Nokia poach Microsoft staff with N930Billion

The world’s largest mobile phone manufacturer Nokia has decided to pay its new President and CEO Stephen Elop a total of EUR 4.5 million (N9.3billion) in two installments as a compensation for terminating his contract with the American software house Microsoft and becoming Nokia’s President and CEO.

Elop joined Nokia at the end of September 2010 and in October, Nokia paid Elop EUR 2.3 million to offset the income he lost after handing in his notice of resignation at Microsoft. In October 2011, Nokia will also pay him another USD 3.0 million, which is equal to EUR 2.2 million according to the current exchange rate.

In practice, the payment is a compensation for signing an employment contract. In 2010, Nokia paid Elop a total of EUR 3.8 million, including salaries and remunerations. In mid-February of this year, Elop announced that he had sold his entire holding in Microsoft stock and purchased 150,000 Nokia shares, currently worth around EUR 1 million.    

On the Finnish scale, Elop’s fixed annual salary is at the same level as the basic salary paid last year to Jouko Karvinen, the President and CEO of the forest company Stora Enso, and to Jussi Pesonen, the President and CEO of the forest products company UPM.

When it comes to Nordic companies, the fixed annual salary paid in 2010 to Hans Vestberg, the President and CEO of the network equipment provider Ericsson, was EUR 1.3 million.

The fixed remuneration received by Elop is on the same plane as the basic salary of many presidents and CEOs in the US telecommunications companies. However, in the United States the salaries of corporate executives easily tend to rise to tens of millions of dollars, thanks to hefty share-based incentive and option schemes.

The 47-year-old Canadian also received €509,744 to reimburse fees he was obliged to repay Microsoft and €312,203 to cover legal expenses. Mr Elop became the first non-Finnish head of Nokia last September after the ousting of Olli-Pekka Kallasvuo amid shareholder unrest over the company’s plummeting stock price and sinking market share. Mr Kallasvuo received a severance payment of €4.62m but forfeited nearly €14m in pension payments, stock and options because of his departure.

The disclosures came in Nokia’s annual 20-F filing with the US Securities and Exchange Commission, which also included a stark assessment of the company’s efforts to claw back lost ground from Apple and Google in the smartphone market. In a radical strategic shake-up, Mr Elop last month announced Nokia planned to forge an alliance with Microsoft that would see the US group’s Windows Phone software become the main operating system for Nokia smartphones.

Mr Elop said at the time that Nokia and Microsoft would create a “three-horse race” in the smartphone market by creating a powerful competitor to Apple’s iOS operating system and Google’s Android platform.

Nokia’s filing admits that the strategy is fraught with risks. “The Windows Phone is a very recent, largely unproven addition to the market, with currently very low adoption and consumer awareness relative to the Android and Apple platforms,” said Nokia.

It added that its partnership with Microsoft “may not succeed in developing it into a sufficiently broad competitive smartphone platform”. The document acknowledged many of the criticisms leveled against the alliance by analysts and investors, including the risk that Nokia’s transition to the Windows platform “may prove to be too long to compete effectively in the smartphone market longer term given the ongoing developments of other competing platforms.”

Moreover, Nokia said the Microsoft alliance “may erode our brand identity in markets where we are strong and may not enhance [it] in markets where we are weak.”