• Pekka Lundmark is stepping down as Nokia CEO
• His successor is Justin Hotard, who is currently general manager of Intel’s Data Center and AI Group (DCAI)
• Finnish vendor’s chairwoman notes Hotard has “vast expertise” in “critical areas for Nokia’s future growth” 
• The move will raise further questions about the long-term future of Nokia’s Mobile Networks division

In a move that clearly signals Nokia’s medium- and long-term aspirations, and one that will raise further questions about the future of its Mobile Networks division, the Finnish vendor has appointed a new CEO who has “vast expertise in AI and datacentre markets, which are critical areas for Nokia’s future growth”. Justin Hotard, who is currently general manager of Intel’s Data Center and AI Group (DCAI), will become the vendor’s new CEO on 1 April, replacing Pekka Lundmark, who will “continue as an advisor” to his successor until the end of the year.  

The focus on Hotard’s expertise in AI and datacentres is key, given that it is at the heart of Nokia’s sales growth focus for the coming years, as the vendor, like its peers, looks beyond the telecom networking sector to secure long-term viability. And while Lundmark has led Nokia into its new strategic focus, the vendor’s board wants a new face to execute the plan. 

Lundmark took over from Rajeev Suri as Nokia CEO on 1 August 2020, only a few months into the Covid-19 crisis that impacted global supply chains and business practices. 

Since then he has overseen a company that, like major rival Ericsson, has been forced to make significant operating expenditure cuts and is frantically seeking growth opportunities beyond the traditional telecom infrastructure market, which lacks significant growth prospects. 

Ericsson’s strategy has been to focus on global enterprise requirements for wireless infrastructure and communications platform-as-a-service (CPaaS)/API-enabled services, underpinned by the acquisitions of Cradlepoint and Vonage, respectively. 

Nokia is also focusing on non-telco opportunities, with three specific areas of potential growth. The first is private wireless networks – the vendor has long been one of the market leaders in the 4G/5G private networks sector and currently boasts more than 850 customers. The second is in the defence sector, where Nokia has acquired Fenix Group, though that is a longer-term opportunity.

The bigger opportunity, as Nokia sees it, is in the provision of network infrastructure to webscale datacentre operators. For this particular subset of the enterprise sector, Nokia already has the IP routing/switching portfolio that is part of its Network Infrastructure division, as well as the optical networking systems (also part of the Network Infrastructure division) that can be used for datacentre interconnect (DCI) deployments. But key to Nokia’s focus in this market is the optical networking portfolio that will be added with the impending acquisition of Infinera, which has developed products designed to significantly enhance the network infrastructure deployed inside datacentre facilities to connect servers – see Nokia to beef up optical unit with $2.3bn Infinera acquisition.

Lundmark noted in October last year (during Nokia’s third-quarter webcast) that the market for optical and IP routing technology for the “datacentre fabric” is potentially worth $20bn a year. He stated at the time that Nokia’s focus on the datacentre market, which had already resulted in a key contract win with AI hyperscaler CoreWeave, is now “the very core of our strategy… datacentres will be our number one growth target for the coming years. There will be others as well, but that will be the number one. We already have references like Apple and Microsoft in this space, but CoreWeave is so important [because it is] the leading GPU-as-a-service company, and they have now taken pretty much our entire portfolio, both on the IP side and optical side. And as we know, AI is driving new business models. And one of the business models is clearly GPU-as-a-service. Even some of the operators, like T-Mobile US, [are] talking about an opportunity to look into GPU-as-a-service as an add-on to their business. And then there are the significant hyperscaler opportunities and smaller datacentre opportunities… We are already quite well exposed to datacentres on the IP side, but the Infinera deal will significantly increase our exposure on the optical side, and it will help us to get more and more inside the datacentre fabric.” 

With that focus in mind, the Nokia board has recruited Hotard for the next stake in Nokia’s business transformation. The Finnish vendor noted that Hotard has more than 25 years of experience in the global tech sector.  He currently leads the DCAI Group at Intel, a job he started only a year ago. Prior to this role, he was general manager of high-performance computing, AI and labs at Hewlett Packard Enterprise (HPE), which he joined in 2015 from NCR, where he was president of the small business division. Prior to that he worked at Symbol Technologies and Motorola. 

Hotard commented: “I am honored by the opportunity to lead Nokia, a global leader in connectivity with a unique heritage in technology. Networks are the backbone that power society and businesses, and enable generational technology shifts like the one we are currently experiencing in AI.” 

Nokia’s chairwoman, Sari Baldauf, stated: “I am delighted to welcome Justin to Nokia. He has a strong track record of accelerating growth in technology companies along with vast expertise in AI and datacentre markets, which are critical areas for Nokia’s future growth.”

She added that Lundmark told the board (almost a year ago) that he wanted to move on from executive roles “when the repositioning of the business was in a more advanced stage, and when the right successor had been identified. Now, both of those conditions have been met, and he has decided to step down.” 

She added, “I want to thank Pekka for his significant contributions to Nokia, he will leave with our highest respect. Pekka joined at a difficult time in Nokia’s history. Under his tenure, Nokia has re-established its technology leadership in 5G radio networks and built a strong position in cloud-native core networks. Network Infrastructure has delivered growth and significant profit improvement, and Nokia has secured the longevity of its patent licensing business. At the same time, Nokia has built strong foundations in new growth areas, refreshed the company’s brand and culture, transformed its operating model and rebalanced its portfolio,” she added. 

While there’s no doubt that Nokia’s Network Infrastructure division (optical, IP routing, fixed broadband) has provided the company with an excellent business balance in recent years – including in 2024, as we reported recently – and that the unit is at the heart of its future growth strategy, the claim of “technology leadership in 5G radio networks” might be considered a contentious one, given that Nokia has suffered some significant customer setbacks in recent years, most notably at the US telco giants AT&T and Verizon. In addition, its competitive positioning from a product performance perspective has also been called into question.

It was also noteworthy that Mobile Networks was the only division in the Nokia portfolio to report a year-on-year decline in revenues for the fourth quarter of 2024: For the full year, Mobile Networks reported a 21% drop in sales to €7.73bn. 

Add to the mix last year’s speculation that Nokia was considering whether it should spin out or sell part of, or even all of, its mobile network infrastructure business and that Samsung Networks was hovering in the wings with a view to picking up some, or all, of the division. 

Nokia denied any such move and reiterated its ongoing commitment to the mobile networking sector, but it seems likely that questions about the ongoing importance and viability of Nokia’s Mobile Networks division will emerge in the coming months and be a talking point on the show floor at the upcoming MWC25 in Barcelona next month. 

- Ray Le Maistre, Editorial Director, TelecomTV