By Sakari Suoninen and Jussi Rosendahl
HELSINKI (Reuters) - Finnish telecommunication gear maker Nokia promoted Rajeev Suri, the head of its biggest division, to chief executive on Tuesday, tasking him with charting its future growth without the mobile phone unit for which it was best known.
The company also announced plans to return $3.1 billion to shareholders via buybacks and extra dividends, a move seen by some analysts as an attempt to retain investors as it refocuses is business.
Suri, a 46-year-old Indian national, has until now led Nokia Solutions and Networks (NSN), the network equipment unit which competes with larger rivals such as industry leader Ericsson as well as Chinese rival Huawei.
The division was loss-making for several years but turned profitable in 2012 after Suri slashed costs and shed unprofitable businesses. Last year, NSN contributed most of the 12.7 billion euro ($17.6 billion) turnover Nokia made from its continuing operations and the company has vowed to make a more aggressive push to increase its share of the networks market.
"Rajeev is the right person to lead the company forward," Nokia Chairman Risto Siilasmaa said in a statement. "He has a proven ability to create strategic clarity, drive innovation and growth, ensure disciplined execution, and deliver results."
Suri has been with Nokia since 1995 and was widely expected to become chief executive.
Nokia has said it would concentrate growing its networks, navigation and patents units which remained after it sold its struggling mobile phone business to Microsoft for about 5.4 billion euros ($7.5 billion) in a deal that was finalized on Friday.
Last year, the networks unit's sales were 11.3 billion euros, while navigation unit HERE accounted for 914 million euros and its patent unit, dubbed advance technologies, 529 million euros.
Analysts say the company may face challenges in growing its business, as higher research and development costs mean bigger, deep-pocketed rivals have an advantage.
Suri, in a video posted on the company's website, said there was plenty of scope for expansion. "I have been with Nokia for almost 20 years, and the opportunities ahead of us are as great as I have ever seen," he said.
Nokia's mobile phones were its most renowned product. In a bid to retain shareholders, the company said it would pay an extra 1 billion euros in dividends for last year and start a 1.25 billion euros share buyback program.
The extra dividend of 0.26 euros per share is on top of the annual dividend of 0.11 euros for last year. The ordinary dividend will cost the company another 400 million, or about half of Nokia's earnings for last year.
The company has also said it would cut debt by 2 billion, which would save it around 100 million euros in interest annually.
"The dividend proposal is slightly smaller than expected, but the buy-back program is quite extensive. It reflects the management's view that the stock is valued below its sum-of-parts," said Inderes analyst Mikael Rautanen.
Nokia said that its net cash position at the end of March was 2.1 billion euros, down from 2.3 billion at the end of last year. Had the phone-unit sale closed in the first quarter, the net cash position would have been 7.1 billion, Nokia added.
Timo Ihamuotila will continue as Nokia's chief financial officer and Risto Siilasmaa as the chairman of the board, Nokia also said. ($1= 0.7223 Euros)
(Editing by Miral Fahmy)