RIP old Nokia, it was fun while it lasted

10 Jul 2015

Nokia is dead. Well, the old Nokia mobile phone brand that we all knew and loved is dead, anyway, according to Finland’s Prime Minister. Microsoft’s decision to cull 7,800 employees in its smartphone group this week was the nail in the coffin.

During the week, Microsoft CEO Satya Nadella said Microsoft is set to let go 7,800 staff in its smartphone division, on top of the 18,000 it announced would go last year.

This confirms what many of us suspected back in 2011 when the then-CEO of Nokia, Stephen Elop (recently axed by Nadella in executive musical chairs), announced that Nokia was a “burning platform” – Nokia never had a future at Microsoft.

Back then, the question was whether Elop – previously a longtime Microsoft executive – could be a Microsoft plant ahead of an inevitable acquisition of Nokia’s once-powerful handset division. That acquisition happened last year for US$7.2bn and the Nokia mobile brand has since been steadily phased out in favour of a universal Windows brand.

But Microsoft’s corporate game hasn’t been without a hefty price and the Redmond software giant has had its fingers burnt, recording a gigantic US$7.6bn impairment charge mainly due to the Nokia acquisition and other restructuring costs.

Infographic: Microsoft Spent $9.4 Billion on a Sinking Ship | Statista

For Finland, Nokia was comparable to Ireland’s Guinness. It was a proud local brand that did good – it went global.

The smartphone cull at Microsoft will leave a skeleton crew of 900 jobs in Finland. This is in harsh comparison with the year 2000, when Nokia employed 24,000 people to assemble mobile devices in Finland.

At its peak, Nokia’s market value was a staggering US$320bn and it was the undisputed king of the mobile world.

“In practice, this means the end of the mobile-phone operations of the old Nokia in Finland,” said Prime Minister Juha Sipila.

Where did it all go wrong for Nokia and what can we learn from this?

Microsoft’s impairment charge of US$7.6bn is a lot of money for most of us, but a drop in the ocean when you consider that in Apple’s most recent Q2 financial results in April it revealed that iPhone sales brought in US$40.3bn in revenue, with some 61.1m iPhones sold during the quarter.

It all went wrong for Nokia, and indeed Microsoft and BlackBerry (then RIM), when the iPhone came along in 2007.

Before that, Microsoft was the king of the technology world and, indeed, continued to believe it was when Windows 7 launched in 2009. But the writing was already on the wall and seismic changes were coming as computing moved from desks to hands. Former Microsoft CEO Steve Ballmer foolishly sneered at the iPhone – “it has only one button,” he guffawed – while both Nokia and BlackBerry stubbornly refused to adapt to the changing market, launching limp, so-called “iPhone killers” instead.

At the turn of the century, Nokia was the undisputed king of mobile. The former Finnish lumber company was the epitome of how old world companies could transform and adapt to the brash new 21st century – or so we thought.

To own a Nokia device was to own quality and the hardware was initially fabled for its ability to run for days – even weeks – on a single battery charge.

When the iPhone arrived in 2007, Nokia was big, bloated and arrogant, and not near nimble enough to defeat the new arrival.

Sticking to its old, outdated Symbian software, it trundled on but failed to do anything new or surprising. Microsoft smelled blood, installed Elop, and Nokia feebly allowed itself to switch to Microsoft’s Windows Phone operating system.

The lesson in all of this is that companies must be careful never to lose nimbleness or conviction, and should appreciate competition as a wake-up call and an opportunity to change.

While Apple is now the king of mobile, lessons from Nokia’s demise should be taken on board. Apple is approaching a US$1 trillion valuation, but still has less than 20pc of the global mobile market and its devices aren’t cheap. It has a rock-solid iOS and App Store ecosystem, but the developed world is still economically fragile, smartphone and tablet markets are saturated, and the real growth is to come in the developing world where people want affordable but quality smartphones. This latter market is where Nokia could have and should have been.

Not only this, but Apple’s latest form factor –the Apple Watch – is already seeing a sales decline, with some reports indicating a 90pc drop. Apple is big, but it’s not too big to fail.

The future of Nokia

Firstly, what remains of Nokia after the sell-off of its handset division to Microsoft last year is focused on the future of networks and services, particularly the 5G future. It proved this through the acquisition in April of Alcatel-Lucent for €15.6bn.

The ingredients that made Nokia a potent and exciting mobile brand exist in the spirit of feisty young smartphone design brand Jolla, which was formed in 2011 by a bunch of disgruntled Nokia employees who were annoyed that the unthinkable was going to happen – that Nokia would bend and take on Windows Phone as its primary OS.

They absconded from Nokia just before it was acquired by Microsoft, and the fruits of their labour – a smartphone and a tablet computer – were on show at Mobile World Congress 2015.

The pride these workers had in Nokia’s legacy, their belief in open source and what they had achieved, was evident in their decision to build their own crowd-sourced operating system, Sailfish OS.

Their enmity towards Microsoft is clear in their ambition to usurp Windows and become the third biggest operating system in the world after Android and iOS.

If the Nokia mobile brand is dead, its spirit lives on.

Old Nokia phone image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years