Will Stephen Elop Convince Nokia to Quit Finland?

Despite being the world’s largest handset maker, Nokia doesn’t get talked about much. All the buzz goes to rivals like Apple and Google’s Android, with gloom and doom. This week seems to be changing all that, though: the carousel of rumors about the Finnish company is twirling so fast that it seems about to take off.

The reason for the frenzy? Nearly six months after taking over, new chief executive Stephen Elop is set to make a significant announcement on Friday. And considering his “burning platform” memo, those changes will be truly sweeping.

The news has sparked a series of reports and insightful analyses. First the Wall Street Journal suggested that Elop (who was previously with Microsoft) is preparing to cull senior executives; then there were suggestions that it would be dumping its current operating systems in favor of Windows Phone 7. Or maybe it’s going to go with Android instead. Meanwhile English tech news site The Register really set the cat among the pigeons by suggesting that Elop may be considering what it calls “de-finnistration” — preparing the company to mentally quit Helsinki and move its “center of gravity” to Silicon Valley’s promised lands.

The current state of Nokia

Sifting through the rumors seems almost impossible. So what truth is there to it all?

I’ve spoken to several sources this week, who have all indicated similar things: Nokia is troubled, confused and conflicted — but most of all it is defiant.

Before I address each of these rumors, there are a few things worth thinking about. Nokia has a handful of distinct problems.

First of all it has a perception problem. Many people think it is good at the basics but can’t compete when it comes to exciting, innovation and usable smartphones. That’s not entirely true, but there is a lot more substance to it than many of Nokia’s fans would like to admit. It can make great high-end hardware, but it’s long struggled to lay out a smart software strategy.

Secondly, it has a cultural problem. Nokia is an engineering-driven company that has elevated hardcore technicians to many of its most senior positions, often at the expense of the huge array of talented designers it also employs. This has created a slow, bureaucratic management style that dampens the spirits of many of the company’s more creative employees. It also feeds into the first problem, because many decision-makers at the company dismiss progress made by Apple, Google and others as some kind of snake charming offensive, and believe that consumers will eventually decide that power trumps form. They are wrong on a number of counts.

Thirdly it has a legacy problem. Despite the torrid headlines about its profit and loss, and declining share of the most desirable part of the market, Nokia is still huge. It’s hard to turn something like that around quickly (just ask Microsoft or, increasingly, Google).

Got that?

Elop’s big changes

So let’s address those rumors.

Will Elop fire some senior executives? It seems likely. I don’t have any inside knowledge on this one, but it seems sensible that he tries to stamp his authority on the business, if only to prove that he’s in charge. There is always some management resentment in situations like this.

From a cultural perspective, Elop is far from being your traditional Nokia executive. He’s Canadian. He’s spent a long time embroiled in the West Coast technology industry. And he’s a software guy. If he doesn’t take this opportunity to cast the company in his own image — even just a little bit — then he might not stick around for long.

Will Elop convince Nokia to dump its software entirely and partner with Microsoft or Google? Well, his software chops might suggest that he’s prepared to make a big change here. And it’s true that both of its current systems, Symbian and MeeGo, have struggled. But Elop’s software background is precisely why he might feel it’s wrong to hand over what is potentially the most profitable part of the business to a rival. Insiders are frustrated with existing limitations, but seem to remain committed to making them work.

There is some chatter suggesting that Nokia may find a partner for the difficult American market, but it’s unlikely to be Android, not least because the mobile phone operators don’t want to further contribute to an Apple-Google hegemony (something underscored in a Financial Times report). But the idea that Elop’s going to partner up with his old friends at Microsoft is no slam dunk either: remember, he only arrived in Redmond in 2008 — before that he was with Juniper Networks and the CEO of Macromedia, the company behind Flash that was sold to Adobe under his watch.

And then there’s the big question: Will Nokia move to the United States?

My conversations with people close to the company suggest that such a move is highly unlikely, although the company may increase its presence. There are already Nokia Research Centers across the U.S., and my understanding is that the company has talked fairly frequently over the past few years about setting up shop in a more serious way in America. Many senior Nokia staff are simultaneously entranced and confused by America, a market they have struggled to understand and break into.

But it’s also worth remembering that the American market isn’t everything. Nokia has huge brand awareness and power around the rest of the planet, and has a vast base of users in every fast-growing market worldwide. And it also has a strong alliance with Japan’s NTTDoCoMo, one of the world’s unsung mobile giants, and other major powers in major markets. The U.S. is a tempting place right now, but it’s not the only market.

There’s one other reason that Nokia would not make any substantial move away from Finland: the terrifying impact it would have on the Finnish economy. While shifting HQ to another country would not result in the immediate draining of all money from the country — for starters, Nokia would most likely remain listed on the Helsinki stock exchange — it would have dramatic consequences almost straight away.

There is a huge ecosystem of other businesses that rely on Nokia; companies that have been created to service it and the 100,000+ workers who work around its headquarters in Espoo, just outside Helsinki. Imagine how Seattle would struggle if Microsoft suddenly picked up and moved out, or how Silicon Valley would drift with virtual tumbleweed if all of the major technology companies left. Even if Elop posed the possibility of leaving, the Finnish government would implement a number of measures aimed at making it less enticing. Finland — even with a Canadian in charge — is too important to Nokia, and Nokia is too important to Finland.

Of course, since Elop seems to be playing his cards close to his chest, anything is possible. But by Friday the picture should become clear. Perhaps then the rumor mill will stop grinding — for a while at least.

Related content from GigaOM Pro (subscription req’d):