Nokia at crisis point, warns new boss Stephen Elop

Stephen Elop was at Microsoft before taking over Nokia in September 2010

Nokia's new head has sent an outspoken and frank memo to his staff that suggests the phone giant is in crisis.

Stephen Elop describes the company as standing on a "burning platform" surrounded by innovative competitors who are grabbing its market share.

In particular, he said, the firm had been caught off guard by the success of Google's Android operating system and Apple's iPhone.

BBC News has verified that the memo is genuine.

"The first iPhone shipped in 2007, and we still don't have a product that is close to their experience," chief executive Mr Elop wrote in the note that was distributed to the Finnish company's staff and was first published by technology website Engadget.

"Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable."

Although Nokia leads the global smartphone market in terms of handset sales, its overall share has been gradually declining.

According to research firm IDC, Nokia's share fell from 38% in 2009 to 28% by the end of 2010.

Meanwhile its rivals, including Apple and HTC have seen their share increase, or remain constant.

Ben Wood, an analyst at research firm CCS insight, said the memo showed that Mr Elop has a "deep understanding of the severe structural problems Nokia is facing".

"I think it shows that he has inherited an organisation that is in much worse shape than he anticipated and the work that will be required to get it back on track should not be underestimated," he told BBC News.

Mr Elop's leaked memo also suggests that Nokia is also being squeezed at the lower, non-smartphone end of the market by Chinese manufacturers.

"They are fast, they are cheap, and they are challenging us," he wrote.

Nokia is expected to publicly address its future strategy at a media event this Friday.

Mr Wood said that he thought Mr Elop would use the briefing as a chance to issue a "mea culpa".

"He will use it to say 'we are not in a good position, we have been outgunned and if we are to recover we are going to have to take some drastic decisions'."

Mr Wood said this could involve using Android or Microsoft's Windows Phone 7 operating systems.

"No options will be ruled out," he said.