Nokia Shareholders Threaten Lawsuit Over Windows Phone Switch

Nokia plans to “defend itself” against a class-action complaint filed on 3 May by several disgruntled shareholders.

The Finnish smartphone maker, which recently watched its 14-year reign as the global leader of mobile phone shipments end, said it is “reviewing the allegations contained in the complaint and believes that they are without merit”.

Investors ‘misled’

The lawsuit was filed in a US District Court for the Southern District of New York by Robert Chmielinski, according to Barron’s, and claims that Nokia misled investors.

“Defendants told investors that Nokia’s conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not,” according to the report.

The complaint follows Nokia’s Annual General Meeting (AGM), held on 3 May in the company’s hometown of Espoo, Finland. During the gathering, Nokia chief executive Stephen Elop and outgoing chairman Jorma Ollila likewise expressed disappointment in Nokia’s first-quarter performance.

“Like you, we were disappointed with our financial results over the last year and most notably during the first quarter,” Elop said when he took the stage. “It reflects both the transition that Nokia is currently undergoing as well as the increase in competitive pressures within our industry.”

Ollila was chief executive of Nokia from 1992 through 2006, years that included its arrival at the top of the market in 1998, and leaves on a low note. A recent survey by broadcaster YLE found 40 percent of analysts rate Ollila’s 13-year performance as “poor” or “unacceptable”.

Ollila has also defended his decision to take on a chairman position at Shell Oil while serving at Nokia – a time some have pointed to as a downward turning point for Nokia – saying that it’s common for two such positions to be held at once. By one estimate, the two positions paid Ollila a joint salary of approximately $1.6 million (£1m).

‘Painful’ transformation

“The transformation period is truly painful,” Ollila told shareholders. “We cannot be satisfied with our economic performance or that so many Nokia workers have had to leave the company because of the changes.”

Heading into the meeting, Ollila told reporters that Nokia was working on several new devices, including tablets – a form factor noticeably missing from the Nokia arsenal as it works to defend its slipping market share against Apple and vendors supporting Google’s Android operating system – and “hybrid” smartphone-tablet devices.

Formally, however, the company has made no such announcements, and it quickly downplayed Ollila’s comments as “misconstrued”. Nokia spokesperson Keith Nowak additionally told eWEEK by email, “As we have been saying, we are watching the space with interest, but have made no announcements regarding a tablet product.”

During its first quarter, Nokia experienced a 29 percent drop in net sales and announced sales of more than 2 million Lumia handsets – its first smartphone lineup to run Microsoft’s Windows Phone operating system. While at least one analyst has pointed out that it took Google five quarters to sell as many Android-running phones, following the platform’s introduction, the number also represents the intense competition and challenges that Nokia faces in the mobile market. Apple, during the same period, sold 35.1 million iPhones.

‘Intense focus’

Elop, during Nokia’s earnings call, said the company is “intensely focused” on these challenges and working to accelerate the pace at which it is responding.

During the AGM, Nokia said in a 4 May announcement on the event, 11 members of the board of directors were elected, including Stephen Elop. Risto Siilasmaa was elected chairman of the board, replacing Ollila, and Dame Marjorie Scardino as vice chairman of the board.

For their efforts, Siilasmaa will receive an annual salary of 440,000 euros (£355,000), Scardino 150,000 euros and each member of the board will receive 130,000 euros – except for Elop, who “will not receive any remuneration pursuant to his membership in the board of directors”.

To help Nokia, the AGM also authorised the board to repurchase a maximum of 360 million Nokia shares.

“The shares may be repurchased in order to develop the capital structure of the company, finance or carry out acquisitions or other arrangements, settle the company’s equity-based incentive plans, be transferred for other purposes, or be cancelled,” it said in the statement, noting the authorisation is effective until 30 June, 2013, and no plans are in place for a repurchase this year.

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