Nokia appoints Rajeev Suri as President and CEO and announces new strategy, program to optimize capital structure, and leadership team
Stock exchange release
April 29, 2014 at 06:00 (CET+1)
Espoo, Finland - Having completed the sale of substantially all of its Devices & Services business to Microsoft on April 25, 2014, Nokia today announced the following:
- The appointment of Rajeev Suri as President and Chief Executive Officer, effective May 1, 2014;
- A vision to be a leader in technologies important in a connected world;
- A strategy to realize that vision by building on Nokia's three strong businesses in networks, location and technologies;
- Plans for a EUR 5 billion program to optimize its capital structure, including the Nokia Board's proposal to the Annual General Meeting 2014 for the dividend and for an authorization for the Board to repurchase shares; and
- A new governance structure and the appointment of a new leadership team, effective May 1, 2014.
New President and CEO
Nokia Board of Directors has appointed Rajeev Suri as President and CEO of Nokia Corporation, effective May 1, 2014. Suri joined Nokia in 1995 and has held a wide range of leadership positions in the company. Since October of 2009, he has served as CEO of NSN, the former joint venture between Nokia and Siemens that is now fully owned by Nokia. During his tenure as CEO, that business went through a radical transformation to become one of the leaders in the telecommunications infrastructure industry.
"As Nokia opens this new chapter, the Nokia Board and I are confident that Rajeev is the right person to lead the company forward," said Risto Siilasmaa, Chairman of the Nokia Board of Directors. "He has a proven ability to create strategic clarity, drive innovation and growth, ensure disciplined execution, and deliver results. We believe that his passion for technology will help ensure that Nokia continues to deliver innovations that have a positive impact on people's lives."
Siilasmaa, who has also been serving as an interim CEO, will return to focusing exclusively on his role as Chairman of Nokia's Board of Directors as of May 1, 2014.
"I am honored to have been asked to take this role, and excited about the possibilities that lie in our future," said Rajeev Suri. "Nokia, with its deep experience in connecting people and its three strong businesses, is well-positioned to tap new opportunities during this time of technological change. I look forward to working with the entire Nokia team as we embark on this exciting journey."
Long-term leadership targeted in three key areas
Nokia believes that over the next 10 years billions of connected devices will converge into intelligent and programmable systems that will have the potential to improve lives in a vast number of areas: time and availability, transportation and resource consumption, learning and work, health and wellness, and many more.
This new world of technology will require 1) connectivity capable of handling massive numbers of devices and exponential increases in data traffic; 2) location services that seamlessly bridge between the real and virtual worlds; and 3) innovation, including in sensing, radio and low power technologies. Nokia's vision is to be a leader over the long term in these three areas.
"The world of technology is on the verge of a change that we believe will be as profound as the creation of the internet" said Rajeev Suri. "With our three strong businesses - Networks, HERE and Technologies - and position as one of the world's largest software companies, we are well placed to meet our goal to be a leader in the technologies for a world where everybody and everything is connected."
"Nokia's strategy is to develop its three businesses in order to realize its vision of being a technology leader in a connected world and, in turn, create long-term shareholder value," said Rajeev Suri. "Our goal is to optimize the company so that each business is best enabled to meet its goals. Where it makes sense to do so, we will pursue shared opportunities between the businesses, but not at the expense of focus and discipline in each."
Nokia will target the creation of long-term shareholder value by focusing on the following three areas:
Through its Networks business (formerly Nokia Solutions and Networks, or NSN), Nokia will invest in the innovative products and services needed by telecoms operators to manage the increase in wireless data traffic which is more than doubling every year. Future investment will focus on further building on our strong position in mobile broadband and related services, and strengthening our leadership position in next-generation network technologies.
Today, the Networks business serves more than 90 of the world's 100 largest operators, is a leader in the large and dynamic mobile broadband market, and is ranked third in estimated global market share in mobile radio and second in telecommunication services. An early leader in virtualization and cloud technologies, Networks conducted trials and pre-commercial live projects with more than 50 customers in 2013.
