Nokia (Finland)

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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 E5.4bn. The Nokia brand was gradually phased out on Microsoft's handsets and finally abandoned altogether. An independent company acquired the handset license and attempted 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.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 21st Dec 2017: Ads of the Week: "Be The Gift". For most people, Christmas and New Year is a time for celebration, but for some it can be the loneliest week of the year. Mother does a fine job of trying to rebuild the Nokia handset brand - now managed by an independent Finnish company under license - with a touching film about a mother (hey, coincidence!) and her absent son, connected only by their mobiles. It's a familiar theme for any Christmas, but seems to be even more prevalent in 2017.

Adbrands Weekly Update 2nd Mar 2017: Welcome to the return of the living dead! One of the most widely publicised takeaways from Mobile World Congress this week has been the relaunch of the Nokia mobile brand. This is not from Nokia itself, which now only makes network infrastructure; nor from Microsoft, which bought the Nokia handset business for billions and then effectively shuttered it last year at a cost of millions more. The maker this time is independent company HMD Global, which acquired the Nokia brand license and is now re-entering the market with a new line of smartphones. You'd hardly know about those, though, because the device that got all the media coverage is a revamp of the iconic Nokia 3310 "chocolate bar" handset, probably the first mobile phone owned by anyone over the age of 40. Such is the power of short-term nostalgia that the biggest hit of Nokia's relaunch is not those new smart devices but an updated dumbphone, that will be purchased "ironically" by a few retro hipsters and then dumped a month or two later. It doesn't even have 3G. But it does have that old chestnut, the "Snake" game, and a battery charge that lasts a month. Yeah, because it's only 2G. So no wi-fi either. We give new Nokia a year at best before it crashes and burns like its predecessor. And there's a new Blackberry device too. Like corporate Nokia, corporate Blackberry quit the device market after losing almost all its one-time Crackberry addicts. However that brand too was licensed by Chinese manufacturer TCL, which has unveiled its first device under the once-celebrated name, the Blackberry KeyOne. Good luck with that.

Adbrands Weekly Update 19th May 2016: The Nokia mobile phone brand is destined to live on. Microsoft acquired the struggling Finnish mobile phone business two years ago, but has failed since then to weaken the iron grip on the market of Samsung and Apple. Though it will continue to market smartphones under the Lumia name, Microsoft is offloading its non-smart "feature phone" operations, which still carry the Nokia name, to a joint venture between FIH Mobile - a unit of Taiwan tech giant Foxconn - and a newly formed Finnish company HMD Global, run by former Nokia executive Jean-Francois Baril. The price tag was $350m. At the same time, Nokia Corp, now focused on network equipment, agreed to transfer the license for its name to be used on those devices. Nokia is still the leading brand in the shrinking but still sizeable global feature phone market. In 1Q, Microsoft sold 15.7m Nokia-branded non-smartphone devices, equivalent to around 13% global share.

Adbrands Weekly Update 5th May 2016: Nokia is making a move back into consumer devices with a deal to acquire French company Withings for E170m. 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.

Adbrands Weekly Update 6th Aug 2015: German luxury auto brands Audi, Mercedes-Benz and BMW agreed terms for the joint acquisition from Nokia of its Berlin-based mapping services division Here for E2.8bn. Their combined offer topped several rival bids including, it's thought, one from global taxi service Uber. Nokia Here is already a leader in mapping services for in-car GPS systems, and the trio of new owners were keen to ensure it doesn't fall into the hands of Appple or Google. Each of the partners will hold an equal stake in the business, which will be run by an independent team, and its services will also be offered to third-party manufactures. A key factor in the ongoing development of the business will be the use of pooled "swarm intelligence" collected from individual vehicles to offer real-time traffic and road condition information.


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Background

Free for all users | see full profile for current activities: 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. See full profile for current activities


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