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Nokia is back on the news! Now, you can buy the legendary brand for a cheap and reliable phone.
Oh, right. For those younger ones in our audience, there was a time when Nokia was one of the world's biggest mobile phone manufacturers, with 50% of the global market share. So, you might be wondering why that's big news. This brand helped shape mobile communications as we know it today.
At one point, Nokia was one of the world's biggest telecom brands and a mobile device icon. Let's look at its history and how Microsoft played a massive role in killing it.
Before Nokia produced phones stronger than Mjölnir, Thor's hammer, the company had humble beginnings. So for many, it could be a surprise that the Nokia name has existed for almost 160 years.
The company was born in the dusk of the Industrial Revolution, when two friends, Frederik Idestam and Leo Mechelin, created a joint venture and called it the Nokia company. So here's a good conversation starter: the name comes from the Nokia town and Nokianvirta River, the site of Mechelin's pulp mill.
Though the company started managing pulp mills, it soon expanded to other markets. For example, Mechelin later expanded into electricity (an idea Idestam opposed) in 1902.
By 1922, Nokia partnered with Finnish Rubber Works and the Cable Factory to expand into everything from respirators to rubber boots and toilet paper. (We don't know how good the service was with the last one).
For decades, the three companies remained separate entities, and it wasn't until 1967 that the three merged. The result was the Nokia Corporation, which would dominate the telecom world, thanks to vital decisions during the 70s.
In this decade, Nokia added one important branch: electronics, which eventually evolved into the phone industry. Many factors contributed to this growth, from the free trade agreement with the Soviet Union and the acquisition of several other communication companies. Plus, there was a mastermind behind the plan, Kari Kairamo, the company's CEO since 1977.
On December 11, 1988, Nokia wanted no attention from the press. The company was quietly navigating one of its biggest challenges to date. Times were tough, and the Finnish media focused on foreign policy and all domestic companies.
Nokia had long worked with the Soviet Union, but there were clear signs that the West was about to win. Finland had to be at the forefront of both sides, and this wasn't easy. After all, the Soviet Union had been vital, and ditching them in the uncertainty of the later stages of the Cold War was a significant gamble.
At the same time, Finland was struggling both politically and financially. All the while, Nokia's CEO, Kairamo, understood how Nokia could be vital for the country in these changing times.
Of course, this wasn't new, as pressure had mounted throughout the years. However, Kairamo had always delivered, from the acquisitions to a focus on communication.
The problem was that there was a dark side, one that not even Nokia executives knew about. Kairamo was struggling with his mental health. While it's not clear whether it was bipolar disorder or bouts with manic-depression, what's clear is that the pressure had gotten to him.
On that fateful December day, he chose to end his life. Unfortunately, as part of Finnish culture and corporate secrecy, Nokia didn't want anyone to know.
So, the company rushed to cover up the news. Eventually, word got out, and in the future, many works would like this dark time, such as David Cord's The Decline and Fall Of Nokia. Kairamo's death, however, was not in vain. His actions would eventually pay off.
The short end of it is that major acquisitions turned Nokia into a phone pioneer. One vital move under Kairamo was buying Mobira, a cell phone manufacturer already shaping local communications. Mobira produced the first cell phone with mobile roaming.
By 1981, Mobira had expanded its network to Sweden, Norway, Denmark, and Iceland. Still, it would be one essential moment in Soviet Politics that would cement Nokia as the mobile manufacturer to rule the region.
In 1987, Mikhail Gorbachev, then president of the Soviet Union, used the Nokia-Mobira Cityman 900 to make a call from Helsinki to the Soviet Union. The moment was so big that even the Americans noticed, drawing the attention of one company born in Albuquerque, New Mexico.
Thanks to Mobira and Gorbachev, by 1988, Nokia's revenue was $2.7 billion, and there was no slowing down. Nokia quickly ditched the past, even closing the Cable Factory, an essential brand for over a century. Though Nokia was deadset on its goal, times wouldn't be easy.
Nokia's massive expansion was becoming troublesome, mainly because the company focused on telecommunications. So, after Kairamo's untimely demise came Simo Vuorilehto as CEO, who shook up the brand.
Nokia sold the divisions handling tire manufacture, computers, and rubber products. The problem was this move came when Finland went through one of its worse recessions, and the Soviet Union was collapsing. Therefore, shareholders took this as a desperate financial move, and the stock plummeted.
Vuorilehto resigned, but eventually, these moves, once called crazy, paid off. When Jorma Ollila took over, his mind was clear, and he even reduced Nokia further, leaving only the phone division. By 1995, the company had returned to positive profits, with $1 billion that year and $4 billion in 1999.
Nokia then experimented with everything you could imagine. For example, the Nokia 900 Communicator was the first device to provide spreadsheets, emails, and even fax connectivity. Sure, it wasn't a commercial success, but it even captivated the attention of Bill Gates.
Nokia executives at that time tell that a Microsoft recon team had purchased several devices to analyze and that even Bill Gates loved the idea when he saw the phone at a big tech conference in Las Vegas.
This wouldn't be Microsoft's last dance with Nokia, but it wouldn't be the main reason for the Finnish company's success.
Sisu.
Finnish people love this word as it describes the harsh and challenging history the country has had to endure. Though it lacks a direct translation, a close meaning is "unbreakable." It's easy to understand why, from frigid winters to a history of conflict with neighboring countries such as Russia.
Finland loves ruggedness and reliability; if it's not expensive, that's extra points. So naturally, this translated into Nokia phones. In fact, it's because of this philosophy that Nokia phones were so tough, and it all started with this one.
The Nokia 6110 was so reliable that it became a go-to for businesspeople and casual phone users in Europe. Plus, it had a long-lasting batter and the game Snake!
