Nokia's Microsoft deal leads to shareholder revolt, call for a "Plan B" (updated)

The mobile partnership between Nokia and Microsoft is under fire by shareholders who are calling for the CEO's head and are proposing a "Plan B" on how to revive Nokia's position as a mobile powerhouse.

update below

Were the champagne celebrations of a Nokia-Microsoft partnership premature?

An unnamed "group nine young Nokia shareholders" who have also been employees at some point today released an open letter to the company's other shareholders and institutional investors that, in a nutshell, said that the Microsoft deal is a bad one for Nokia and that CEO Stephen Elop should be replaced. (Techmeme)

In the letter, the group said it plans to challenge the Microsoft partnership and strategy at the company's Annual General Meeting for Shareholders on May 3. It said that it has also developed a "Plan B" approach that involves not only replacing Elop but also looks to revamp the company's hiring strategy and eliminate "outdated and bureaucratic R&D practices."

These shareholders said they want to avoid, at all costs, "becoming a poorly differentiated OEM with only low margin, commodity products that is unable to attract top software talent and cannot create shareholder value though innovation."

In generations past, a small group of shareholders might have had trouble generating support for a plan that runs contrary to what the executives determine to be best. But in the modern age of communications, the group is spreading its message virally on the Internet and asking others - from other shareholders to users, fans, employees or developers - to join the cause by spreading the word via Facebook, Twitter and their own blogs.

It's unclear whether these shareholders will gain any traction with their efforts - but they seem to be in good company. Financial markets also seem to have a bad feeling about this deal with Microsoft, which, like Nokia, is suddenly finding itself scrambling to catch up because it failed to respond and innovate fast enough when the market shifted.

It's almost ironic that HP, which has been a long time partner is distancing itself from Microsoft on the mobile front, pushing its WebOS over Windows, while Nokia, which has also seen a decline in its own mobile leadership, would turn to Microsoft as its savior.

Separately, at the Mobile World Congress conference in Barcelona today, Google CEO Eric Schmidt said that his company tried hard to woo Nokia and that the two were involved in "extensive" confidential discussions, according to a Reuters report.

Also see: Fear of Google drove Nokia-Microsoft partnership

Meanwhile, Nokia Executive VP Mary McDowell told Bloomberg that the Microsoft option was the only one put before the board for a vote at its Feb. 10 meeting, a day before Elop and Microsoft CEO made their partnership announcement. McDowell told Bloomberg:

We had presented three scenarios: continue with the current plan of record, a Google option and a Microsoft option but the recommendation that we made to them was the Microsoft option so that’s what they approved.

That report noted that, since then, Nokia's shares have declined by 18 percent and wiped out about 5.5 billion euros, or $7.4 billion, of the company's market value.

update Feb. 17: It appears that this "Plan B" revolt is a hoax, according to Dow Jones and a Twitter post. That message reads: "there are no 'nine young investors', just one very bored engineer who really likes his iPhone." Dow Jones said it never could confirm the identities of those behind the Plan B.

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