history-of-nokia

History of Nokia

Nokia is a Finnish multinational company specializing in consumer electronics, information technology, and telecommunications.  While most associate Nokia with the development of the earliest cell phones, the company was founded as a paper mill in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.

Founding and diversification

Nokia was founded as a single paper mill operation by Idestam in Tampere, a city located in the southwest region of Finland.

The operation was successful and soon expanded to the nearby town of Nokia which would inspire the company name in 1871.

Idestam then retired in 1896, which paved the way for Mechelin to expand the company into electricity generation in 1902.

Two years later and also in the town of Nokia, Polón founded the Finnish Rubber Works factory that manufactured items such as car tires and rubber shoes.

A third company, Finnish Cable Works, was established in 1912 to profit from advances in electric cable, telephone, and telegraph communication.

Both were then incorporated into the Nokia Corporation in 1967, which sold a diverse range of products including paper and rubber products, military communication, computers, televisions, nuclear power plant infrastructure, and even toilet paper.

The shift to telecommunications

In 1975, new CEO Kari Kairamo was appointed. Kairamo oversaw the expansion of Nokia into other parts of Europe while ensuring the company earned a reputation for quality manufacturing at the same time.

Four years later, Nokia released the Mobira Oy telephone and launched the Nordic Mobile Telephone (NMT) service in a joint venture with television producer Salora.

The NMT was the first international cell network in the world. Shortly after, Nokia released the Mobira Senator car phone and the DXT 200, a fault-tolerant and scalable digital switching system.

Nokia also released the Mobira Cityman in 1986, the world’s first proper handheld mobile phone weighing in at a hefty 1.7 pounds

Nokia also began manufacturing personal computers at this time, but sales were lackluster.

However, it did succeed in digital television and satellite products, with the company producing items for Ericsson in Sweden, IBM in Britain, and Hitachi in France, among many other partnerships.

In the 1990s, Nokia executives decided to focus on communications and sell off the company’s remaining business units.

Nokia cell phones are launched

With a sole focus on telecommunications, Nokia enjoyed a period of sustained success over the next few years.

In 1992, it released the first handheld GSM phone called the Nokia 1011. In 1994, the Nokia 2100 was launched with the now infamous Nokia ringtone. 

Head of Nokia Mobile Phones Pekka Ala-Pietilä predicted that mobile phone adoption could reach ”around 25% of the population in the most advanced economies by 2000.

This statement was ridiculed by many in the industry, but in any case, Nokia gained a competitive advantage over the likes of Motorola and Ericsson.

The company provided end-to-end mobile phone solutions and understood the consumer market for these products better than anyone else.

Between 1991 and 1994, Nokia increased production from 500,000 to 5 million cell phones and reported a profit of $1.44 billion in today’s prices.

The company then debuted on the New York Stock Exchange, which allowed it to develop and release the 5110, 6110, and 7110.

These phones were revolutionary at the time and were miles ahead of competitor products from Sony, Apple, and Motorola.

In fact, in 1998, Nokia overtook Motorola to become the largest phone manufacturer in the world. The company was a pioneer of innovation and had identified that cell phones were the future. The world, as it seemed, was at Nokia’s feet.

Demise

At the turn of the millennium, Nokia made a series of fateful missteps both internally and externally. Management was slow to make crucial decisions and moved away from the company’s innovative culture in favor of mass production. 

The company also refused to accept that a new product could ever jeopardize its success. Nokia had a 49.4% market share shortly before the iPhone was released in 2007.

This had reduced to 34.2% in 2010 and sits at just 3% today. 

Ultimately, the failure to withstand the release of Apple’s product was down to Nokia ignoring the importance of software in smartphone design.

Acquisition and future

Microsoft then acquired Nokia for $7 billion in 2013 as it made its own ill-fated attempt to counter the rise of the iPhone and newly-released Android phones.

Once its mobile phone division was sold off, Nokia returned to data networking and telecommunications equipment in a partnership with Siemens and the acquisition of telco equipment company Alcatel-Lucent.

Finnish company HMD Global then purchased Nokia’s mobile phone business from Microsoft, launching the Nokia 8.3 – the world’s first 5G smartphone.

Key takeaways:

  • Nokia is a Finnish multinational company specializing in consumer electronics, information technology, and telecommunications. The company was founded as a paper mill in 1865 by Fredrik Idestam, Leo Mechelin, and Eduard Polón.
  • In the 1990s, Nokia executives decided to focus on communications and sell off the company’s diverse business units. The company enjoyed a period of success in the 1990s as an innovative visionary in the consumer cell phone market.
  • Nokia became complacent in the early 2000s. With almost 50% market share, it underestimated the rise of smartphones such as the iPhone which had more of a software focus. The company went back to its roots after Microsoft purchased its failed cell phone division in 2013.

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