"Customers of our Networks business can have confidence that we will continue to make the investments necessary to deliver the innovation needed to help them build even stronger businesses," said Rajeev Suri.
Through its HERE business, Nokia will invest to further develop its location cloud to make it the leading source of location intelligence and experiences across many different operating systems, platforms and screens. Given that location is an essential element of a connected world, we will target our investment in three areas: 1) technology for smart, connected cars; 2) cloud-based services for personal mobility and location intelligence, including for the growing segment of wearables and special purpose devices; and 3) location-based analytics for better business decisions.
Today, HERE is the leading global provider of map content, powering four out of five in-car navigation systems. Its location platform is used by leading internet companies such as Amazon, Microsoft and Yahoo. "Our view is that only one other company has location services that come close to the depth and breadth of those from HERE - and HERE has the advantage of being independent from any operating system or single business model," said Rajeev Suri.
Through its Technologies business, Nokia will invest in the further development of its industry-leading innovation portfolio. This will include 1) expanding our successful intellectual property licensing program; 2) helping other companies and organizations benefit from our breakthrough innovations through technology licensing; and 3) exploring new technologies for use in potential future products and services.
The Technologies team includes hundreds of world-class scientists and engineers who have driven more than half of Nokia's recent patent filings and many of whom are recognized as leading experts in fields that are essential for enabling the future connected world. These areas include low-power connected smart multi-sensor systems, distributed sensing, and intelligent interplay between various types of radio technologies.
"Nokia's industry leading intellectual property has the potential to create significant value for our licensees and our shareholders," said Rajeev Suri. "With the strength of our Technologies team and continuing investment in advanced research and development, we can also drive new opportunities for Nokia in both business-to-business and consumer markets."
Nokia's continuing businesses invested more than EUR 2.5 billion in research and development in 2013. We believe that the company has a strong financial position and the capacity to continue to make the investments necessary to remain an innovation leader in the three segments in which it competes.
Planned EUR 5 billion capital structure optimization program
As a result of the closing of the transaction between Nokia and Microsoft, Nokia's financial position and earnings profile have both improved significantly. Furthermore, Nokia's Board of Directors has conducted a thorough analysis of Nokia's potential capital structure requirements. Based on this analysis, the Nokia Board is confident that Nokia has the financial strength and flexibility to sustain the long-term investments necessary to ensure industry leadership in the future.
To improve the efficiency of Nokia's capital structure, the Nokia Board is today announcing plans for a EUR 5 billion capital structure optimization program which focuses on recommencing ordinary dividends, distributing deemed excess capital to shareholders, and reducing interest bearing debt. This comprehensive program consists of the following components:
Recommencement of ordinary dividend payments, with at least EUR 800 million of ordinary dividends in total planned for 2013 and 2014, as follows:
- An ordinary dividend for 2013 of EUR 0.11 per share (approximately EUR 400 million), subject to shareholder approval in 2014; and
- A planned ordinary dividend for 2014 of at least EUR 0.11 per share (at least approximately EUR 400 million), subject to shareholder approval in 2015;
- A special dividend of EUR 0.26 per share, subject to shareholder approval in 2014 (approximately EUR 1 billion);
- A EUR 1.25 billion share repurchase program, subject to the authorization to the Board by the shareholders in 2014; and
- Debt reduction of approximately EUR 2 billion by the end of the second quarter 2016.
"We are committed to effective deployment of capital to drive future value creation," said Timo Ihamuotila, who is currently Nokia's Chief Financial Officer and who has been appointed to serve as the Group Chief Financial Officer as of May 1, 2014. "We believe our planned comprehensive EUR 5 billion capital structure optimization program enables Nokia to make quick and orderly progress towards a more efficient capital structure, and is aligned with the long-term interests of our customers and shareholders. Together with our continued focus on solid business execution, these capital structure enhancements support our longer-term target to return to an investment grade credit rating, which would further affirm our long-term competitive strength and support our strategic objectives."
