Why Microsoft Should Heed Nokia's Shareholders

Considering the early tally from Nokia (NYSE: NOK  ) shareholders, who were voting on the deal to sell its devices and services unit to Microsoft (NASDAQ: MSFT  ) for $7.34 billion (based on today's conversion rates), the final results were a given. As expected, "more than 99% of the votes cast" were in favor. The only question was -- what were the opponents even thinking?

But Nokia shareholders weren't done. In addition to overwhelmingly agreeing to the Microsoft transaction, shareholders made it clear that they've washed their hands of former Nokia CEO Stephen Elop, too. Which begs another question: With Microsoft looking for a new CEO to replace outgoing Steve Ballmer, should it heed the words of Nokia's shareholders and remove Elop from its short list?

The root of shareholder angst
Elop received some less-than-kind feedback during Nokia's 4.5 hour shareholder gathering. But before we look at that, it's important to appreciate the role that the company plays in Finland. Nokia has been an institution in Finland since its roots as a paper producer beginning in 1865. From there, Nokia added rubber production to its business in the late 1800s, and transitioned to electronics in the 1960s.

The Finnish population has come to view the 150-year old Nokia much like we in the U.S. look at Coca-Cola and Ford: They're not just companies to us, they're Mom, baseball, and apple pie. For example, when the deal with Microsoft was announced, Finnish Minister for European Affairs and Foreign Trade Alexander Stubb tweeted, "For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional."

Based on yesterday's meeting, Stubb got it right: emotional. At one point during the proceedings, Nokia's chairman had to ask shareholders to stop verbally abusing Elop, who sat on stage, but apparently didn't have anything to add. Shareholders called Elop a "triple a flop," blamed him for ruining Nokia, and referred to the shareholder meeting as "the funeral of Nokia phones." Ouch.

Do Nokia shareholders have Elop pegged?
Emotions aside, it's easy to see why Nokia fans aren't enamored with Elop. When he took over Nokia in 2010, it employed about 20,000 people, easily making it Finland's top employer, and a huge part of the national economy. Following the deal with Microsoft, Nokia will employ about 6,000 Finns. The decline of Nokia's mobile phone market share, and the precipitous stock price decline that followed, sealed Elop's fate in Finland.

Ditching Symbian, Nokia's proprietary OS, in favor of Microsoft's Windows Phone also struck a bad chord with Finns, and is largely blamed for the demise in its mobile phone market share. Of course, as we're starting to see, Elop's gamble is beginning to pay off as Windows Phone picks up steam, especially overseas. But that's little consolation to disillusioned Nokia shareholders, and Elop's the target of their discontent.

Microsoft's CEO solution
While there are a few names being bandied about as Microsoft's new CEO, the focus of most rumors are on Elop and Ford's Alan Mulally. Since Mulally joined Ford as CEO in 2006, he's worked miracles for a company that was knocking on death's door. In the last five years, Ford shareholders have enjoyed a robust 837% return on their investment. Nokia is down 38% during that same time, and is just now nearing breakeven since Elop joined in 2010.

The concern with Mulally is his lack of mobile experience, and that's legitimate, but there's an answer for that -- Elop. His background with Microsoft, and knowledge of mobile, has put Elop atop many a list as its new CEO. However, his track record, as Nokia shareholders will tell you, leaves much to be desired.

The solution? Let Elop do what he knows best, and run Microsoft's devices unit, as originally planned. Then, move mountains, if need be, to get Mulally installed as its CEO. Problem solved.

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Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 20, 2013, at 8:18 PM, lee654 wrote:

    Good article,agree. Long & buying Nokia !

  • Report this Comment On November 20, 2013, at 10:50 PM, techy46 wrote:

    Gee, if Nokia were anything like For or Coke they wouldn't have needed to be bailed out of the disaster they made in leading the mobile phone market. Also, if analysts and investing commentators know so much about how to run a high technology company how come their making peanuts in the Monday morning gallery? Microsoft is in really good shape right now because of Gates and Ballmer's leadership. Wall Street and retail investors would love someone to take over and run up the stock price only to burn out at a peak like Apple and Google are doing, luckily that's not going to happen!

  • Report this Comment On November 20, 2013, at 11:52 PM, daverhall wrote:

    I would not have Mr. Elop be in charge of Microdsoft except the clean up custodians. Get some one who is strongly technically trained and experienced and some good business background. Nokia should have been rebuilt and not just baby sat. We also need to have Microsoft have all their work done in the US and not out sourced. Build America not China or Russia.

  • Report this Comment On November 21, 2013, at 7:07 AM, hjt wrote:

    ummm... lets not change history. When Elop started at Nokia it was already in big trouble missing product innovations and the move towards Smart Phones. Everyone just needs to look at BlackBerry and thank him for getting so much share holder value. The shareholders and BOD who are complaining should have taken action so they were never in this position. I am not sure anyone could have done a better job with the hand that was dealt.

  • Report this Comment On November 21, 2013, at 10:59 AM, tuan2le wrote:

    Nokia phones were "BIG" part of their growing up, but in the last few years Samsung had the best selling phone in Finland while Nokia struggled to survive. Kudos to their open mind, but boos to their fake pride. Without Elop Nokia could have been bankrupt for a few years by now. They should think about washing Elop's feet instead.

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