updated 8/1/2005 3:03:05 PM ET 2005-08-01T19:03:05

Nokia Corp. named the head of its cell phone unit Monday to succeed Jorma Ollila, the longtime CEO who steered the producer of consumer electronics and cables past Motorola Corp. to become the world’s No. 1 maker of mobile handsets.

Olli-Pekka Kallasvuo, 52, is slated to replace the 54-year-old Ollila as chief executive in June 2006.

The selection of an insider to succeed Ollila, who will continue to serve as chairman, suggests Nokia’s board saw no need for major shifts in strategy.

Ollila, CEO for 13 years and chairman for six, had planned to leave Nokia in 2001, but was asked by the board to stay on, and had repeatedly said he would not remain at the helm after 2006.

“I felt that 13 and a half years is a long time, and I decided to move on to other things,” Ollila said Monday.

While a change at the helm was expected, Monday’s announcement also revealed that Nokia President Pekka Ala-Pietila will be leaving the company in February and that Kallasvuo will be assuming that post in October. Nokia said Ala-Pietila is resigning for personal reasons.

Some analysts said choosing a new successor from within the company would signal stagnation, but Ollila defended the decision.

“Companies who have been able to groom CEOs internally have done significantly better,” he said. “We came to the conclusion that the quality of several of the reviewed internal candidates was so high that it did not merit to go outside.”

Jussi Hyoty, an analyst at FIM Securities, saw the selection of Kallasvuo as a good sign. “Nokia has really no reason to look for substantial change,” he said. “In their case, continuity is more important.”

Ollila is widely credited for streamlining management and instituting training programs that have kept the company, originally based in the small Finnish town of Nokia, the most popular employer in Finland. He also spearheaded a drive for innovative designs that made Nokia popular among rich, young, urban consumers.

But more recently, Nokia has come under increasing pressure at the higher and lower ends of the market.

Top rival Motorola has gained momentum with the launch of sleek handsets such as the RAZR, while many handset makers are introducing phones to compete with Nokia’s ubiquitous lower-priced models.

Motorola recently said its market share has risen to 16.8 percent and that its new phones would be directly targeted at Nokia’s core product line.

Espoo-based Nokia, which has sales in 130 countries and about 55,500 employees, had an estimated first-quarter global market share of 30.4 percent, Gartner Dataquest said in May. Nokia says its market share grew to 33 percent in the second quarter.

Kallasvuo, who joined Nokia in 1980, also belonged to the core group who made changes that turned the small Finnish company into the world’s top mobile phone maker.

“Kallasvuo has very much the same Nokia values as Ollila, so I doubt there will be any major changes,” said Jari Honko, an analyst at EQ Bank. “Kallasvuo is unlikely to be very different.”

Copenhagen-based telecom analyst John Strand said the decision to replace Ollila with someone from within the company came as no surprise. Kallasvuo is “an operational guy,” Strand said. “He knows how the organization is put together.”

Kallasvuo described his appointment as “a great privilege.”

“I’m ready for this job, both from my experience and mentally. I feel a burning urge to grab the challenge posed by changes,” he told reporters.

Speaking at Nokia headquarters Monday, he said the decision to leave was personal and did not say what he would do next, except that he was trained in international business and “I believe I still have much to give.”

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