This is a Trilogy, a B3B about Nokia. How it went from Best to Bankrupt and Back to Billions.
Once upon a time, in a land not so far away was a brand named Nokia.
For 13 years, a mirror confirmed she was the fairest of them all. Indeed she was the BEST in B2C (business to consumer). Nokia overtook Motorola in 1998 as the top mobile phone manufacturer, and lost this to Samsung in 2011.
A series of strategic decisions resulted in the rapid decline of Nokia’s mobile phone business. After years of losses, Nokia sold its mobile phone division to Microsoft in September 2013 for $7.2 billion USD. The deal included both Nokia’s mobile phone business and its patents. The sale was completed in April 2014, after receiving regulatory approval.
Microsoft, after struggling to compete in the smartphone market, ultimately decided to exit the mobile phone business. In May 2016, Microsoft announced that it was selling its feature phone business to Foxconn and HMD Global for $350 million USD. This marked the final phase of Microsoft’s retreat from the mobile phone industry, effectively closing its mobile phone division.
A famous quote attributed to Stephen Elop, the former CEO of Nokia, came from his emotional farewell memo to employees when the company was preparing to sell its mobile phone division to Microsoft in 2013. In it, he stated:
But, like in many a Star Wars trilogy, rebirth (Act 3 or B3B) and Nokia is back in a different game. In 2023, Nokia generated revenue of approximately $23.9 billion USD. Nokia has demonstrated resilience by focusing on growth areas such as enterprise solutions, network infrastructure, and R&D investments. The company continues to adapt and innovate, aiming to achieve long-term stability and growth.
Watch the 16 min video to learn more about this true story:
Several Key Areas were covered in the video:
- Touch Screen, User Experience and New Products
2. Drop Test
3. Ecosystem: Partnership and Alliances
4. Strategies and Choices: Flashy vs Stability
5. Product Life Cycle
Here is the video transcript, with time stamps:
From Bankruptcy To Billions: The Rebirth Of Nokia
(0:00 – 0:15)
In 2008, Nokia generated over 76 billion dollars in revenue. They were at the top of the mobile market. But after a few short years, they exited after losing all their market share.
(0:15 – 2:55)
It seemed like bankruptcy was inevitable as executives fled, but one man could not accept this. This is the story of how a single man destroyed Nokia and how another gave them a new life in the modern smartphone era. Nokia was once the king of the mobile industry, and as mobile phones grew, so did they.
Their revenue in 1996 was 7.5 billion dollars, but by 2008, it was 10 times that. Yet, all of this was about to change. Around the time of Nokia’s dominance, something happened.
In 2007, a single press conference was being held which would change the world, one which sealed Nokia’s fate. People watched as they saw the phone market change overnight. Compared to Nokia’s classic brick phones, the iPhone was different.
It was sleek, had a fast, seamless user experience, and most of all, introduced the revolutionary touchscreen. No one had seen anything like it. But smartphones were still new.
Nokia was in the perfect position to adapt and retaliate. Though, that’s not how things played out. Leaked internal reports show that Nokia wasn’t intimidated by Apple’s new product.
Instead, they mocked it. Their engineers claimed the iPhone was expensive to manufacture. They also pointed out that it didn’t come close to passing their drop test.
Nokia believed the iPhone was a niche product, but really, they were just seeing what they wanted to see. Nokia was the most reliable phone on the market, yes, but soon, that bulky durability was seen less of a selling point and more of a drawback. People now wanted something sleek with a touchscreen.
Smartphones had changed the industry forever. Nokia watched consumers flock to these new smartphones, and soon, competitors began offering their own smartphones. In 2008, HTC and Google released the T-Mobile G1 with the first version of the Android operating system.
By this point, Nokia’s executives finally realized they had underestimated the iPhone. So, how did they respond? The N97 was Nokia’s response. It had a 5MP camera, a slide-out keyboard, twice the storage space as the iPhone, a GPS system, and most importantly, a touchscreen.
(2:55 – 10:00)
Nokia was so confident about the N97 that they labeled it the iPhone killer. Unfortunately, it was anything but. In reality, it was clunky and the screen was unresponsive.
But the biggest problem came from their operating system, Symbian. Symbian was a huge selling point for their older phones, but now, it was costing them. Compared to Android and iOS, Symbian was a nightmare for third parties.
At launch, their online store for the N97 had just over 500 applications, but at this time, the Apple App Store had over 100,000. The N97 ended up a colossal failure, and it was at this point that Nokia realized they needed to make a change. And this change came from their newest CEO.
In September of 2010, Nokia announced their new CEO would be Stephen Elop. Elop was previously the head of Microsoft’s business division, and throughout his leadership, he pushed Microsoft to develop the Office Suite and move into cloud technology. Elop had produced record profits for Microsoft, and he was known as a change agent.
