Nokia seeks to replace CEO in bid to revive falling sales

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Nokia is looking for a new chief executive, as one of the world’s biggest telecoms equipment makers struggles with stagnating sales and a depressed share price.

The Finnish group has approached candidates about replacing Pekka Lundmark as chief executive, according to people familiar with the situation. The search is ongoing and at least one headhunter has been appointed to run the process, they added.

The group was one of the great European technology success stories when it became the world’s leading manufacturer of mobile phones in the 1990s and 2000s. But it has struggled since selling that business to Microsoft in 2013 and reinventing itself as a maker of network gear for the telecoms industry.

The move to replace Lundmark, who has been in charge since 2020, comes after he steadied Nokia when it was outpaced by rivals such as China’s Huawei and Sweden’s Ericsson in the early years of the shift to 5G networks. He cut costs and restructured its businesses.

But shareholders have become frustrated with his inability to increase revenues, which are lower now than they were in 2016 after its €15.6bn takeover of Alcatel-Lucent, even as Huawei has been locked out of some western markets following US-led security concerns.

“The current CEO has not got to grips with the growth problem. The top line has not increased since the Alcatel-Lucent takeover,” said a shareholder.

Nokia is also looking for a new chair as Sari Baldauf, a close ally of Lundmark, will turn 70 next year, according to several people. Outsiders have been approached and the new chair is not expected to come from the current board, they added.

Nokia said in a statement: “The Board fully supports President and CEO Pekka Lundmark and is not undergoing a process to replace him.”

“It is a core responsibility for every Board to systematically and continuously assess and discuss the leadership team’s long-term succession plan through a comprehensive approach that covers internal and external candidates. This is the same process for our Chair and Board of Directors. For this work we also use the help of professional advisors. Our CEO and Chair are fully aware and involved in this process.”

The Finnish group has struggled to adapt to sluggish spending by telecoms operators after the initial jump in business from the move to 5G networks ended. Lundmark announced up to 14,000 job cuts last October — equivalent to 16 per cent of the workforce — as Nokia tried to cut costs.

Just two months later, rival Ericsson secured a high-profile contract with US telecoms company AT&T that could be worth up to $14bn.

Nokia in July reported an 18 per cent fall in sales and 32 per cent drop in operating profit in the second quarter on a comparable basis with a year earlier. Lundmark at the time said its financial performance “continued to be impacted by the ongoing market weakness” but that Nokia expected a “significant acceleration” in sales growth in the second half of the year.

Lundmark is a Nokia veteran. He started at the group in 1990 as an account manager during the period when the Finnish company became the world’s largest maker of mobile phones. He left in 2000, as Nokia’s market capitalisation was close to its all-time peak of about €300bn.

He then spent almost two decades as chief executive for Finnish companies such as utility Fortum and Konecranes.

Since returning to Nokia as chief executive in August 2020, the company’s share price has declined by 7 per cent, giving it a market capitalisation of €21.2bn on Thursday.