What happens when you destroy more than $15 billion in shareholder value in less than three years? Some CEOs might be removed or at least lose their bonus. Not at Nokia.
Stephen Elop sells the handset division (with some patents) that was valued at $40 billion in early 2011 (he was hired in September 2010) for a mere $7.2 billion to Microsoft and a couple of weeks later receives a $25 MILLION bonus, which we are told is “part of the contractual arrangement” for the sale. Interestingly, Microsoft will be paying 70% of that bonus while Nokia picks up the remainder.
Nokia’s share price has surged more than 60% since the deal was announced in early September, giving the firm a market cap of $24.6 billion.
In the 2-½ years since Elop delivered his infamous “burning platform” speech and soon after aligning Nokia’s future with that of Windows Phone, the OS has a market share of 3.9% (the No 3 spot after recently surpassing BlackBerry) – up a mere 1.2 percentage points. IDC predicts it will have a market share of 10.2% in 2017. I wouldn’t bet on it. Both IDC and Gartner optimistically projected in 2011 that WP would have a 20% market share in 2015. Yet a year after Elop took the reins on the world’s largest maker of handsets, Windows Phone’s market share dropped from 2.7% to just 1.5% in Q3 2011.
For some historical perspective, six months after the launch of the first iPhone, Nokia’s market cap hit $131 billion (its highest since it peaked at a staggering $230 billion in 2000) – and as we all know now, that was the beginning of the end. There is little doubt Elop bet Nokia’s future on the wrong horse. The question is why didn’t the board revisit that decision in light of the OS’s stagnation?
See related story by my colleague Tony Poulos on “Was the sale planned since Elop moved from Microsoft to take over at Nokia?