Nokia was surely in desperate need of change, but the change that came had unintended consequences. On his very first day at Nokia, Elop announced a mandatory meeting with the entire company. A historic day which is detailed thoroughly in the book Operation Elop, a book by past Nokia employees.
The cafeteria was closed the whole day, and a stage was built especially for the event on the west side of the lobby. The doors were covered by security, and everybody was repeatedly reminded about turning off their cameras. No recording of the event was allowed.
Then, Elop began his speech. I have learned that we are standing on a burning platform. There is intense heat coming from our competitors, more rapidly than we ever expected.
Apple disrupted the market by redefining the smartphone and attracting developers to a closed but very powerful ecosystem. At the mid-range, we have Symbian. It has proven to be non-competitive in leading markets like North America.
Additionally, Symbian is proving to be an increasingly difficult environment, leading to slowness in product development. The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, e-commerce, advertising, search, and many other things. Nokia, our platform is burning.
We are working on a path forward, a path to rebuild our market leadership. I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
But unfortunately, this speech caused plenty of problems. It attacked Nokia’s products and value proposition and exaggerated Nokia’s challenges from problem to crisis. And despite all the security, the speech was indeed leaked to the public, which damaged Nokia’s brand, decreased their sales, and dropped the confidence of shareholders.
But Elop wasn’t concerned. Why? Because he wanted Nokia in crisis mode, so he could implement his changes in the board meeting a few days later. Symbian obviously needed to go, but the question was what would replace it? This would be the most important decision of Nokia’s future.
They could adopt the widely used and supported Android, the biggest competitor to Apple’s iOS, which was dominating the market. But Elop had his eyes set on something else, which would change Nokia forever. Elop set out to use Microsoft’s OS and create the Windows Phone.
After the burning platform speech, there was no time to reopen the negotiations with Google, so switching to Windows Phone was the only choice the board could make. And Elop, with his deep relationship with Microsoft, established a partnership in no time. Nokia would provide the hardware, R&D, and marketing, and use the Windows OS exclusively.
In February of 2011, Elop announced Nokia’s new strategy to the world. Symbian would be phased out in favor of the new Windows OS. From Nokia’s perspective, this would be the third ecosystem in the smartphone market and a way for Nokia to stand out.
Nokia received billions from Microsoft to develop the new generation of Windows Phones and for marketing. The two companies were setting out to challenge the status quo and disrupt the industry and the stakes were sky high. Nokia was now losing lots of money, with a Q2 loss of 368 million euros, compared to a 227 million euro profit in the Q2 of the previous year.
Then, Nokia unveiled the product of this partnership, the Lumia 800 and Lumia 710, their new generation of smartphones with the Windows 8 OS. This is when things went from bad to worse. Nokia’s Windows phones were doomed from the start.
The interface was unique, but too unique. Users had to essentially relearn how to use a smartphone, and many found it unnatural and unintuitive. You could see that a desktop-first company designed the software.
Not only that, Windows placed heavy restrictions on The Windows OS required both phones to use a single-core processor, while competitors were operating on dual or quad cores, meaning Nokia was leagues behind in speed and power. They also had small storage and, bafflingly, no front-facing camera. But most of all, there was a serious lack of apps.
Windows 8 had a bad interface and was unappealing to most developers. And since these phones were launched late, many users were already on Team Android or Team iOS. The Windows phone had a terrible ecosystem, which is strange given that this was the entire focus of Elop’s famous speech.
And as time went on, it wasn’t clear where Elop’s loyalty was. Despite being the CEO, it seemed like he was still deeply tied to Microsoft. Elop was insistent on sticking to Windows, even though it was clear it was a poor choice.
If they had started off with Android for their phones, they might have survived. But unfortunately, they tried something even riskier, a risk that turned into a colossal failure. Many board members felt that Elop was making decisions too independently and not keeping the board informed.
It was also revealed that the final decision for the Nokia-Microsoft partnership was made the night before the world reveal. During their entire lifespan, between November 2011 and April 23, 2014, 52 million Lumia smartphones running the Windows phone operating system were sold. Might sound like a lot actually, but for comparison, it took Samsung just 2 months to match this number.
The Nokia-Microsoft partnership was a colossal failure. All of this drew attention back to Steven Elop. Suspicion of his loyalty and competence was at its peak.
(10:00 – 11:23)
So what did he do? In 2014, Elop jumped ship back to Microsoft. But if that wasn’t bad enough, he took most of Nokia with him. Microsoft acquired Nokia’s devices and services division for $7.2 billion.
And with the deal, Elop became president of the mobile devices group at Microsoft. Worst of all, he took many of Nokia’s leadership with him. Given our long partnership with Nokia and the key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and a great execution.
