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Nokia's CEO Shift

Nokia is the world’s top phone maker by volume, but it was woefully unprepared for the smartphone revolution brought by Apple’s iPhone and Google’s Android operating systems.

When the iPhone arrived in summer of 2007, Nokia executives dismissed it as a joke – take a look at what Nokia stock has done since .


That’s why the Finnish phone giant has poached Stephen Elop from Microsoft.

For almost three years, Elop has been running Microsoft’s $19 billion Business Division, its most profitable unit, which includes its Office suite. Before that, he held top executive positions at Juniper, Adobe and Macromedia – all Silicon Valley companies.

Here’s what Elop is up against: Nokia still has the largest volumes in the phone industry, but its revenues and profit margins have declined over the past three years; Nokia earned $10.6 billion on $75.2 billion in revenue in 2007, and that was down to $380 million on $58.8 billion in 2009.


Profits are shifting toward smartphone offerings from folks like Apple, which differentiate themselves based on advanced operating system software and apps. Nokia instead has bet the farm on Symbian, an underpowered smartphone OS that has failed to hold its own against the newcomers.

"By hiring Elop its first North American CEO, Nokia is signaling that it’s serious about this crucial market, and about software." -CNBC, Jon Fortt

Symbian might have high smartphone share, but it’s not adding buzz or economic value. Nothing illustrates that better than Nokia’s failure to gain ground in the North American market, which is all about apps, Internet and software.

By hiring Elop its first North American CEO, Nokia is signaling that it’s serious about this crucial market, and about software. Right off the bat, Elop will have to decide whether to ditch Symbian, and how much to overhaul Nokia’s hidebound structure without running afoul of its European labor sensibilities.

And let’s talk about Microsoft for a moment. With Elop’s departure, the software giant just lost one of its most prominent executives, a guy who pushed hard to get Microsoft Office to embrace cloud computing, one of the folks who could have taken over for Steve Ballmer. It’s crucial that they replace him with someone good.

Questions? Comments? TechCheck@cnbc.com And you can follow Jon Fortt on Twitter @jonfortt