* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *
Nokia retains a lead in mobile network infrastructure but its once dominant role as the world's biggest handset brand has entirely vanished. In an industry that has seen more than its fair share of fortunes made and lost, few business arcs were as dramatic as that experienced by Nokia. The massive explosion of wireless communications during the 1990s thrust an obscure company from rural Finland into the global spotlight. Over the following 15 years, Nokia gradually established itself as the clear leader in the sector, and by 2008 it accounted for four out of every ten mobile phones sold worldwide. After that, though, performance slumped, mainly as a result of the startling growth of the global smartphone sector, prompted by Apple's iPhone and the explosion of devices powered by Google's Android operating system. The speed of that change caught Nokia completely off-guard. As the company's dominance crumbled, it attempted to bolster its position through its new global alliance with Microsoft. It was almost inevitable that the larger US company would eventually take full control, and in 2013 Microsoft agreed to buy out Nokia's mobile phone division for €5.4bn. The Nokia brand was gradually phased out on Microsoft's handsets and finally abandoned altogether. An independent company acquired the handset license and will attempt to relaunch the brand in 2017. Meanwhile, a slimmed-down Nokia company soldiers on as a leader in mobile network infrastructure and software development. It consolidated its lead with the acquisition of rival Alcatel-Lucent at the beginning of 2016.
Click here for a listing of Nokia Agency Account Assignments from Adbrands.net.
See Consumer Electronics index for other companies.
It was the beginning of the end of an era when Microsoft announced in Sept 2013 that it had agreed to buy out Nokia's struggling handset business for €5.44bn. It paid €3.79bn for the actual business, plus an additional €1.65bn to license the Finnish group's patents.
Nokia had suffered something of a rollercoaster ride over the previous ten years. A global leader by the end of the 1990s, it suffered a first slump mid-2000s, before appearing to make a full recovery. However, the explosive growth of Apple and Android smartphones from 2009 onwards has created a far bigger set of problems, toppling Nokia from its position as a leader in the sector, and leaving it struggling to catch up. The underlying cause of each crisis was broadly similar. In 2003, Nokia had under-estimated the popularity of "clamshell" handsets pioneered by Motorola, resulting in a sharp slump in sales of its "chocolate bar" devices. It later recovered some of those losses, but the failure to predict the explosive growth of American-designed smartphones towards the end of the decade proved far more damaging.
Though it was one of the first mobile manufacturers to produce smartphones, and was still the market leader in that sector as recently as 2009, Nokia's designs were marketed primarily to high-end business users, and didn't allow for add-on applications created by third-party developers. By contrast Apple and Android devices were geared towards ordinary users, and originated in North America, a region where Nokia was already perilously weak. The Finnish company was alarmingly slow to develop its own competitive models, and as sales in the smartphone segment soared on the back of Apple's global appeal, Nokia's global market went into steep decline. Total handset share slumped from a high of almost 40% in 2008 to 11.5% by 1Q 2014, the final quarter before the transfer to Microsoft. In the smartphone segment, its share plunged from a market-leading 47% in 2009 to under 4%.
The biggest weakness by far in Nokia's global coverage was North America, where it had ranked well behind other companies for years. Even in 2008, when Nokia's dominance of the total global market was at a record high of almost 40%, the number of handsets the company sold in North America fell by 19% to under 16m units, and its local market share plunged to just 8%, from 15% two years earlier. One key difference about the US market was that manufacturers were generally expected by major networks such as AT&T and Verizon to supply customised versions of their handsets, with a specified selection of features or software. However, Nokia had at that time refused to submit to these demands. Its shrinking share persuaded the company to think again in early 2008, and it recruited large teams of developers to support the wishes of both major carriers. Yet far from halting the slide, Nokia's volumes in North America continued to plunge, falling to a new low of just 2.2m units for all of 2012, less than Samsung sold in a single week.
Another critical fault in Nokia's business model was the comparative inflexibility of its operating system Symbian. This had originally been an independent software developer before being jointly acquired by the different handset manufacturers who used its code. Nokia gradually increased its stake in the business before taking full control in 2008. However, by 2011 Symbian had been completely outclassed by Apple's iOS and Google's Android. Microsoft was also seeking an opportunity to boost the take-up of its own equally outshadowed mobile software, so the two companies joined forces in the hope of preventing a stronger combined front. Early that year, Nokia announced plans to phase out Symbian for its new high-end devices in favour of Microsoft's Windows Phone system. However, the first Windows-powered handsets took months to arrive, by which time further ground had been lost to Android and Apple. The only viable way forward was for the larger and stronger Microsoft to take full control of the business if there was any hope of regaining its momentum. Microsoft completed the acquisition of Nokia's entire mobile phone division in April 2014.
