Nokia Shakes Up Management, Organization

Nokia has taken several steps in its ongoing
reorganization of its divisions and top management.

Nokia is putting renewed emphasis on its enterprise and multimedia
divisions, which it expects will generate growth over the next few years.

“We see this as a positive move – increasing the visibility and focus on
areas of new business opportunity,” said Keith Westhead, analyst at Deutsche
Bank, in a research note issued Friday.

“the new structure consists of four business groups, corporate-wide
sales, marketing, logistics, manufacturing and technology units, as well as
a corporate strategy, development and research unit,” Nokia said. The corporate reorganization, which began back in the spring of 2002, has resulted nine business units streamlined down to four groups: Mobile Phones, Multimedia, Networks and Enterprise Solutions.

Nokia is the world market leader for mobile phone handsets, with about 36 percent
market share, according to Gartner Dataquest. Last year, Nokia claimed a 38 percent market share, so its rivals are picking up some share, putting additional
pressure on its current top management.

As part of the management shakeup, Nokia said it named Rick Simonson its new
chief financial officer, which has prompted some to speculate the move may
be a step towards grooming a potential successor to the company’s current
CEO Jorma Ollila, who is under contract through the spring of 2006. Simonson
is the first North American to join the company’s Finnish senior management,
according to Deutsche Bank.

Simonson was named the company’s new financial officer replacing Olli-Pekka
Kallasvuo, who will now be in charge of the company’s Mobile Phones
division.

As part of the reorganization, the Mobile Phones unit has been subdivided,
making the Multimedia division responsible for more advanced phones and it
for more entry-level phones.

New camera-equipped phones like Nokia’s 3650 model are part of the
Multimedia division. The division is also developing new combination phone
and personal computer “communicator” class of devices.

Other management changes in the Nokia structure, include naming of the
current Mobile Phones head Matti Alahuhta to become the company’s executive
vice president and chief strategy officer. Meanwhile, Anssi Vanjoki will
lead the Multimedia division, some say, his appointment may be a sign that
he is being groomed for a top management position.

On September 10, UBS wireless analyst Jeffrey Schlesinger downgraded Nokia
shares, shifting his rating to Neutral 2.

“Nokia has recovered from post 2Q03 results lows, but current excess return
potential to our EUR 16 price target is less than 15 percent hence our
downgrade. We believe that until sustainable top-line growth becomes more
visible, the stock will continue to trade in the EUR 12-16 range,” said
Schlesinger.

Schlesinger goes onto say “Nokia and the industry are in the midst of a
transition from the legacy mobile voice cycle to new applications based on
extending mobility to other forms of communication and personal
entertainment.”

Separately, Nokia said is out with its new 7600 model, which will “support 2G (second generation) GSM (Global System for Mobile Communications)
and GPRS (General Packet Radio Service) technologies operating in the 900MHz
and 1,800MHz frequency bands, as well as the new 3G (third generation)
mobile broadband networks based on WCDMA (Wideband Code Division Multiplex
Access) technology.”

Customers can take pictures with a built-in camera and view them on an
illuminated display with over 65,000 colors. They can send both still
pictures and video clips via MMS (Multimedia Messaging Service) at speeds up
to 384K bps (bits per second), Nokia said.

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