Ordinary Dividends - at least EUR 800 million in total for 2013 and 2014
As part of the overall capital structure optimization program, Nokia Board of Directors proposes to the Annual General Meeting, scheduled to take place on June 17, 2014 (Annual General Meeting 2014), the recommencement of ordinary dividend payments to shareholders. The Nokia Board proposes to the Annual General Meeting 2014 that a dividend of EUR 0.11 per share be paid with respect to the year 2013, which equals approximately half of Nokia's non-IFRS earnings from continuing operations in 2013. This ordinary dividend for 2013 is expected to be paid on or about July 3, 2014.
Furthermore, the Nokia Board plans to propose an ordinary dividend of at least EUR 0.11 per share with respect to the year 2014 to the Annual General Meeting convening in spring 2015.
Special Dividend and Share Repurchase Program - EUR 2.25 billion in total
The Nokia Board of Directors proposes to the Annual General Meeting 2014 a special dividend of EUR 0.26 per share (approximately EUR 1 billion). The special dividend is expected to be paid on or about July 3, 2014.
The Nokia Board also proposes a share repurchase authorization to facilitate the EUR 1.25 billion of planned share repurchases over two years. The Nokia Board proposes that the Annual General Meeting 2014 authorize the Board to resolve to repurchase a maximum of 370 million Nokia shares, which corresponds to less than 10% of Nokia shares outstanding. The term of the repurchase authorization is for the maximum of 18 months under Finnish regulations, and is expected to be re-proposed by the Nokia Board at the Annual General Meeting 2015. The repurchased shares are expected to be cancelled. The shares may be repurchased in the open market, in privately negotiated transactions, through the use of derivative instruments, or through a tender offer made to all shareholders on equal terms. The share repurchase authorization would be effective until December 17, 2015 and terminate the current authorization granted by the Annual General Meeting on May 7, 2013. The Nokia Board plans to commence the repurchases following the publication of the Company's interim report for the second quarter of 2014.
Debt reduction program - EUR 2 billion in total
In addition, Nokia plans to reduce interest bearing debt by approximately EUR 2 billion by the end of the second quarter 2016. Once complete, the debt reduction is expected to result in annual run rate savings of at least EUR 100 million related to recurring interest costs. Furthermore, lowering our gross debt level is aligned with our target to return to being an investment grade company. Nokia intends to reduce interest bearing debt by utilizing applicable maturity dates, call dates, or other terms allowing early redemption or retirement of debt or by making offers to repurchase debt in the open market.
Nokia ended the first quarter 2014 with a strong balance sheet and solid cash position with gross cash of EUR 6.9 billion and net cash of EUR 2.1 billion compared to EUR 9.0 billion and EUR 2.3 billion, respectively, at the end of the fourth quarter 2013. The sequential decline in Nokia's gross cash was primarily due to repayment of certain debt facilities totalling approximately EUR 1.8 billion during the first quarter 2014. If the transaction to sell Microsoft substantially all of our Devices & Services business would have closed before the end of the first quarter 2014, Nokia would have ended the quarter with gross cash of approximately EUR 10.5 billion and net cash of approximately EUR 7.1 billion.
Clear operational governance and structure; strong leadership team
Nokia will adopt a simple and clear operational governance model, designed to facilitate innovation and growth. As of May 1, 2014, all three businesses will report to the Nokia President and CEO, who has full accountability for the performance of the company. HERE and Technologies each will have a single leader reporting to the President and CEO. To ensure efficiency and simplicity, the Nokia President and CEO will assume direct control of the Networks business and key Networks leaders will report to him.
The primary operative decision-making body for the company will be the Nokia Group Leadership Team, which will be responsible for Group level matters, including the company strategy and overall business portfolio. Effective May 1 2014, the Nokia Group Leadership Team will replace the current Nokia Leadership Team, and the President and CEO will chair the Group Leadership Team, which will consist of the following members:
Rajeev Suri as President and CEO of Nokia.
Timo Ihamuotila as Executive Vice President and Group Chief Financial Officer.
