Nokia overestimated the strength of its brand, and believed that even if it was late to the smartphone game it would be able to catch up quickly. In that sense, Nokia’s failure resulted at least in part from an institutional reluctance to transition into a new era.Īnd there was another mistake. Diverting a lot of resources into a high-end, low-volume business (which is what the touch-screen smartphone business was in 2007) would have looked risky. Nokia was, after all, earning more than fifty per cent of all the profits in the mobile-phone industry in 2007, and most of those profits were not coming from smartphones. And this was, in retrospect, a classic case of a company being enthralled (and, in a way, imprisoned) by its past success. It also underestimated how important the transition to smartphones would be. It wasn’t just that Nokia failed to recognize the increasing importance of software, though. spending into products that people actually wanted to buy. What it was unable to do, though, was translate all that R.
It also spent enormous amounts of money on research and development. Even more strikingly, Nokia was hardly a technological laggard-on the contrary, it came up with its first smartphone back in 1996, and built a prototype of a touch-screen, Internet-enabled phone at the end of the nineties. For years, the company had been a conglomerate, with a number of disparate businesses operating under the Nokia umbrella in the early nineteen-nineties, anticipating the rise of cell phones, executives got rid of everything but the telecom business. Recently, it successfully reinvented itself again. Historically, after all, Nokia had been a surprisingly adaptive company, moving in and out of many different businesses-paper, electricity, rubber galoshes. But the reasons for that failure are a bit more mysterious.
What happened to Nokia is no secret: Apple and Android crushed it.
Today, it has just three per cent of the global smartphone market, and its market cap is a fifth of what it was in 2007-even after rising more than thirty per cent on Tuesday. Not that long ago, it was the world’s dominant and pace-setting mobile-phone maker. It also demonstrates just how far and fast Nokia has fallen in recent years. Nokia’s agreement on Tuesday to sell its handset business to Microsoft for $7.2 billion is something of a minor business coup for Nokia, since a year from now that business might well turn out to have been worth nothing.