The birth and fall of the Nokia phone empire

Nokia once dominated the global phone market in the 1990s, but its slow innovation in the face of rivals cost it.

Nokia was founded in 1865 in Tampere (Finland), by mining engineer Fredrik Idestam. Originally, this was just a pulp mill. The name Nokia is named after the Nokianvirta river - where Idestam opened its second factory.

Later, after more than 100 years of operation, Nokia continuously expanded into the rubber industry (famous for its boots and tires) and then into the production of cables and electronics. Nokia's phone business was born in 1979, as Mobira, thanks to a joint venture with Finnish TV maker Salora.

A Nokia pulp mill. Photo: Bloomberg

In 1982, Nokia released the first mobile phone for use in the car, the Mobira Senator. Five years later, they produced Mobira Cityman – the first hand-held mobile phone. The device weighed about 800 grams, costing 24,000 Finnish marks then (4,650 euros). Former Soviet leader Mikhail Gorbachev used this phone to call from Helsinki to Moscow.

Thanks to Nokia, Finland then became the birthplace of a series of technological breakthroughs in the world. In 1991, Finnish Prime Minister Harri Holkeri used a Nokia phone to make the first 2G call.

In 1992, Nokia launched Nokia 1011. However, due to many business segments, it was difficult to avoid losses. Nokia CEO at the time - Jorma Ollila - therefore decided to focus only on mobile phones and telecommunications. The rubber, cable and consumer electronics segments were then gradually sold off.

In 1994, Nokia released the 2100 - the first phone with its legendary ringtone. Only set a goal of selling 400,000 units, but in the end, Nokia sold up to 20 million units globally.

In just four years, Nokia became the world's leading mobile phone company. This segment is also valued at about 300 billion USD. By 2001, their phones had added many features, from cameras to web access. Annual revenue also increased 5 times.

Analysts say that Nokia made the mobile phone revolution in the late 90s, and made Finland's economy the richest in the world. According to the Finnish Institute of Economic Research, Nokia contributed up to 25% of Finland's growth between 1998-2007. This was the period that former Finnish Finance Minister Alexander Stubb called the "economic miracle".

However, on the cusp of success and able to take advantage of the arrival of 3G networks, Nokia again issued a profit warning and announced plans to lay off 1,000 people. The reason they give is the market going down.

One of the early Nokia phones. Photo: Reuters

By 2004, Nokia admitted that it was gradually losing market share to rivals, although they were still the leading name. In 2005, they sold their billionth phone. According to data analysis firm Gartner, Nokia's smartphone market share in 2007 was still close to 50%, with phones using the Symbian operating system.

However, that same year, Nokia had to recall 46 million phones due to faulty batteries. The other big problem is that Apple launches the iPhone. Analysts say the arrival of the iPhone makes Nokia phones suddenly become obsolete like the Mobira Cityman.

Nokia's profits began to plunge as iPhone sales boomed. In 2008, Nokia reported a 30% drop in third-quarter profits. iPhone sales increased more than 300%.

The global financial crisis exacerbated their problems. In 2009, Nokia cut another 1,700 employees and recorded its first five losses in more than a decade.

Company leaders said it was too slow to adapt to new technology. The arrival of the iPhone changed consumers' perception of smartphones. Apple's app store is also more attractive than Nokia's phones.

When Samsung and Google's Android operating system began to pose a threat, Nokia appointed its first non-Finnish CEO - former Microsoft head Stephen Elop. Their goal is to turn the tide for the company.

However, Elop failed to do this. Nokia is surpassed by both Samsung and Apple in the smartphone segment. Profits and sales both went down. Elop then announced a strategic partnership with Microsoft, bringing the Windows Phone operating system to Nokia's Lumia line of products since 2011. He also denied that he was negotiating to sell Nokia to Microsoft.

In 2012, Nokia lost 1 billion USD. They also lost the world's largest phone company to Samsung. Nokia's mobile phone market share is only 21%, according to data from market research firm IDC.

Smartphone production is shifted to Asia. Analysts began to predict that Microsoft would buy Nokia when it cut another 10,000 employees and announced that the last factory in Finland would close.

In 2013, Microsoft acquired Nokia's handset business for 5.44 billion euros. However, by 2016, they had to sell this segment for only $ 350 million. The buyer is HMD Global – a company in Finland founded by a former Nokia employee. The Nokia brand thus re-emerged in the mobile phone market.

Analysts say that Nokia failed because it grew too fast and its management was subjective on winning. They are slow to react to changes in the world around them. Nokia continued to develop the Symbian operating system, but was slow to introduce touch features on the platform. In 2010, it worked with Intel to develop another mobile platform, but abandoned this project a year later and turned to work with Microsoft.

Currently, Nokia focuses on networking equipment and software. They founded Nokia Networks after acquiring shares in a joint venture with Siemens. In 2015, Nokia bought French telecommunications equipment supplier Alcatel-Lucent for $16.6 billion to grow its customer base and business. Nokia is currently the leading name in the global telecommunications equipment segment, with sales last year reaching $26.2 billion, equivalent to 2021.

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