Yet it soon became clear that Microsoft couldn't rescue the Nokia brand name either. The purchase of Nokia, championed by Microsoft's then-CEO Steve Ballmer, proved to be a white elephant for the US company, and eventually prompted Ballmer's resignation. New Microsoft CEO Satya Nadella gradually shrank that group's still-marginal presence in smartphones, and eventually put all its remaining operations up for sale in 2016. A new Finland-based company, HMD Global, acquired rights to relaunch the Nokia brand for smartphones. That is expected to take place in 2017. Microsoft's remaining handset operations were acquired by Taiwanese manufacturer Hon Hai Technology (Foxconn).
For several years, Nokia also produced a range of luxury handsets under the Vertu sub-brand. These highly exclusive limited edition phones retailed at up to $20,000 each, and were handmade using gold, platinum, sapphires and other precious materials, even diamonds. Despite their price, these phones developed a significant market in Russia, the Middle East and Asia. However, Nokia put the business up for sale in 2011 to concentrate on less precious phones. It was sold in 2012 to private equity fund EQT.
As a result of the handset sale, the Finnish company was stripped back to its remaining divisions in software and network infrastructure. One of the most significant developments in Nokia's evolution during the early 2000s was an aggressive push beyond handset manufacturing into a broad range of content-based services, either acquired or developed inhouse. In this respect, Nokia established a clear head start over rival handset suppliers. However, much of that internal investment was effectively wiped out towards the end of the decade by Apple's iPhone, which got around the catch-up problem (and eliminated considerable cost) by opening up design of its "apps" to third-party developers. That process was completed by the launch of Android, which was designed from the beginning to be open-source. As a result, virtually all of the music, media and gaming operations developed or acquired by Nokia were entirely eclipsed. The "Comes With Music" and other music download services and Ovi gaming and applications portal were all gradually phased out.
The main remaining pillar of what became known as Nokia's Location & Commerce division is mapping. This was based around US company Navteq, acquired by Nokia in 2007 for $8.1bn. Then the leading provider of digital map information for mobile navigation systems, it already supplied several other service providers as well as Nokia. In particular, it was a key provider of mapping data to in-car navigation systems. In 2010, Nokia agreed a global strategic alliance with Yahoo to supply mapping services to that company's online audience, in return for Yahoo's email and instant messaging services, which were bundled with new handsets. As part of the alliance with Microsoft, Nokia also began to provide mapping services for the US company's Bing search service. The mapping division was rebranded in 2012 as Here. Sales for 2013 were €914m. Yet here too, Nokia, finally called it quits. In 2015, a deal was agreed to sell the business for €2.8bn to a consortium comprising Germany's three luxury car manufacturers Audi, Mercedes-Benz and BMW.
The core of the remaining group is Nokia Networks, which builds and sells mobile broadband and IP networks and related services. Despite its leadership in handsets, Nokia had traditionally lagged behind market leader Ericsson in mobile infrastructure. As a result, in 2006, the group agreed to merge its network operations with those of Siemens, then the #3 in the sector, in order to leapfrog the Swedish company. The combined joint venture became the new market leader in network infrastructure. Completion of the deal, originally planned for the end of 2006, was delayed by a corruption scandal at Siemens Networks. The merger finally took place in April 2007. In 2011, the company also acquired most of the networks infrastructure business of Motorola for $975m, giving it a significant additional presence in the US, and also strengthening its relationship with existing customers such as China Mobile, Sprint, Verizon and Vodafone. In 2013, Nokia agreed to buy out Siemens for €1.7bn to take full control of the business. Two years later it sealed a deal to acquire another major competitor, France's Alcatel-Lucent, which also had a strong presence in fixed line infrastructure. That purchase, for €15.6bn, finally completed at the beginning of 2016, consolidated Nokia's leadership of the sector. Sales for 2015, prior to the addition of Alcatel-Lucent, were €11.49bn. Of that, almost €6.1bn was generated by mobile broadband systems, and the remaining €5.4bn from support services. Combined sales for 2016 are likely to be in excess of €25bn. Main rivals are Cisco, Ericsson, Huawei and ZTE.
A separate unit, Nokia Technologies, was established in 2013 to explore new products and services. Perhaps surprisingly, this unit dipped its toe back into hardware in 2014 with the launch of a tablet device, the Nokia N1. More successful was the launch of OZO, a professional VR camera. In 2016, the group made a move back into other consumer devices with a deal to acquire French company Withings for €170m. The company makes healthcare tracking products such as weighing scales and blood pressure monitors, but has also moved more recently into fitness bands. Nokia says it has no plans to re-enter the telecoms sector but aims to become the global leader in digital healthcare. Combined revenues for 2015 for Nokia Technologies were €1.02bn.