Michael Halbherr as CEO of HERE.
Henry Tirri as Executive Vice President, and acting Head of Technologies.
Samih Elhage as Executive Vice President and Chief Financial and Operating Officer of Networks.
The current Nokia Leadership Team will be disbanded. On April 25, 2014, Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber stepped down from the Nokia Leadership Team and transferred to Microsoft. In addition, Louise Pentland, Juha Äkräs and Kai Öistämö will step down from the Nokia Leadership Team effective May 1, 2014 and leave the company to pursue opportunities outside of Nokia. Pentland, Äkräs and Öistämö will continue to serve Nokia in an advisory role during a transition period. Of the current Nokia Leadership Team members, Timo Ihamuotila, Michael Halbherr and Henry Tirri will continue as members of the Group Leadership Team, as mentioned above.
With these leaders leaving the company, Nokia announces the appointment of Hans-Jürgen Bill as Executive Vice President of Human Resources, Barry French as Executive Vice President of Marketing and Corporate Affairs, and Maria Varsellona as Executive Vice President and Chief Legal Officer, effective May 1, 2014.
"Nokia has a strong and proven team of leaders," said Rajeev Suri. "We intend to move fast to further refine our execution plan, build the right company culture, and institute the necessary operational governance and performance management systems."
Effective May 1, the interim governance structure of Nokia will cease to exist. Risto Siilasmaa, who has been serving as an interim CEO since September 3, 2013, will focus exclusively on his role as the Chairman of the Nokia Board of Directors. In addition, Timo Ihamuotila will step down from the interim President position.
Consistent with the planned structural changes announced today, Networks (formerly Nokia Solutions and Networks, or NSN) and Technologies will operate under the Nokia brand. HERE will retain its distinct identity within the Nokia family and, where appropriate, will be identified as "A Nokia Company". The NSN name will no longer be used after a short phase-out period. For financial reporting purposes, Nokia will have four reportable segments: Mobile Broadband and Global Services within Networks, HERE, and Technologies.
More information on the Nokia Leaders is available at: http://company.nokia.com.
Nokia is to hold a press conference today at its Karaportti campus in Espoo, Finland. The event is open to representatives of the media.
Time: 10:30-11:30 (CET+1). Registration opens at 10:00.
Place: Karakaari 7, Espoo 02610. http://her.is/UWyd6
For others wishing to view the press conference, we will be live-streaming the event at the following link: http://sites.media-server.com/mmc-custom-portals/nokia/2014-04-29_press-conference/index.php?p=wnkrw6rc
Analyst conference call
Nokia is to hold a conference call for equity analysts today at 15:00 (CET+1). A webcast of the conference call will be available at http://company.nokia.com/financials. Media representatives wishing to listen in may call +1 706 634 5012, conference ID 30453654.
