|Armchair Quarterbacking: Jean-Louis Gassée Speaks out about Elop and the Nokia Board ... |
Jean-Louis Gassée is perhaps (but perhaps not) qualified to speak to an issue many are mulling. He is a 68 year old transplanted Parisian who joined Apple France as their head from Hewlett Packard in the early eighties and subsequently became head of Macintosh development, starting the ill fated Newton MessagePad project. He was forced out by John Sculley in 1990 and he is best known as the founder of Be Inc., the creator of the promising BeOS. operating system that Sculley's Apple once considered for Macs. Be Inc's assets were purchased by Palm where he served on the BOD and for a short time beginning in late 2004 he became Chairman of PalmSource which was spiraling into oblivion. It is possible that he may have been interviewed for the job that Nokia awarded to Stephen Elop and there may be some sour grapes coloring his current thinking.
>> Nokia should fire Elop and the board should go too - Jean-Louis Gassée
04 July 2012
Stephen Elop ought to be fired as the CEO of Nokia and the rest of the board should join him, according to Silicon Valley veteran Jean-Louis Gassée.
"I think that Elop will have to go, but I also think that the board also needs to be renewed with people who have an understanding and working knowledge of the mobile industry," Gassée told Computing in an exclusive interview.
Gassée built up HP in Europe during the 1970s before joining Apple in 1981, where he served as a senior executive from 1981 to 1990. He also founded operating system company Be Inc, and is now a partner at venture capital company Allegis Capital.
Gassée criticised the company for allowing Elop to effectively ‘Osborne' its products not once, but twice: first in his infamous, Gerald Ratner-like "burning platform" memo in February 2011; and, more recently, when Microsoft pre-announced Windows Phone 8, which effectively obsoleted Nokia's new range of Windows Phone 7 devices months before the new mobile operating system will be formally released.
"Microsoft can do that with new versions of Windows; IBM used to do that in the olden days. But I'm shocked that the board of Nokia allowed Elop to do that," said Gassée.
The company was banking on burgeoning sales of its Windows Phone 7 devices this year – especially over the next two quarters – to arrest the company's sharp decline in sales and profitability.
Current mobile devices running Windows Phone 7 won't be upgradeable to Windows Phone 8 and apps built for Windows Phone 8 will not be backwards compatible. A point upgrade, though, will provide many of the features of Windows Phone 8 to users of the older operating system.
While acknowledging that Elop inherited a company facing many looming challenges, Gassée questioned whether the knowledge and experience Elop offered are appropriate to the role.
"He has zero experience in terms of what makes a smartphone maker tick. And what is his experience in supply chain management? Zero," said Gassée.
He added: "He did a very good thing, which is to tell everyone that it is an eco-system ‘play', not a platform play. That was very insightful. But then he reveals the plans without implementing them. Everyone knew that Symbian phones were dead-enders and Nokia's partners – the carriers – ran away from Symbian in large numbers."
In his "burning platform" memo of February 2011, Elop likened the company's Symbian platform to the platform of a burning oil rig in the North Sea from which the company needed to escape.
However, the memo, published in an internal blog, was leaked to the press.
Days later, Elop announced a tie-up with Microsoft, in which Nokia would adopt the software giant's Windows Phone operating system as its primary smartphone platform. But that deal was only finalised two months later and Nokia Lumia phones featuring Windows Phone 7 only started to emerge in modest volumes by the autumn.
In the meantime, sales of Nokia's products across the board have fallen and have yet to recover, despite a modest spike in sales of Lumia phones in the US since the introduction of the Microsoft-based products.
Gassée reserves his most potent criticisms, though, for Elop's predecessor, Olli-Pekka Kallasvuo, a lawyer-turned-accountant who succeeded Jorma Ollila in 2006. "I've now doubt that Kallasvuo is highly intelligent, very hard working and dedicated. But that didn't matter. He had no connection with what makes the business work," said Gassée.
Kallasvuo failed to recognise the threat posed by Apple's iPhone and Google Android, launched in 2007 and 2008 respectively. Instead, Kallasvuo presided over a confused platform strategy featuring multiple iterations of the Symbian operating system and Linux-based alternatives.
Nokia's demise is all the more poignant for Gassée after he was consulted by the company's board in New York over its future two years ago. He recommended that they fire Kallasvuo, drop Symbian and adopt Android instead. "The board of Nokia were already thinking that Kallasvuo should go. They made no bones about their dissatisfaction with the top management," said Gassée.
He added: "I told them to drop everything and go Android. Do it in secret and let the rumours fly... I would have used Nokia's design flare to make very nice phones. I would integrate Ovi [Nokia's app store] into Android and people would say that Nokia sided with the winner.
"It would have been tough fighting Samsung, though, because Samsung takes no prisoners. They don't brush their teeth in the morning – they file them," said Gassée.
