Nokia restructuring from strength for mobile internet

Will recombine handset activities

Three years after its last major reorganization, Nokia has announced another one, as new CEO Olli-Pekka Kallasvuo seeks to stamp his mark further on the firm and accelerate the push towards being a mobile internet company, his stated objective.

This time, Nokia is to recombine all its handset activities into one unit, called Devices, having previously split them into three (Mobile Phones or basic handsets, Multimedia and Enterprise) at the start of 2004. In addition, there will also be two other business units - Software and Services, which will spearhead the mobile internet push and is poised to stride out on the acquisitions trail; and Markets, which will house all sales, marketing, logistics and manufacturing operations. In a bid to streamline its world-class supply chain and simplify financial reporting, Nokia will integrate all three divisions, and has appointed Mary McDowell, formerly head of the Enterprise unit, as the overall chief development officer. Financially, it will report just two operations - the three new units combined under the label Devices and Services, plus the Nokia Siemens infrastructure joint venture. Some analysts complain that this will reduce Nokia's level of visibility.

The reorganization highlights several key elements of Kallasvuo's strategy, notably the shift to software architectures and mobile internet models, the continuing quest to set efficiency benchmarks, and the need to chase emerging markets without sacrificing too much margin. This last task relies on driving the characteristics of the high-end E-Series enterprise and N-Series multimedia internet handsets rapidly into mid-range models that can then be targeted at volume markets and at the more affluent sectors of emerging economies - generating aspirational spending and eroding margin more gradually than chasing the ultra-low cost sector too aggressively.

Kallasvuo's evolving strategy differentiates from that of his predecessor Jorma Olilla - contrary to some analysts' fears that, as a Nokia veteran, the new CEO would not be sufficiently radical in his thinking to break away from Olilla's powerful legacy when required. In fact, Kallasvuo has taken the seeds of mobile internet thinking planted under Olilla and has explicitly made it the centerpiece of his growth strategy, while seeking to build and improve further on Nokia's existing advantages over its rivals in terms of supply-chain efficiency, purchasing weight and strong process control - as much elements of its success as cool handset designs.

A longer version of this report can be found in our sister service Wireless Watch this week, email me if you would like to see a copy.

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