What on Earth Happened to Nokia?
From omnipresent to obsolete
If you're at least 25yrs old, there's a good chance you used a Nokia phone and an even better chance it was your first. Nobody can argue; Nokia was a really big deal back in the day. So big that till this day, the biggest single mobile phone ever sold was produced by Nokia.
Unfortunately, more than 85 to even 95% of the persons reading this are no longer using a Nokia smart phone, neither do they know anyone using one. So where did it all go wrong? What on earth happened to Nokia?
There was a time when, in their peak period, they left Apple eating their dust. Nowadays they mostly feature as cell service providers and the likes, in other words, they're mostly into other things now.
A brief history
The name Nokia is actually a town in Finland where it all started and you'll never guess when —go on, I'll wait. Okay if you guessed the late 90s you're wrong, and if you guessed the early 2,000s, you're way off the mark.
Nokia's (the company) origin actually dates back to 1865. Of course they weren't making cell phones, the core of their business was actually paper and this lasted for more than a hundred years before they decided to diversify by collaborating with a rubber and cable company in the 1960s.
They kept expanding by acquisition and collaboration until they eventually bought a Finnish mobile company and started making phones in 1981. By the 90s, Nokia was already into a lot of things from phones and rubber to paper, they didn't really stick to one thing in particular.
They sold a lot of diverse products but weren't really making much profit, I mean, your grades are going to tank if you take up a dozen jobs after school right? Nokia was that student and decided they needed to shed some dead weight and focus on one thing, mobile phones. The public were at a period when curiosity for cell phones were high and they were willing to try new things.
Nokia took advantage of this through consumer research and came up with phones of varied designs and purposes. Everything paid off in 1995 when their profits skyrocketed, sales went through the roof and their market value shot up by 1,000%. They became the best selling mobile phone brand on the planet by 1998. For more than a decade, Nokia dominated the market.
For perspective as to how much power they had, this is the rank for the best selling phones of all time:
1. Nokia 1100
2. Nokia 1110
3. IPhone 6
4. Nokia 3210
5. Nokia 1200
6. Nokia 6600
7. Nokia 5230
8. Samsung E1100
9. Nokia 2600
10. Motorola RAZR V3
Nokia was all over the place, a whole 7 slots on the ranking were occupied by Nokia phones. Nokia saw tremendous success in 2008 when they sold 475M units worldwide. For comparison, in 2018, Apple sold 209M units worldwide.
In the same 2008, Nokia's market share was about 38.6%, which means a third of mobile phones sold belonged to Nokia. Again, for perspective, in 2018, Apple held a market share of 13%.
Nokia's market share was almost 40%. To show you how big that is, as of November 2022, Apple and Samsung's market shares combined were about 38%. 2007 was their best year financially when they brought sales of €51bn and €8bn in operating profit.
The beginning of the end
In 2012, their market share, which already started plummeting towards the end of 2008 placed them at the number 2 spot, and their sales weren't looking too good either. Their operating profit had already entered the negative zone in 2011 (they lost €1bn that year). Within 5yrs, they went from making close to 10bn a year to losing 1bn. But what went wrong here? Let's rewind a bit.
The rise of smartphones
The popular legacy versions of Nokia like the 3310, 1100, were making them good money but they weren't smartphones. Throughout that period, smartphones started popping up, with Steve Jobs unveiling the first iPhone in 2007. However, not many people seemed to care that much as the vast majority of the public saw smartphones as luxury and for business purposes.
Nokia was not at all threatened and carried on making their phones at relatively low costs. At the end of the year the iPhone was launched, 5% of smartphones were sold by Apple and 50% by Nokia, can you see how comfortable they were? To be honest if I was the CEO at that time, those numbers won't scare me either.
Nokia became too comfortable with the now (then) and never took the future seriously, they never expected smartphones to catch on. On the other hand, while the first version of the iPhone didn't sell so well, the versions after kept selling better than their previous. At this point, Nokia gradually began to join the smartphone party but it was already too late.
One of the reasons the iPhone kept enjoying success after success was due to the fact that Apple kept tweaking and making relevant changes to their operating system. The OS, in summary, is what's responsible for what's showing on your screen. While Apple took theirs seriously, Nokia didn't and rather kept focusing more on adding external features and stuff that pretty much weren't necessary.
Nokia was using an OS named Symbian, which wasn't too compatible with the smartphones they had started building. Instead of producing OS that will then be compatible with the smartphones, they began developing smartphones that will be compatible with the OS. Due to the fact that they were already under pressure because they joined the smartphone party pretty late, they had to rush things, which ultimately led to a lot of bugs and glitches.
This made the population gravitate towards phones with better OS, which led to the 2011 crash in profits and sales.
"The first iPhone shipped in 2007 and we still don't have a product that is close to their experience. Android came on the scene just over 2yrs ago and this week, they overtook our leadership position in smartphone volume. Unbelievable"
– Former Nokia CEO.
Apple made it clear that even if the prices are high, if the phones were designed well, people would make more applications for it and consequently, more people will buy.
"We fell behind, we missed big trends and we lost time. At that time, we thought we were making the right decisions but with the benefit of hindsight, we now find ourselves years behind"
Their fate
Sometime later, Nokia abandoned Symbian and decided to adopt windows as their main OS. Later that year, the Nokia Lumia was born, a phone which ran on windows OS.
In 2014, Microsoft bought the phone division of Nokia for $7.2bn, however, the whole thing didn't work out and they ended up selling it in 2016 for $350M.
Today, with only 1% of the market share, they're still trying to claw their way back into the smartphone business. Nokia was dominating the market, got too comfortable with their lead, slept on it and was severely punished by more serious brands.
NO company is too big to fail. Looking at you, Google
Sources