember that mid-2011 Symbian manufacturing stopped (thus all new sales at the end of the year were of old phones already shipped). Yet from your own link, it states that Symbian still was ahead of iOS. Anyway, I DO have numbers from Brazil: http://techcrunch.com/2012/09/03/android-smartphone-sales-led-by-big-screens-are-growing-everywhere-except-in-the-u-s-kantar/ http://techcrunch.com/2012/09/03/android-smartphone-sales-le... (some other numbers I had were also from Kantar, unfortunately their site is TERRIBLE) Note that in 2012 Brazil STILL HAD 22% of new Smartphones being Symbian. Also, several other countries in 2011 still had some good Symbian numbers (like first or second place). Suddenly stopping selling Symbian to switch to WP7 made no sense, even worse when claimed it was to make it different (when other manufacturers ALSO made WP7 phones). I just wish I could find the 2010 and 2011 numbers for all the BRICS again, but today that is seemly very hard :(
lanaius 13y ago
I read the "unlikely" as sarcasm implying that the events were potentially quite likely, particularly given the structuring of the contract.

iamshs 13y ago

Why would the board include such a clause? Wow. It undermines MS's Windows Phone, if Nokia fails WP fails, being its only partner. But Lumia's are slowly gaining ground, even if its 520 one and Nokia has only ramped up the line since they debuted the first one. The snarky tone of the author is getting in the way of the message, it is obvious he is a Finn and is emotionally invested in Nokia. Please do some analysis for us, you are writing on Forbes, rather than regurgitating original article, 1) what was the share price drop, 2) How was it accomplished, 3)How the share bounced back and how was it accomplished. It would make the collusion of quid pro quo more obvious. Right now, it can be a mere coincidence too.

apalmer 13y ago
The author really doesn't have enough information to provide that level of evidence
camus 13y ago
"Lumia's are slowly gaining ground" WP is a disaster, Nokia is dead, Ballmer is forced out, yet you still believe it is "gaining ground" ? Of course WP ramped up,from 0 ,any product can ramp up. Let's stop the whole PR, WP is a failure, it is time for anybody who invested in WP eco system to acknowledge that fact. This whole enterprise was designed to fail, because nobody wants Windows on his phone.
- cwoods 13y ago
  Well, atleast gaining marketshare is better than going into a death spiral of losses like Blackberry seems to be doing. From http://www.wpcentral.com/kantar-windows-phone-hitting-8-percent-europe-progress-still-slow-us http://www.wpcentral.com/kantar-windows-phone-hitting-8-perc... Kantar Worldpanel - July 2013 Windows Phone Share by country Germany: 8.8% (+2.6% YoY) GB: 9.2% (+5% YoY) France: 11% (+7.4% YoY) Italy: 7.8% (-0.5% YoY) Spain: 1.8% (+0.1% YoY) USA: 3.5% (+0.5% YoY) China: 2.4% (-2.2% YoY) Australia: 7.4% (+2.4% YoY) Mexico: 12.5% (+10.5% YoY) >The biggest and most impressive individual gains were seen in Mexico (12.5%) and France (11%) where double digit Windows Phone sales figures were finally reached.

apalmer 13y ago

I would like some clarification, to me it seems very obvious that this Elop's tenure at Nokia accomplished exactly what it was intended to accomplish, and further it seems clear that the Board of Directors were in line with this plan. What exactly is the benefit of this plan for the Board of Directors? Is it literally the assumption that they were paid far in excess of the money they (I assumed) lost due to the stock tanking. And finally in a well run market, what is supposed to keep this kind of thing from happening? It seems like having the Board of Directors essentially scuttle a company for their own payoffs is not in the markets best interest, so i assume some mechanism is in place to try to reduce the likelihood of this occurrance.

