McKay never failed for a useful quote. He was acerbic and witty, about the only assets he could rely on during his first two years as Buccaneer’s head coach. The Buccanneer's were as hapless at football as Bernie Sanders is clueless on socialist history. McKay’s first win wouldn’t arrive until game 27.
I don’t know, but I wonder if Nokia CEO Rajeev Suri was asked a question similar to McKay's after reporting another round of beat-down quarterly financial results: “What do you think about your team’s execution, CEO Suri?" I suspect an answer less provocative than McKay's would be forthcoming. .
At least McKay had an excuse. His Buccaneers were composed mostly of other teams' rejects. McKay masterfully set expectations low until the real talent arrived, thus minimizing frustration among the fans and maximizing encouragement among his overwhelmed personnel.
Suri’s Nokia appears equally as overwhelmed as McKay's Buccaneers, relatively speaking, at least at the top. Suri, on the other hand, blunderingly sets expectations high. After all, no real talent is slated to roll in.
Only 90 days ago, Suri expected market growth in 2019, with Nokia finishing strong to end the year. “Demand is strong in lead 5G markets, US and Korea,” Suri assured investors after second-quarter earnings were released in July. He added that the market growth for new 5G technology would start this year in Japan, the Middle East, China, the Nordics, Italy, and the United Kingdom.
Suri expected Nokia to hit 2020 in full stride based on his projections for rising demand in the fourth-quarter for the company's 5G technology. Expectations for the bottom line were ratcheted higher. Full-year EPS would land between €0.25-€0.29 for 2019 and €0.37-€0.42 for 2020.
Investors sighed contentedly and then settled in for the long-awaited share-price recovery. Nokia shares haven’t been priced using double digits since 2010. Now that the company was positioned to ride the expected wave of 5G spending, investors were expecting the double-digit share price to emerge sooner than later.
But then the wipe-out occurred. Nokia reported third-quarter results. Everything that went right in the second quarter went wrong in the third. Nokia reported financial numbers that would embarrass the Tampa Bay Buccaneers circa 1976,
Profit expectations for this year and next were ratcheted lower. Nokia cut its forecast for 2019 earnings per share to €0.18-€0.24. The company also lowered its 2020 EPS forecast to €0.20-€0.30. Suri attempted to placate investors.He told them that Nokia needs to spend money more to fend off competitors who have thwarted the expected earnings boost from 5G mobile networks.
Everything but the kitchen sink? Forget about it. The kitchen sink was included. Suri used it to go upside investors’ head by suspending the dividend. The kitchen sink, metaphorically speaking was the dividend, and it won't be forthcoming for the third and fourth quarters. This after Nokia implemented an income-investor-friendly quarterly dividend policy earlier this year.
Suspending the dividend will save Nokia €1.1 billion annually. (It cost the company roughly €5 billion in equity market cap in one trading session.) Nokia shares suffered their largest drop in nearly two decades after the company one-eighty-ed on its business outlook and the dividend.
The dividend is unlikely to return. Suri first wants to rebuild the company's net cash to €2 billion before the company considers paying dividend. (The cash account has shriveled to €344 million. It was €1.9 billion this time last year.)
The renaissance was slated for next year. Suri says it has been re-slated for 2021. Are there any believers, Charlie Brown?
If asked what they thought of their company’s management’s execution, many Nokia investors would likely answer that they're for it. Something needs to be executed when the company’s business plan isn’t. The lack of execution is inexcusable when you factor the competition, or rather the lack thereof.
Nokia faces only two major competitors in the telecom 5G equipment business. One of them — China’s Huawei Technologies Co. — has been all but banned from the United States. At the same time, phone companies around the are opening their checkbooks for a new generation of 5G technology that’s supplied only by Nokia, Huawei, and Sweden’s Ericsson AB.
I’m unsure what it takes to fire someone in egalitarian-infused Finland. I suspect that it’s only slightly less difficult than arranging a real execution. I jest, of course, but heads must roll when a company continually without remission performs as the 1970s Buccaneers.
McKay kept his job because his team gradually improved.The Buccaneers finished atop their division in McKay's fourth year. Nokia has shown no analogous improvement under Suri's tenure. Time to put Suri and Nokia investors out of their respective misery.
Board chairman Risto Siilasmaa might have to jump through numerous bureaucratic hoops before he can fire Suri and anyone deserving the same fate. Do it anyway. Unlike McKay's Buccanneers, Suri's Nokia fails with no sign of impending improvement. Nothing will change until the talent is upgraded. Nokia's talent needs upgrading.