FORWARD LOOKING STATEMENTS
It should be noted that Nokia and its business are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements, including, without limitation, those regarding: A) expectations, plans or benefits related to Nokia's new strategy; B) expectations, plans or benefits related to future performance of Nokia's continuing businesses Networks, HERE and Technologies; C) expectations, plans or benefits related to changes in leadership and operational structure; D) expectations regarding market developments, general economic conditions and structural changes; E) expectations and targets regarding performance, including those related to market share, prices, net sales and margins; F) the timing of the deliveries of our products and services; G) expectations and targets regarding our financial performance, cost savings and competitiveness as well as results of operations; H) expectations and targets regarding collaboration and partnering arrangements; I) the outcome of pending and threatened litigation, disputes, regulatory proceedings or investigations by authorities; J) expectations regarding restructurings, investments, uses of proceeds from transactions, acquisitions and divestments and our ability to achieve the financial and operational targets set in connection with any such restructurings, investments, divestments and acquisitions, including any expectations, plans or benefits related to or caused by the transaction announced on September 3, 2013 where Nokia sold substantially all of Nokia's Devices & Services business to Microsoft on April 25, 2014 ("Sale of the D&S Business"); K) statements preceded by or including "believe," "expect," "anticipate," "foresee," "sees," "target," "estimate," "designed," "aim", "plans," "intends," "focus", "continue", "project", "should", "will" or similar expressions. These statements are based on management's best assumptions and beliefs in light of the information currently available to it. Because they involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors, including risks and uncertainties that could cause these differences include, but are not limited to: 1) our ability to execute our new strategy successfully and in a timely manner, and our ability to successfully adjust our operations; 2) our ability to sustain or improve the operational and financial performance of our continuing businesses and correctly identify business opportunities or successfully pursue new business opportunities; 3) our ability to execute Networks' strategy and effectively, profitably and timely adapt its business and operations to the increasingly diverse needs of its customers and technological developments; 4) our ability within our Networks business to effectively and profitably invest in and timely introduce new competitive high-quality products, services, upgrades and technologies; 5) our ability to invent new relevant technologies, products and services, to develop and maintain our intellectual property portfolio and to maintain the existing sources of intellectual property related revenue and establish new such sources; 6) our ability to protect numerous patented standardized or proprietary technologies from third-party infringement or actions to invalidate the intellectual property rights of these technologies; 7) our ability within our HERE business to maintain current sources of revenue, historically derived mainly from the automotive industry, create new sources of revenue, establish a successful location-based platform and extend our location-based services across devices and operating systems; 8) effects of impairments or charges to carrying values of assets, including goodwill, or liabilities; 9) our dependence on the development of the mobile and communications industry in numerous diverse markets, as well as on general economic conditions globally and regionally; 10) our Networks business' dependence on a limited number of customers and large, multi-year contracts; 11) our ability to retain, motivate, develop and recruit appropriately skilled employees; 12) the potential complex tax issues and obligations we may face, including the obligation to pay additional taxes in various jurisdictions and our actual or anticipated performance, among other factors, could result in allowances related to deferred tax assets; 13) our ability to manage our manufacturing, service creation and delivery, and logistics efficiently and without interruption, especially if the limited number of suppliers we depend on fail to deliver sufficient quantities of fully functional products and components or deliver timely services; 14) potential exposure to contingent liabilities due to the Sale of the D&S Business and possibility that the agreements we have entered into with Microsoft may have terms that prove to be unfavorable to us; 15) any inefficiency, malfunction or disruption of a system or network that our operations rely on or any impact of a possible cybersecurity breach; 16) our ability to reach targeted results or improvements by managing and improving our financial performance, cost savings and competitiveness; 17) management of Networks' customer financing exposure; 18) the performance of the parties we partner and collaborate with, and our ability to achieve successful collaboration or partnering arrangements; 19) our ability to protect the technologies, which we develop, license, use or intend to use from claims that we have infringed third parties' intellectual property rights, as well as, impact of possible licensing costs, restriction on our usage of certain technologies, and litigation related to intellectual property rights; 20) the impact of regulatory, political or other developments on our operations and sales in those various countries or regions where we do business; 21) exchange rate fluctuations, particularly between the euro, which is our reporting currency, and the US dollar, the Japanese yen and the Chinese yuan, as well as certain other currencies; 22) our ability to successfully implement planned transactions, such as acquisitions, divestments, mergers or joint ventures, manage unexpected liabilities related thereto and achieve the targeted benefits; 23) the impact of unfavorable outcome of litigation, contract related disputes or allegations of health hazards associated with our business, as well as the risk factors specified in the most recent Nokia's annual report on Form 20-F in under Item 3D. "Risk Factors". Other unknown or unpredictable factors or underlying assumptions subsequently proven to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Nokia does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
Nokia invests in technologies important in a world where billions of devices are connected. We are focused on three businesses: network infrastructure software, hardware and services, which we offer through Networks; location intelligence, which we provide through HERE; and advanced technology development and licensing, which we pursue through Technologies. Each of these businesses is a leader in its respective field. http://company.nokia.com
Tel. +358 (0) 10 448 4900