glesica 13y ago
Whoever said anything about there being a "well run market"? I think it's pretty clear that, at least in the US, the incentives CEOs and boards face are almost laughably perverse.
- apalmer 13y ago
  Understood, but thats not really what I am asking. I want to know what is SUPPOSED to stop this kinda thing from happening in a well run market, regardless of whether the US is or isnt a well run market.
  - CodeCube 13y ago
    What's supposed to hedge this for the market is competition. There's nothing anyone can do to stop a dedicated board from tanking a company (for whatever benefit they get from doing so). But what that does is open up an opportunity for a competitor to step up and take the marketshare of the company that is going down.
    - apalmer 13y ago
      If I am understanding competition doesnt help the victim in a case like this. the victim isn't the consumer of the products produced, its the stock holders who own the company who are being fleeced. I guess it seems to me one can buy a company not for the price of the valuation, but for the price of the board of directors.

jessaustin 13y ago

I knew somebody had been paying Elop to sacrifice Nokia for the (apparently slight) benefit of Windows Mobile, but I had reckoned it was M$: they could have just "forgotten" to take him off the payroll. Very strange behavior from the Nokia board of directors.

freehunter 13y ago
Are we still doing the M$ thing? I thought the 90's was more than a decade ago.
- samspenc 13y ago
  Luckily, I haven't seen anyone mention "Windoze" recently on HN... ;)
- jessaustin 13y ago
  For me it's simply an unambiguous 2LA. Apologies to anyone who gets annoyed.

Zigurd 13y ago

The author of the article goes a step too far in saying Nokia was deliberately run into the ground, but the result is indistinguishable. The real villain is Windows Phone. Had Nokia kept options open and had tried other OSs, they would have, at least, seen different levels of market acceptance among the OS choices. The argument that they had to "focus" is specious. No other OEM ever harmed their results by hedging their OS bets.

apalmer 13y ago
Yes but that's kind of the whole conclusion of this arguement. Basically the behavior of a hardware manufacturer was so counter intuitive that to many people the only logical explanation is that the CEO must be trying to take the company down. I really dont know, but will say seems crazy that Nokia didn't have at least a small team dedicated to making an android OS 'port' for their devices. It seems like even if they thought it was a 1% chance of windows mobile not working out for them the hedge would have been worth it.
- Zigurd 13y ago
  The speculation has been that since Microsoft was paying Nokia some kind of subsidy they were not permitted to market other OSs. That would explain killing their Meego phones which were selling reasonably well, as well as killing another project for a low-end Linux-based OS. Nokia could easily have tried some Android products at minimal cost. But all the terms of those contracts were never revealed. I've seen it mentioned in the press that Nokia can re-enter the handset business in 2016, that Nokia owns part of Jolla, and that Nokia ported Android to several phones, which may have had a role in inducing Microsoft to buy the handset business.
- cwoods 13y ago
  >I really dont know, but will say seems crazy that Nokia didn't have at least a small team dedicated to making an android OS 'port' for their devices. It seems like even if they thought it was a 1% chance of windows mobile not working out for them the hedge would have been worth it. Elop did have such a team working on an Android port. http://bits.blogs.nytimes.com/2013/09/13/behind-microsoft-deal-the-specter-of-a-nokia-android-phone/?smid=tw-nytimesbits&seid=auto&_r=1 http://bits.blogs.nytimes.com/2013/09/13/behind-microsoft-de... http://www.theverge.com/2013/9/13/4728184/microsoft-surface-phone-testing-while-nokia-experimented-with-android http://www.theverge.com/2013/9/13/4728184/microsoft-surface-...

chris_wot 13y ago

Nokia is a dead company. My prediction: in 5 years time, it will be but a distant memory.

