Nokia Corp. is charting a new future. Only those who haven’t researched its history will look at the recent challenges and write off the Finnish company. Nokia is not new to change; it’s first logo spotted a fish. (See below). It’s going through a wrenching evolution right now but the current reorganization is being layered on a long history of self-renewal the company has gone through since it was founded by a mining engineer as a wood pulp mill in 1865.
Today, Nokia is still the world’s second biggest mobile phone manufacturer by unit shipment and remains a leader in the high-tech world. It sold 64.6 million handsets in the third quarter and nearly 250 million units for the first nine months of the year, making it a formidable adversary in the sector. Its past couldn’t be more different, however, and the future it wants to engineer may similarly diverge from its current business. In addition to its start in forestry, Nokia has in its nearly 150 years existence lumbered into rubber, boots, car tires, cables, electricity and once was Europe’s top TV maker.
Within the next several months, Nokia will conclude the sale of its wireless handset division to Microsoft Corp. and embark upon its next and probably most challenging reinvention. Upon wrapping up the Microsoft transaction sometimes early in 2014, Nokia will keep a strong foothold in the telecommunications equipment market via its Nokia Solutions and Networks (NSN) division and maintain an enviable patent portfolio that it would be freer to monetize, according to company executives and analysts.
“Subject to the transaction with Microsoft closing, Nokia's earnings profile and financial position are expected to strengthen significantly,” said Timo Ihamuotila, Nokia’s CFO and interim president while presenting the company’s latest financial results to analysts. “And from a position of strength in NSN, HERE and Advanced Technologies, we will have a solid basis to drive future value creation through investing in growth. We believe all of this will benefit Nokia and its shareholders and we will continue to operate with the guiding principle of value creation.”
Will Nokia execute a successful transition and hold onto a prime position in the high-tech supply chain or after valiant restructuring efforts disappear like Canada’s Nortel Networks Inc. into the industry’s enterprise graveyard? The company is starting off this round of reorganization financially stronger, well known and better capitalized than in previous reincarnations. It will also be dealing with a more competitive global economy where the advantages it once had of being the first mover or stronger competitor in the markets it veered into over the decades may not exist.
One of the main challenges Nokia will face comes from the intensely competitive networking and data communication equipment market. It faces some strong opponents, all of which are experiencing turmoil in the sector due to the vagaries of demand. Alcatel-Lucent, for example, is in the throes of another round of reorganization to return to profitability and some analyst have speculated it could actually be an acquisition target for Nokia or another OEM in the market.