Nokia group revenues peaked in 2007 at €51.06bn, boosted by the bolt-on of the former Siemens Networks business. Growth hit a brick wall, however, in 2008, and sales drifted steadily lower, falling to €30.18bn by 2012. Devices and services accounted for just over half of sales, and networks for the remainder. Profits have fallen just as steadily from a high of almost €7bn in 2007 to a net loss of €1.5bn in 2011, and then a net loss of €3.79bn in 2012. For 2013, group sales from continuing operations (excluding handsets) were €12.71bn, with an attributable loss of €615m. The following year saw revenues of €11.8bn and a profit of €2.7bn.
Nokia's group revenues for 2015 were €12.50bn, up 6%. Expenses associated with the purchase of Alcatel-Lucent resulted in a sharp decline in profit to €1.2bn. Alcatel-Lucent reported revenues of €14.3bn for 2015.
At its peak, Nokia was Finland's biggest company by a considerable margin, and accounted for around a fifth of all the country's exports, and a fifth of the government's entire corporate tax income. However, its share price has plunged since 2011. It was overtaken as Finland's biggest company by market capitalisation in 2012, slipping to third place by early Spring.
Nokia may have become famous for mobile phones, but that was only the latest incarnation of a company whose previous businesses included paper, chemicals and rubber before it moved into telecommunications during the 1960s. Nokia was originally founded in 1865 by Finnish engineer Fredrik Idestam. He established a wood-pulp mill on the river Emakoski in southern Finland to manufacture paper, and experienced soaring demand. As literacy spread, so did Idestam's business. The company began trading internationally, setting up sales offices in Russia, followed by the UK, France and China. As the business grew, a town grew up around the factory and even adopted the company's name. (Nokia moved its factories in the 1960s and has no remaining link with the town which still bears its name).
In 1898, a new business grew up alongside Nokia's paper mill. Attracted by the hydroelectric potential of the Emakoski river, the Finnish Rubber Works also established a factory in the town of Nokia. This company flourished too, expanding its range over the years from galoshes to rubber gloves, tires and industrial parts. In 1921 it also adopted the Nokia name. After World War II, Nokia Rubber Works decided to diversify its operations, acquiring a large stake in Helsinki based Finnish Cable Works, which already used the company's rubber to coat its cabling. Gradually the two companies grew closer together, finally merging with Nokia Paper in 1967 to form Nokia Group. Although Cable Works' main business was electrical cabling it had become increasingly involved in the manufacture of telecommunications wiring. During the 1960s, the company's research department began to experiment with digital telephone switching systems also, and they launched their DX220 digital switch at the end of the decade. The rapid growth of telecommunications during the 1970s allowed Nokia to diversify and expand rapidly.
However, the company's most important business gradually became electronics. Nokia's digital switch was a key component in the launch in 1981 of Nordic Mobile Telephony (NMT), the world's first multinational cellular network for car mobile phones. Also that year the company acquired 51% of Finland's state-owned telecoms operator, renaming it Telenokia. A year later Nokia bought into Salora, the biggest Scandinavian manufacturer of colour televisions, followed by Swedish electronics firm Luxor in 1983. In 1986, the group bought Finland's largest electrical wholesaler Sahkoliikkeiden, and then created the biggest IT services company in Scandinavia by acquiring Ericsson's Data Division and merging it with its own IT subsidiary to form Nokia Data. However the company still had a broad portfolio of other interests. Despite its developing interest in telecommunications, the company was also the leading manufacturer of toilet paper in Ireland, the world's only supplier of studded winter bicycle tyres and the provider of electricity to 350 Egyptian villages.
Meanwhile, Nokia continued to experiment with mobile telephony. In 1984 it launched the Mobira Talkman, arguably the first portable phone, weighing just under 5 kilos. The company was also a pioneer in the development of the Global System for Mobile Communications (GSM), which now forms the basis of digital mobile service in Europe and most other major markets except the US. The first GSM call was made in Finland in 1991 with a Nokia phone on a Nokia-equipped network. That year Nokia began selling its network technology around the world. However the collapse of the Soviet Union in the early 1990s caused a severe recession in its immediate neighbours and especially Finland. In addition, fierce competition in the consumer electronics market and hefty restructuring costs from expansion dented Nokia's profits badly.
Mid-decade, newly appointed group CEO Jorma Ollila began a restructuring process designed to focus the company on its core telecommunications business. The first unit to go was Nokia Data, sold to ICL in 1991. This was followed by the group's power businesses in 1994, television manufacturing (sold to Semi-Tech of Canada in 1996), the cabling business (sold to NKF of Holland in 1996), car electronics (to Autoliv of Sweden in 1997) and audio electronics and loudspeakers (to Harman International in 1997). Most recently, Nokia Display Products, manufacturing computer monitors, was sold to US company ViewSonic in 2000. The last remaining non-core business is Nokian Tyres, based around the group's original rubber business. This now operates as a joint venture with Sumitomo of Japan. The group also sold off some of its mobile phone accessory businesses including Salcomp, one of the world's largest manufacturers of mobile phone battery chargers. Nokia sold the company to venture capital investors in 1999, after selling its mobile phone antenna manufacturing business to UK-based Filtronics the previous year.