A cheery statement, but the exact opposite is what actually happened. Before Elop joined Nokia, they had a 33% market share in the smartphone market itself. But when he left, they had less than 3%.
The partnership was a loss for both Microsoft and Nokia. But there was one crucial difference. Microsoft could afford the loss.
Microsoft sold off Nokia’s phone business in 2016 for a bleak $350 million, wrote off the loss, and moved on to win the cloud. Nokia, on the other hand, was left with nothing. They had suffered a cumulative 4.9 billion euro loss and were left without key executives or their most important division.
From here, most customers forgot about Nokia altogether. Nokia should be dead and buried. But it isn’t.
(11:26 – 16:21)
While Nokia’s phone division was in flames under Elop’s leadership, another division of Nokia was doing remarkably. The Nokia solutions and networks department was an unprofitable division. But in 2009, Nokia appointed Rajeev Suri as its head.
And by 2014, he had turned it into an extremely profitable, stable part of the business. A sector keeping the rest of Nokia afloat. Suri had been here since 1990, and he had seen it all.
As such, he was their leader in their time of crisis. In 2014, Suri was appointed as the new CEO. From here, he immediately laid out his plans.
Nokia would be restructured, costs would be cut, and the company would be scaled back dramatically. They clearly needed to pivot. But the question was, to what? The answer came from Suri’s old sector.
With our three strong businesses, networks, gear, and technologies, and our position as one of the world’s largest software companies, we are well-placed to meet our goal to be a leader in the technologies for a world where everybody and everything is connected. Suri was the opposite of Elop. His strategies weren’t flashy or risky, and some might even consider them to be boring.
But they were all focused on one thing, stability, and we can see that clearly in his first action. Confidence in Nokia was at an all-time low, and they needed to rebuild trust with shareholders. With the money from the Microsoft deal, Nokia enacted a massive share buyback.
Shareholders received dividends, the amount of Nokia shares decreased, and most importantly, the value of existing shares increased. Suri knew that Nokia needed to be in perfect financial condition after the Microsoft disaster. The shareholders had to be confident in the company so he could begin enacting the rest of his plan.
And with that, Nokia began investing in their new strategy. In 2015, they acquired Alcatel-Lucent for $16.6 billion. The reason? This firm owned the prestigious and historic Bell Labs, one of the most legendary R&D labs in telecommunications, who owned over 29,000 patents.
Suri was investing into something massive, a new technology that could save their business, 5G. Nokia was building a 5G network before it was commercially available. They wanted to be a first mover like their early adoption of the mobile market.
They couldn’t afford to be a late adopter like in the smartphone race. But they weren’t alone. They were up against Huawei and Ericsson, both of which had bigger networks and were at home in this market.
But things did begin to turn for Nokia. In 2018, after several years of investment and research, Nokia revealed their biggest breakthrough yet, ReefShark, computer chips specifically designed for 5G. It wasn’t their first, but ReefShark was a massive leap forward.
Their bandwidth could reach 84 gigabits per second, three times their previous 5G chips. ReefShark was also 50% smaller and reduced power consumption by up to 64%, making it much cheaper to run. Suri was pivoting from consumers to other businesses, from B2C to B2B.
Just after this announcement, Nokia also announced a partnership with NTT Docomo, Japan’s largest telecommunications company, and this was just the beginning. Nokia soon began supplying to giant firms like AT&T and Vodafone, and by 2020, they had secured 100 commercial 5G agreements. By late 2024, this has risen to over 300, and they currently control 29% of the 5G market outside China.
In their 2020 press release, they revealed that their products support more than 6.4 billion subscriptions through their various customers. Suri’s investment and restructure had paid off. Before the demerger with Microsoft, their revenue had fallen to under 6 billion, but by 2022, their restructure had added over 20 billion to their revenue.
Now, granted, Nokia is still only worth about a tenth of their peak market cap, coming in at $25 billion. But for the first time, they have something that they haven’t had in 17 years, stability. Nokia had done the impossible, they had survived certain death.
After Elop left Nokia and returned to Microsoft, their mobile division continued to suffer. His bold, risky strategy had ultimately led to both Nokia’s downfall in mobile and his own. By 2015, the Microsoft Devices group was largely shut down, sold for pennies, and Elop was laid off.
His career has unsurprisingly not reached the same heights since. Conversely, Rajeev Suri had saved the company he’d been so loyal to. His long-term vision, foresight, and emphasis on financial stability had allowed Nokia to survive.
(16:21 – 16:35)
Both Elop and Suri made bold decisions with Nokia, but the results couldn’t be more different. If you’re interested in deeper dives, interviews with insiders, and exclusive tech analysis, you can sign up to our free weekly newsletter. Link is below.