However, while they took his advice over Kallasvuo, they rejected his suggestion that the company ought to adopt Android, arguing that the company would "lose control of their destiny", they told Gassée. ###
>> Analysis: Is Nokia's leadership fit for purpose?
When Stephen Elop was appointed CEO of Nokia in October 2010, it raised more than a few eyebrows. Not only was the well-travelled executive the first non-Finn to head up the mobile technology company, but he was also an ex-Microsoft employee.
Finns ain't what they used to be
In the 1990s and early years of this century, Nokia phones were synonymous with user-friendly interface design and mass popularity. When Elop took over, Apple and Android mobile devices had begun chipping away at Nokia’s lead, but it remained the global market leader in smartphones, as well as cheaper "feature phones".
Just 18 months later, Elop had presided over a 28 per cent fall in revenues, seen the company’s credit rating slashed from investment grade to junk status, and instigated two restructurings that will see the company’s workforce slashed by 24,500 by the end of 2013 – a reduction of some 36 per cent since he took over.
The company has also been burning cash at such a rate that its entire balances might be gone by the end of 2013, jeopardising its ability to repay or rollover maturing corporate bonds.
And to top it all, it cannot even rely on its new partner Microsoft. Just as Nokia phones based on Windows Phone 7 were starting to appear in volume, Microsoft pre-announced Windows Phone 8, months before the formal launch of the new operating system.
Windows Phone 8 marks the end of Windows Phone operating systems based on the 1990s-developed Windows CE kernel. As a result, applications built for Windows Phone 8 will not run on Windows Phone 7, while existing devices will not be upgradeable to the new operating system.
Nokia’s new Lumia range of smartphones, therefore, is effectively obsolete. And it might be six months – two potentially catastrophic financial quarters – before Windows Phone 8 Lumias start appearing in volume.
The deal that was supposed to rescue Nokia from its “burning platform” (a phrase used by Elop in February 2011 to describe Nokia’s predicament) might yet arrive too late to save the company.
While some of Nokia’s US shareholders have responded in time-honoured fashion to its downturn in fortunes by suing the company, its Finnish shareholders have been more philosophical – even though the lay-offs will devastate a number of communities in Finland.
“You can’t blame one person,” said Ari Rikkilä, a Nokia shareholder who is also CEO of Finnish software company Efecte. “Sometimes, a company has to change quite significantly. When it notices how the market is changing, then often it’s too late,” he said.
However, Rikkilä is critical of Elop's handling of the company - especially his Gerald Ratner-like "burning platform" memo that the company's sharp decline has been attributed to by some.
"It was the wrong statement. As a CEO myself, I'd be very sensitive about releasing such information," he said.
He added: "It's normal for companies to devise a strategy, to execute on that strategy and then - only when it is ready - to announce the transformation."
Elop, though, pre-announced the tie-up with Microsoft in February 2011 before he even had a deal in the bag - tying his own hands in negotiations with his old employer.
The "burning platform" memo that preceded that announcement effectively tarnished the company's products before it had anything to replace them with. That not only damaged its reputation with customers, but also encouraged network operators to either drive a hard bargain with Nokia, or to stock alternatives instead.
"I'm shocked that the board of Nokia let Elop do that," said Silicon Valley veteran Jean-Louis Gassée, a former Apple executive and now a venture capitalist. Gassée described Nokia's board as "terrible" and believes that both Elop and its board of directors ought to be replaced.
In a June 2010 meeting, before Elop was appointed, Gassée had urged Nokia's board first to fire the-then CEO Olli-Pekka Kallasvuo, and then to adopt Android, as the company had already lost the platform battle. While they duly obliged with the first suggestion, they rejected the idea of adopting Android as the company would, they said, no longer be in control of its own destiny.
Gassée attributes the firm's decline to an institutional rot that started a long time before Elop's arrival, as reflected in the proliferation of competing platforms that previous CEOs Jorma Ollila and Kallasvuo had presided over.
However, Gassée questions Elop's qualifications and suitability for the top job. "He has zero experience in terms of what makes a smartphone maker tick. And what is his experience in supply chain management? Zero," claimed Gassée.
An understanding of the supply chain - all the way from the designer's drawing board to the factory, before a device goes on sale - is essential in the mobile phone market, as Apple has demonstrated.
The day after Microsoft's Windows Phone 8 pre-announcement, London's free Metro newspaper carried prominent advertisements for Nokia Lumia phones - at half-price. In some mobile phone shops, Nokia phones are marginalised, if they are stocked at all.
Meanwhile, Android phones remain cheaper and more alluring. Windows Phone 8 will therefore have to be very special to divert people's attention away from Android and Apple's iPhones, especially with the new iPhone 5 expected imminently. ###
- Eric -