Nokia appoints new CEO Pekka Lundmark to replace Rajeev Suri from September

Nokia Chief Executive Rajeev Suri will step down in September and be replaced by Pekka Lundmark, who used to work for the Finnish company and is the current CEO of energy group Fortum, Nokia said on Monday.

Pekka Lundmark, incoming chief executive officer Nokia, left, and Rajeev Suri, outgoing chief executive officer Nokia, sit during a news conference at the Nokia Executive Experience Center in Espoo, Finland, on Monday, March 2, 2020. Lundmark, the CEO of Fortum, will take over from Suri at the start of September. Photographer: Roni Rekomaa/Bloomberg (Bloomberg)

Nokia Chief Executive Rajeev Suri will step down in September and be replaced by Pekka Lundmark, who used to work for the Finnish company and is the current CEO of energy group Fortum, Nokia said on Monday.

Suri has been in the role for six years and was previously head of Nokia Siemens Networks.

The Finnish company has been struggling to regain investors' confidence after it issued a surprise profit warning in October that slashed off a third of its value and forced it to admit to some delays in its 5G development.

Nokia faces intense competition from Sweden's Ericsson and China's Huawei in the race to deliver 5G telecoms networks to operators around the world.

While Huawei has suffered from U.S. authorities' decision last May to blacklist the company on security grounds, Nokia has struggled to capitalise on those restrictions.

Lundmark, CEO at Fortum since 2015, held executive positions at Nokia between 1990 and 2000, including vice president of strategy and business development at Nokia Networks. By 1998 Nokia had grown into the world's largest mobile phone manufacturer, a position it maintained for more than a decade.

His appointment will reunite him at the top of the company with another key executive from that period, Sari Baldauf, who headed Nokia's networks unit - now the group's main business - between 1998 and 2005.

Nokia said in December Baldauf would replace its chairman Risto Siilasmaa.

The group's shares were up 3% in early trade, taking its dive over the past 12 months to 33%.

"The fact that he headed strategy at Nokia Networks means he has an understanding of the telecom equipment market, albeit from a long time ago," analysts at JP Morgan said in a note.

"That along with his CEO responsibilities at a couple of companies gives him the appropriate background to be CEO of Nokia. We also understand that Rajeev will stay for transition until September which is a positive," they said.

Siilasmaa told a news conference on Monday Nokia has no plans to assess strategic options for the company.

Need for direction

Lundmark led Fortum to embark on a bold attempt to gain control of its German rival Uniper, resulting in a power deadlock between the companies that has yet to be resolved.

Before his time at Fortum, Lundmark led Finnish cranemaker Konecranes for 10 years until 2015.

"He has a record of leadership and shareholder value creation at large business-to-business companies; deep experience in telecommunications networks, industrial digitization, and key markets such as the United States and China," Nokia's Siilasmaa said in a statement.

Siilasmaa also pointed to a focus "on strategic clarity, operational excellence and strong financial performance".

Nokia halted dividend payouts after the October profit warning.

"We view the change of CEO positively due to the fact that in its current situation Nokia needs a greater redirection which embarks from changing the management," said analyst Mikael Rautanen of Inderes.

"At the same time, the news strengthens our earlier assessment that the company has more than just temporary problems," he added.

One of Nokia's main headaches has had to do with delays and additional investments in its 5G system-on-chip (SoC) development, which allows a single chip to carry an entire computer system and enables Nokia to produce its network technology more cheaply.

Nokia shares rose last week after Bloomberg News reported that the Finnish telecom network equipment maker was considering asset sales and mergers.

However, a source close to the company told Reuters there was no truth to the report. Nokia declined to comment at the time.