Tichy 13y ago
Or they'll pivot, like they've always done before.
- sirkneeland 13y ago
  Yep. It's already begun. It'll be pretty sweet when you get to see it ;) Still there is no denying that what has happened with Nokia's phone division was a tragedy, and a completely avoidable one at that.
  - solnyshok 13y ago
    anybody thinks they have guts to take ms money and buy into Jolla? that would be bombastic turnaround :(
    - Gravityloss 13y ago
      Can it be fast enough? N9 had excellent UI (so much better than Android even now) but was infuriatingly slow and laggy. Nokia still owns the UI patents from N9.
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dagw 13y ago
NSN was about half the company by revenue, and doing better in terms of profit, before they sold their mobile division. I see no reason that, now that they've dumped the phone division, they won't be able to build and grow around NSN and their other technologies. Look at Nokia's history. It's not like this is the first time they've pivoted.

Tichy 13y ago

Being bought by Microsoft was already their ideal scenario when they took Elop on board.

apalmer 13y ago
Right I think this is a very valid point, but I don't think however the thought of the vast majority of stockholders was that the ideal was to sell to Microsoft after losing almost all of its value. I think the fundamental issue most people are having is that it seems like the board decided that the company should be sold at penny's on the dollar while they felt it could have been sold at nickles on the dollar.

bchjam 13y ago

From the moment I heard that Elop would lead Nokia I assumed that the Nokia board wanted to be acquired and were doing whatever it took to become attractive to the most likely (or highest) perceived bidder. But to say that Elop sank Nokia is to ignore the trend of the company's financial performance leading up to that point. (minor edit, redundancy)

camus 13y ago
Elop did sank Nokia , and he got rewarded for that. How do you call it , a win win contract? But that's the price one pays when one does business with Microsoft => Scroogled !
- sk5t 13y ago
  Wasn't Nokia already well along a slide into irrelevance at the time Elop took the helm?
  - jamornh 13y ago
    Sure, but even if Nokia was already on the path into irrelevance, Elop greatly accelerated the pace. He did this by announcing that Nokia would abandon the Symbian OS for Windows Phone OS; a distant 3rd in terms of the OS penetration. All this while the company had NO products to introduce with the Windows Phone OS for another 6 months, leaving all Symbian smartphones they did have at the time dead in the water. (Who wants to buy a phone with an obsolete OS?) This ensures a definite and immediate share price slide.
    - jacquesm 13y ago
      Elop's initial announcement made me wonder if he had not heard about the Osborne.
      - rbanffy 13y ago
        There is a limit to stupidity before you consider malice. Only extensive brain damage could explain Elop's stupidity.

abalone 13y ago

The author is clearly bitter about Nokia's decline and looking for someone to blame. But the conspiratorial tone is a bit much. He tries to frame the decline of Nokia, its sale, and the market responding positively to that sale, as an "unusual" sequence of events. And therefore explainable only by an internal conspiracy, not the failure of Nokia's business. But when you factor out the ominous tone, there's really nothing unusual about that sequence. Nokia was already in trouble when they brought on board Elop. He was their hatchet man. It shouldn't be that surprising that they incentivized him to handle the sale of the company well if it came to that.

zobzu 13y ago
its still true that elop planned this all along tho. he added the specific clause. theres just no denying it. heck, most people would do the same for $25M...
- rbanffy 13y ago
  Honest people wouldn't.
  - zobzu 13y ago
    $25M makes many of the "honest people" not so honest. ;)
Shamanmuni 13y ago
It's not about unusual sequences of events, he's saying that Elop had an important incentive to accelerate the landslide of Nokia into irrelevance in order for it to be bought cheaply by his former employer. Things like publicly bashing your company (that well-known memo), abruptly stopping a successful (though declining) line like the Symbian cheap phones and spending a whole year to launch a new line with an unproven and unpopular OS (in mobile). Even before all of that enthusiasts had hacked the N900 and made it run Android (look at NITDroid), so it could hardly be argued that it was difficult task for them to swiftly move to Android and differentiate themselves like Samsung does. He wasn't responsible for Nokia's difficulties in 2010, but it was far from an impossible situation. Seriously, these events are things many of us saw as soon as he put a foot on Nokia. We have been calling him a Trojan Horse since then, and with Nokia bought and Elop back at Microsoft as Head of Devices with a juicy check who can say we were mistaken? I even bought a Nokia N9 last year considering it my farewell to a once great company destined to be a part of Microsoft. And I'm hardly a clairvoyant.

