Nokia began life under its new CEO, Pekka Lundmark, on 1 August following the 11-year tenure of his predecessor, Rajeev Suri. Lundmark’s appointment had already been made in March, with the start date accelerated by one month from the original plan.
Lundmark’s appointment as CEO was driven in large part by Nokia’s profitability challenges. Among its greatest challenges, the company is working feverishly to address shortcomings in its 5G radio products that make them more expensive to purchase and operate than radios from its main competitors – a disadvantage that is likely to persist for the next few years.
While the company did post an unexpected operating profit in the second quarter of 2020, revenue declined by double-digits compared to Q2 2019.
Nokia hope to emulate Ericsson turnaround
In appointing Lundmark, Finland-based Nokia is hoping to emulate the success of Swedish rival Ericsson, which has carved out an impressive turnaround since appointing its current CEO Börje Ekholm three years ago. In truth, the two CEOs offer similar selling points, including significant experience outside of telecommunications. Lundmark has spent the last five years as CEO of Fortum, a Finnish state-owned clean-energy company, and also served as CEO of material-handling technology company Konecranes.
Ericsson’s Ekholm also came with considerable experience outside of telecommunications, having served as CEO of Patricia Industries, a subsidiary of Swedish investment firm Investor AB that focuses on taking equity stakes in healthcare and technology firms in the U.S. and Nordic countries. A fresh perspective is arguably what Ericsson was seeking out – and what Nokia is now hoping to leverage as it attempts to return to sustained profitability.
In Nokia’s case, insight into other vertical markets is especially important: the company continues to rely on network operators like Vodafone and Deutsche Telekom for roughly 80% of its revenue, but enterprise customers are driving significant growth (including 18% growth in Q2 2020), and Nokia clearly intends to target what it believes is a significantly larger addressable market in segments like utilities, healthcare, transportation, and ‘Industry 4.0’ manufacturing than it sees from its traditional telecoms base.
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CEO’s telecoms experience is an advantage
One advantage that Lundmark may have coming in to the Nokia CEO role is that – unlike Ekholm – he does have significant telecoms experience to go with his experience outside the industry. Lundmark served in a variety of roles with Nokia from 1990 to 2000.
What happens now with Nokia will largely be determined by Lundmark’s leadership in the coming months. As Ekholm’s experience at Ericsson has shown, a company’s operating profile can be dramatically improved over a short period with a sound plan and some internal discipline. At the same time, rumors of Nokia’s potential sale have been percolating for the past year. That might explain the decision to have Lundmark start his tenure one month earlier than previously planned.
As he hits the ground running, Lundmark may have a short timeframe in which to make some difficult decisions.