Nokia fires boss as it battles to turn around its fortunes

Microsoft's Stephen Elop to be phone group's first non-Finnish chief executive

Nokia ended months of uncertainty by firing its beleaguered chief executive Olli-Pekka Kallasvuo, in a bid to turn the mobile giant around. Mr Kallasvuo leaves the group after three decades – including four years as chief executive – with a severance package worth almost €5.5m (£4.5m).

Nokia's board said Microsoft executive Stephen Elop would take over as president and chief executive of the company in 10 days' time, the first non-Finn to head the company in its 145-year history.

One of the biggest failures in Mr Kallasvuo's reign has been Nokia's inability to compete in the high-end smartphone market, which has left it trailing behind Apple and Google.

Jorman Ollila, chairman of Nokia said the decision to oust Mr Kallasvuo had been a hard one. However, he said: "The time is right to accelerate the company's renewal and to bring in new executive leadership with different skills and strengths in order to drive company success." He added that the former head had handled the situation "gallantly".

Mr Kallasvuo has stepped down from the board with immediate effect and will relinquish his role on 20 September, though he will continue to chair the board of Nokia Siemens Networks. "His dedication and contribution throughout the years has been exceptional," Mr Ollila said.

Nokia's board has been reviewing the group's strategy for almost a year, he said. "In late May we started a chief executive search process. It has been an extensive process with the whole board actively involved."

Ben Wood, an analyst at CCS Insight, said: "This appointment brings to an end the protracted uncertainty over Nokia's leadership. Ending the months of speculation is good news."

Mr Elop, a Canadian whose background is in computer engineering, headed Microsoft's business division. He joined the technology group after also holding senior positions at Juniper Networks, where he was chief operating officer, and president of worldwide filed operations at Adobe Systems. He came to Nokia's attention during recent talks with Microsoft over deepening their co-operation.

Mr Ollila said: "Stephen has the right industry experience and leadership skills to realise the full potential of Nokia. His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company."

Mr Wood said: "He is a complete contrast to Kallasvuo; he is more charismatic – in an era when it is increasingly important to have energising leaders, such as Steve Jobs at Apple, or Eric Schmidt at Google, Kallasvuo struggled." He added that the new appointment could be the spark required to shake up the group. "There are lots of people inside Nokia who know what needs to be done but haven't been given the mandate."

Mr Elop has some mobile phone industry experience, but his background is in software, "which is crucial for Nokia", Mr Wood said. "There is no question about their pedigree in hardware, but their software has been found wanting."

Mr Elop talked of the fundamental shifts in the mobile industry. "My job is to lead this team through this change and take this organisation through a period of disruption."

Nokia's new boss faces a daunting challenge to turn the company around. What turned out to be Mr Kallasvuo's final quarterly results announcement at the end of July showed profits had fallen almost a third between April and June. The previous month the company issued a profit warning, which sent the shares tumbling. The share price itself has declined 75 per cent in just three years. Yesterday's news sent the shares up 4 per cent to €8.

Mr Wood said: "Nokia has all the pieces of the jigsaw but doesn't know what the picture is. Let's hope the new chief executive can see it."

The change at the top comes just days before the mobile company's showpiece event Nokia World in London. Mr Kallasvuo was scheduled to present the keynote, but in a hasty reshuffle Nokia has replaced his speech with one from the company's executive vice-president of markets Niklas Savander.

Talk was expected to focus on the N8, its next-generation smartphone, which will be shipped to the UK next month. Mr Wood said the device "needs to be the foundation of Nokia's recovery".