Nokia secrets show long-term staff bleed, new price drops
updated 10:40 am EDT, Tue July 5, 2011
Nokia reveals show exec rot and price drops
Two leaks Tuesday morning have revealed both long-term and newly developed problems at Nokia. An investigation by Finnish paper Helsingen Sanomat has revealed that Nokia has had a problem with executive defections as far back as 14 years ago. Product developer Jyrki Hallikainen had persuaded 44 other staff to join him at startup Microcell in 1997 and ended up convincing the company to pay $4.5 million per person, or about $200 million, just to keep all but Hallikainen in the company.
The move has not only shown Nokia having trouble keeping senior staff but trying to codify its increasing suspicion into law. Nokia reportedly threatened the Finnish government with leaving the country unless it got a special set of laws that let it spy on employees' conversations to try and prevent anyone from leaving.
Although Nokia ended up leading for roughly the next decade after the Hallikainen split, the attempts have been largely ineffective. Nokia began losing market share almost as soon as the iPhone arrived in mid-2007 and saw the trend worsen when Android came over a year later, ultimately leading to Android passing Symbian for the top spot in market share. Attempts to ignore the threat ultimately led to an ouster of CEO Olli-Pekka Kallasvuo, the defection of its smartphone head Anssi Vanjoki, and a plan by replacement chief Stephen Elop to switch over to Windows Phone and effectively kill Nokia's preferred OS, Symbian.
Proof the company was still facing problems may have come through new tips from the industry. Nokia's raw pricing for its flagship Symbian phones, the N8, C7, and E6, has reportedly been slashed by about 15 percent. While Nokia has cut prices in the past, a carrier source talking to Reuters claimed that the sheer scale, across Nokia's entire line, hadn't been seen in a "very, very long time."
Nokia rejected the idea when confronted and said it was only "business as usual."
The price cuts are likely to help prop up sales as some customers hold off for the first Nokia Windows Phones, which could come as soon as the end of the year. Original comments had implied the platform might not arrive until 2012, but Nokia has been eager to accelerate the pace after seeing its market share disappear faster than originally thought. It's now expected to post losses for at least the spring and summer, even with far-reaching job cuts.
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The HS article
$200m was the amount Hallikainen asked from Nokia to not take the people with him. Nokia didn't pay but the situation was quite serious, got major attention within the company and they did a number of moves to keep the folks from not leaving, or luring them back to Nokia. There was costs (salaries, legal, medical, ...) involved (obviously) but the "coup" failed as such, at the end Hallikainen was alone to build Microcell. The spying e-mail incident happened several years later when Microcell started hiring people from Nokia (although "Lex Nokia" became effective, Nokia has never used it).
These were highly skilled engineers who were getting bored with the growing Nokia that turned into a big, bureaucratic, bean-counting company. A very typical problem. If you look at most big IT/ITC companies, plenty of skilled people have left, established a startup company, and later the former big company has acquired the startup.
The legal documents about the case are public now, 8 years later. Nokia sued Hallikainen for various things, lost in the court, and made an agreement with him before the results from the higher court.