g123g 13y ago

If there was a case for a thorough investigation of a company affairs then I think it is Nokia. There has to be much more that went behind the scenes that brought Nokia to this state. In many parts of the world Nokia was synonomous with the mobile phone. They could have played a vital part in bringing the emerging economies online. Today that company has been destroyed and MS and its ambassador has played a dubious role in this.

runn1ng 13y ago
I just wonder why Nokia didn't went with Maemo-based devices. They had a headstart with smartphone-like OS. But other than N900, they didn't really use it anywhere.
- stonemetal 13y ago
  I haven't seen Maemo so I couldn't talk to its quality vs win phone, but there is more to the argument than product quality. With win phone they got reduced dev costs since they didn't have to support the OS, and reduced marketing costs since MS was promoting win phone so heavily. Add on top of that a larger App ecosystem(sure MS' is pathetic but it beats starting from scratch) without having to run a developer program and you have a strong argument. The only question then is why win instead of android? I think that is easily answered by his background and how well non Samsung android manufactures are doing.

curiousDog 13y ago

This seems more like a benefit in the offer package to Elop. It's like the board was saying to Elop: "hey we know our company is in hard times. Try your best but if you fail, that's ok, we'll pay you for your trouble. But make sure you sell it off to a buyer" I think the new Blackberry CEO had a similar offer. In case of a buyout, he ges paid.

ffrryuu 13y ago

Laying off thousands to pay the executives a few million dollar more!

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jre 13y ago

This makes me wonder about the legality of all this. Isn't the CEO supposed to act in the company's best interest ? By giving him a bonus for selling the company at a low price, isn't the board somehow betraying the shareholders ? Did Nokia's shareholders agree to this ?

brudgers 13y ago

The board was a party to the negotiation of Elop's contract. If such terms are in the, it is only by consent of the board. If they are incentives toward a particular outcome, then that outcome was deemed acceptable by the board at the time the contract was executed. There is nothing unusual in it other than the emotions sparked by the names of the companies involved in the planned sale.

GrinningFool 13y ago

Not to disrupt the hate, but let me propose an alternative scenario: * The board approached Elop to take on a risky position: a failing company losing marketshare. * Elop says, "Well - I'm willing to give it a shot, but this is pretty bad. I need something in the contract that will allow me to actually make some money in the event that all else fails, and sale is the only option." The CEO in this kind of structure does not unilaterally make major business decisions. He is advised by the board - in fact he serves at the whim of the board - and they generally can stop anything they don't agree with. Now if we had a scenario where every board member had asimilar clause, then the idea that he deliberately drove the company into the ground would have more merit. But to me it just seems like a clause that any reasonable person would want before taking the helm of a sinking ship.

auctiontheory 13y ago
(1) The board should not give an incoming CEO a $25 million dollar incentive to destroy and sell the company. (2) A candidate with so little confidence in the company (as you describe) probably should not be hired for the job.
rhizome 13y ago
Elop says, "Well - I'm willing to give it a shot, but this is pretty bad. I need something in the contract that will allow me to actually make some money in the event that all else fails, and sale is the only option." If he's being hired to fix the company and has a clause that guarantees compensation if he fails, that would seem to create a perverse incentive. Why does he get paid extra for doing a bad job?
- GrinningFool 13y ago
  Do you know what his incentives were for turning it around? Might have been considerably higher. (That's only somewhat a rhetorical question - I believe it's a matter of record with the SEC if anyone cares to look it up. )

qwerta 13y ago

Microsoft is next...

iMark 13y ago

What about the flip side - did Elop stand to gain more or less if Nokia had succeeded during his tenure?