Nokia quickly garnered most of the market with this cheap, durable, and reliable phone. By the end of 1998, it had surpassed 100 million manufactured phones.
That year alone, they had a sales revenue of $20 billion, with $2.6 billion in profit. The expansion didn't slow down. By 2000 it employed over 55,000 people in around 140 countries and had 30% of the mobile phone market share. That was almost twice as large as its nearest competitor, Motorola.
Nokia's market share had evolved rapidly, and for some years, no other competitor seemed to catch up.
Some sources vary on how large its share was at its peak, but it's safe to say that Nokia reached more than 40% of the world, and some sources, such as Statista, rate it as high as 50.9%.
Let's think that one of every two mobile phones in the world was a Nokia, and it showed in the money. The company went from a turnover of 6.5 million euros in 1996 to 31 billion euros five years later, in 2001.
But, many factors were coming into play that would challenge Nokia's dominance, and they weren't only technological.
It's hard to believe now, but once, Nokia wanted to be the leader in mobile entertainment. So it partnered with big camera companies and even created a gaming-focused N-gage phone. Yes, it was a failure but props to them for trying, and they had the right vision for the future.
However, as the company tried to venture into the future, inside, things were changing. Several former Nokia executives have revealed the overwhelming transformation that the company went through, thanks to its booming success. The humble beginnings at the pulp mill were gone, and the crazy success and tons of money had rocked Nokia's cultural foundations and principles.
Many testimonials confirm that, during the 90s and early 2000s, meetings didn't happen in board rooms. So instead, let's use a Sauna and plenty of vodka. Creativity might flow, but it might not be ideal for problem-solving.
At the same time, competition was getting more complicated. Nokia lacked devices in several market tiers, which was eating away at its market share. From its heyday, it dropped to below 35% in 2004.
With the competition catching up, Nokia grew desperate. In 2004 alone, they launched 40 new products, but none addressed the real problem.
New operating systems, such as the Google-acquired Android, were making leaps in usability. All the while, Nokia still held on to Symbian, and if you've never heard of it, there's a good reason. Plus, by 2007, no desperate move could compete with what was coming.
Let's get one thing straight. The iPhone didn't kill Nokia, at least not by itself, but it was the final blow. In fact, Nokia's death was slow.
The Symbian operating system needed to improve usability, versatility, and, most importantly, app development. Meanwhile, the two main competitors, iOS and Android, were fast accelerating their app language, opening up the market. But, most importantly, Nokia had rejected working with Android or even moving to other systems.
Then, there was design. The original iPhone was sleek and minimalistic. Nokia phones were the total opposite. Ironically, the 6110's DNA was long gone, and now they were complex and over-designed, as the following image shows. This is the N95, Nokia's direct competitor with the iPhone at the time.
The inevitable happened in 2011. This marked the first time Nokia lost its grip on the world. Now, the iPhone has taken over. Nokia was left scuttling for safety.
There was one brand that was lagging behind everyone in the mobile market, and it was Microsoft. They desperately clung to the Windows Mobile system, a rigid, slow platform that wasn't "free" when buying a phone. So, the company needed a partnership, and that's where Steve Ballmer comes into play. Yes, this Steve Ballmer.
He announced that Nokia and Microsoft had joined forces in 2011, and the partnership seemed ideal from the outside. Microsoft was a computer giant, and Nokia had decades of experience and dominance in the mobile market.
Cut to the end of 2013, and the honeymoon was even sweeter. Microsoft had decided to purchase the entire Nokia brand for 5 billion euros. This was a desperate move to get into the mobile phone game and expand past its PC monopoly.
The dimension and complexity of the acquisition were such that the deal was several months overdue after its announcement due to legal and administrative challenges.
As a result, by the time the deal was closed, some financials had changed, and Nokia had received around 7B euros. The problem was that this marked the beginning, not the end, of a massive puzzle merging both worlds.
By 2013, Nokia sold around 251 million handsets, from basic phones to smartphones. On the other hand, Microsoft's Lumia lineup accounted for only 30 million units. So, Microsoft had to rush to fit more than 200 million units with their operating system, which wasn't great initially, and licenses played a big part in the demise.
The acquisition made Microsoft the world's second-biggest mobile phone manufacturer. Still, all these phones needed to pay for the operating system as Microsoft didn't want to make the Windows OS free.
Looking back, experts agree that the move would've placed them as direct competitors to Android. In addition, with more access, developers could've expanded the app store and improved cloud services, which became vital in the mobile phone market.
Instead, none of this happened. What did happen was that Microsoft was quickly losing ground.
Having millions of devices meant nothing if people weren't buying them. So, by 2015, Microsoft realized that Nokia was a sinking ship. It wrote off $7.6 billion due to the Nokia acquisition and laid off 7,800 employees, having to invest $800 million in restructuring. In two years, Nokia had disappeared, but it wasn't over.
By 2016, Microsoft had enough and sold the remnants of Nokia to a partnership between Foxconn and HMD Global. Nokia earned a seat on the Board and lent its name to a newer generation of phones, but the world still needs to hear about them. That's because they were quietly reinventing themselves.
By 2017, the Nokia brand had developed a new phone for a unique gap in the market that the Nokia of the past had never envisioned. For years it had tried to compete with the iPhone, but now, it aimed at the mid-range, accessible device.
But, most importantly, this new Nokia phone ran on Android. Fast forward to now, and HMD Global has announced the release of new entry-level phones, with prices as low as $99, and this is the perfect equation.
After all, that's how Nokia started, tending to easy-to-use and reliable devices. It has worked, especially in rising markets such as India and China.
Today's phones might not replace a hammer, but Sisu remains alive.
All sources for charts from Statista
