Focusing and refocusing Nokia
Nokia became known as a brand for mobile headsets, yet two decades ago the mobile phone business generated a mere 10% of the revenues of what was then an industrial conglomerate in Finland. Nokia quite literally ‘hit gold’ with its mobile handset design and marketing and thus focused its resources on exploiting this goldmine, selling its other business units along the way. The main restructuring occurred in one major wave in the early 1990s, which created foundations to grow its competencies in mobile telephony globally and to exploit these competencies by developing and marketing related communications devices.
The transformation of the company can be traced through its annual reports. In 1990, Nokia presented itself as:
a European technology company . . . 84 per cent of turnover comes from EFTA and EC countries. The group is divided into six divisions . . . Main products are colour TVs and monitors, microcomputers and terminals, mobile phones, digital telephone exchanges and telecommunication networks, cables and cable machinery as well as tyres and chemicals for forest industry
In contrast, in 2009, the Nokia website introduced the company thus:
We make a wide range of mobile devices with services and software that enable people to experience music, navigation, video, television, imaging, games, business mobility, and more. Developing and growing our offering of consumer internet services, as well as our enterprise solutions and software, is a key area of focus. We also provide equipment, solutions, and services for communications networks through Nokia Siemens Networks.
However, the synergies between the mobile phone handset business and the network business gradually diminished. Mobile phones were increasingly about design, fashion and user software, which required different types of capabilities from a technology business like network infrastructure. After a successful run in mobile phones, Nokia lost its leadership to new competitors like Apple and Samsung. Nokia’s turnover dropped from a peak of €51.0 billion in 2007 to €30.2 billion in 2012. A partnership with Microsoft in 2011 was supposed to help turn the company around but could not stop the slide. Initially, Nokia’s sales in emerging economies held up while sales in Europe were dropping, but in 2012 China sales took a big hit, dropping from €7.1 billion in 2010 to €2.5 billion in 2012.
Under pressure, Nokia went through another major transformation in 2013. First, it acquired Siemens’ stake in Nokia Siemens Networks to become the sole owner. Second, Nokia sold all of its mobile phone business along with licences for its patents and mapping services for €5.4 billion to Microsoft. Third, in 2015, it strengthened its network business by taking over Alcatel Lucent for €15 billion, thus challenging the global leaders Ericsson of Sweden and Huawei of China. Then, in 2016, it also sold its navigation technologies business HERE for €2.5 billion to a consortium of car makers.
Nokia thus became a much smaller and more focused company, reporting a turnover of just €13.8 billion in 2014, up again to €23.6 billion in 2016. It focused on the network infrastructure business, now called Nokia Networks, which develops and installs the infrastructure for mobile networks, fixed networks and optical networks. In addition, Nokia Technologies focused on developing new technologies and exploiting intellectual property rights from old and new patents. Nokia Technologies quickly returned to the consumer market with a tablet device in 2014, developed jointly with Foxconn.
