This is a painful moment for Stephen Elop, the newly appointed CEO of Nokia Corp. (NYSE: NOK). The man is under withering attack from a battalion of foes who have taken him to task for the decision to replace the company's Symbian operating system with Windows OS. But the controversy and uncertainty dredged up by his action are turning out to be even more painful for Nokia investors, who have seen billions wiped off their holdings in the Espoo, Finland-based company over the last few days.
Today, at the World Mobile Congress conference in Barcelona, Spain, Elop was taken to task by investors and analysts. Here are his justifications for the move:
First, Elop says he is not a "Trojan horse." Yes, he was recruited from Microsoft Corp. (Nasdaq: MSFT) five months ago, but this doesn't mean his mission was to help his former employer establish a more concrete presence in the mobile equipment OS market. Nokia, according to Elop, will be receiving billions from Microsoft over the next few years to fund the development and expansion of the Windows OS.
To reassure Nokia investors, Elop said he will be selling all of his Microsoft shares soon -- he has already sold some, but had to stop for regulatory reasons because the divestment was having a "material effect on both companies." Second, he plans to buy Nokia shares and add to his portfolio of holdings in the company as soon as possible, just to show his conviction the changes being implemented are in the best interests of the mobile equipment vendor.
Furthermore, Nokia did consider adopting Google's Android rather than Windows OS, but Elop chose the Microsoft offering because he believed it was in the best interests of the industry. If Nokia had picked Android, the mobile OS market would have turned into a two-horse race between Google (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL), he said. Selecting Windows OS would create competition and offer OEMs, developers, and consumers a wider variety of offerings, Elop insisted.
Finally, by adopting Windows, Nokia will save on the development cost it is currently pouring into Symbian. This is crucial for Nokia as it is trying to cut down on its R&D and other product development costs. The company will be working on further reducing its total costs over the next couple of years and can use the advantages offered by the Microsoft deal to gain leverage in its operations.
Those were Elop's reasons. I already expressed my take on this in an earlier blog. (See: Nok-Win a No-Win Combination.) However, it bears repeating here that the news that Nokia will be receiving "billions" from Microsoft to facilitate the development and advancement of Windows OS only confirms the perception that other OEMs will gravitate towards Android. Why, for instance, should Samsung Electronics Co. Ltd. (Korea: SEC) continue to support Windows OS when funds for its development are being directed to a competitor? Or, does Microsoft also intend to give Samsung and other mobile OEMs "billions" for Windows OS development and customization?
Furthermore, why has Elop, on behalf of Nokia, taken on the task of ensuring the mobile OS market does not morph into a duopoly landscape where Android and Apple iOS are the only players? The argument is ridiculous, in my opinion. Prior to his decision, the market was competitive enough. Symbian had a greater market share than Windows OS. So, the logic of effectively killing off Symbian to adopt a competing product with a lower market share is highly defective. Certainly, Symbian faced an uncertain future, but so did Windows OS, until Nokia adopted it.
And I don't buy the argument that what clinched the deal for Nokia was the chance to lower development costs associated with Symbian. Adopting Android would have offered the company the same deal, but without some of the murky controversy. Additional information gleaned from press reports indicates that Microsoft will not be giving Nokia cash; rather, it would be in the form of "discounted software licenses, marketing cooperation and other non-cash benefits," according to the UK's Telegraph. (See Nokia chief claims Microsoft deal is worth "billions").
Elop's move has only thrown the Nokia community of developers, partners, and investors into further uncertainty. On Monday, February 14, the market demonstrated its further disapproval of the company's direction by further pounding its stocks, following a spate of downgrades by investment analysts. Shares fell about 4 percent, shaving billions off Nokia's market valuation.
Here's the bottom line. Elop has three years to make this work. Nokia shareholders and workers won't give him a day more, and if he fails to deliver, he will be eased out. That would be a shame because it would only further setback the company, when what it needs most is vision and forceful direction. Nokia's future is murky; for Elop, there's always Microsoft.