Yet at the same time as the group was selling off non-core businesses, Nokia's mobile phone business saw its performance rocket. The group launched its first digital phone in 1993, and sold 20 million units, far in excess of its expectations. By the late 1990s, the group was selling more than 40m phones a year. Profits soared, and the group began actively acquiring data communications and software companies around the world to bolster its research and development function. In 2000 Nokia acquired secure online transaction software developers Secure Networks for $335m and digital subscriber network DiscoveryCom for $220m. In early 2001, the group acquired US-based Ramp Networks, a leading provider of internet security appliances. However, the group sent a chill through the world telecoms market in 2001 when it confirmed that growth was slowing dramatically throughout the sector. Mid-year the group paid $421m to acquire US networking infrastructure company Amber Networks. A year later a strategic alliance was signed with broadband developer Redback Networks.
In 2003, Nokia began steps to become the the controlling shareholder in Symbian, the mobile operating system used by virtually all mobile phone brands. That business had previously been a joint venture between various handset manufacturers and mobile device manufacturer Psion, which first developed the software. In late 2003, Motorola sold its stake to Nokia and Psion, and in early 2004, Nokia agreed to buy out Psion's stake as well, a move which would have given it more than 63% of the equity. Although Nokia promised to run Symbian as an independent business, the latter's other shareholders, led by Ericsson, began a campaign to block the purchase. Nokia eventually ended up with around 48%, with the remainder split between Sony Ericsson, Siemens and Panasonic. Also in 2003 the group acquired US company Eizel Technologies, which develops server-based systems for transferring internet objects such as email messages or attachments into cross-platform wireless mobile formats.
The first check to Nokia's previously steady growth came in 2004 when, despite rapid growth in the sector as a whole, Nokia's own market share plunged. After hitting a high of just over 38% global share for 2003, Nokia's share of new handset sales fell to under 30% for the first quarter of 2004. This was accompanied by several profit warnings and a steep fall in the company's share price. (Over the same period, key rivals of the time such as Sony Ericsson, Samsung and LG reported correspondingly sharp rises in profits and market share). Commentators blamed Nokia's failure to keep up with a change in users' tastes towards clamshell-style phones, as well as lack of mid-range models. In response, the group launched its first clamshell design at the end of the first quarter of 2004 and then followed up with nine more models over the course of the year, as well as a number of mid-range and high-end handsets, most of them with integrated cameras and almost all with colour screens.
The speed of Nokia's recovery was impressive (especially compared to the similar problems which plagued Motorola between 2007 and 2009). The company was back into growth mode again by the third quarter of 2004, and its market share climbed inexorably over the next few years. For 2008, Nokia finally surpassed its previous peak, achieving a new record of 39% global share, more than that of the next three suppliers combined. Nevertheless, a new crisis has arisen since 2009, similar to that which dented the company five years earlier, in which its prominence has been sidestepped by a new generation of smart phones, now led by iPhone and Android devices.
In 2006, the group acquired US-based digital music distributor LoudEye, and used this as the platform for an aggressive assault on the music download market to compete with the likes of iPod. In 2007, the group launched its first Nokia Music Store based on LoudEye's technology, and the following year introduced the "Comes With Music" service, whereby selected high-end handsets were sold with unlimited music downloads, with no additional pay-per-track charges. The first such handsets were introduced in the UK in 2008, and rolled out to more than 30 other markets in 2009 and 2010. It failed to catch on, though, and Nokia announced plans to discontinue the plan all but six countries at the beginning of 2011.
An internet services portal, Ovi, was launched in summer 2007 to serve as a portal for various download offerings including a navigation and maps service, games, and now also comprises social networking and media sharing portal Twango, acquired in 2007. There have been several other acquisitions of companies developing mobile messaging, traffic services and social connectivity software. In 2006, the group acquired mobility software design company Intellisync, followed the following year by Enpocket, then among the global leaders in mobile advertising and marketing services.
Olli-Pekka Kallasvuo resigned as president and CEO of Nokia in summer 2010 in the wake of Nokia's declining sales. He was replaced for four years by Canadian-born Stephen Elop, formerly head of Microsoft's Office software division, and the first non-Finn ever to run the group. He transferred to Microsoft in 2014 as head of the handsets business. Rajeev Suri was appointed as CEO of the slimmed down Nokia in May 2014.
Last full revision 21st November 2016
* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *
All rights reserved © Mind Advertising Ltd 1998-2020