It is 150 years since Nokia was founded as a paper mill at the Tammerkoski Rapids in south western Finland and the firm has experienced more than its fair share of ups and downs since then.
Nokia has reinvented itself numerous times (see the potted history below) – including dealing with the rise and fall, and eventual sale, of its mobile phones business – and now, with Wednesday’s announcement that it will acquire rival Alcatel-Lucent in a deal that values it at €15.6 billion, it is seeking to establish itself as a heavyweight in the networks game.
The deal makes logical sense; the firms have different strengths when it comes to product portfolios and geographic footprints, but also the ability to gai n cost synergies and eliminate areas of overlap. But is Nokia overlooking something?
Alongside the AlcaLu deal, the firm announced it is undertaking a strategic review of its mapping business Here, which could lead to a sale. That could be a mistake.
Nokia missed the boat at the start of the smartphone industry, despite being an early developer and well-placed to take advantage of the phenomenal growth that it was then impossible to predict. Here’s mapping capabilities could be a strong asset to Nokia in the nascent Internet of Things (IoT) world that has only just begun to show its potential.
The Nokia 9000 Communicator was launched as long ago as 1996; two years later Nokia overtook Motorola as the world’s largest mobile phones provider. The N95, more akin to modern smartphones, followed in 2007. In Nokia’s Q2 results presentation that year, then-CEO Olli-Pekka Kallasvuo highlighted strong N95 sales and said the vendor had benefited from "a weak competitive environment" during the quarter, name checking Motorola, but not Apple. The iPhone launched in mid-year in the U.S. and the rest is history. Nokia’s handset division – now part of Microsoft – captured just 11% of the global phones market in 2014, according to Strategy Analytics, while in Q4 alone its share fell to 9.7% compared to Apple’s 14.5%. Its smartphone share no longer registers.
Current Nokia CEO Rajeev Suri – who will continue to lead the company when and if the Alcatel-Lucent deal closes – has made repeated mention of the synergies between Nokia’s networks business and Here, particularly in light of various predictions that the world will reach 50 billion connected devices sometime in the next decade.
Last month he presented a new predictive marketing solution that brings together the capabili ties of the networks and mapping businesses, describing it as "a small taste of what the renewed Nokia…can do."
Selling Here at this stage in the game, before it has had the chance to exploit its full potential, seems short-sighted.
Nokia paid $8.1 billion for map maker Navteq in 2008 and has subsequently added to its mapping assets. Late last year it valued the Here business at around €2 billion ($2.2 billion) though.
Getting rid of Here at this stage would be bad news for shareholders, according to Radio Free Mobile founder Richard Windsor.
Earlier this week Windsor noted that Here could be set to benefit from the fact Google’s mapping deals with various companies are due to expire.
"Many of the deals with Google were struck some time ago and many customers now view Google as a competitor and I think would welcome an independent supplier of mapping data…Much of this opportunity still lies in front of Here," he said.
"The fact that there are a number of private equity shops all considering bidding for Here is a good sign of how much value Nokia will be leaving on the table if it sells now," he warned.
Last week Bloomberg sources claimed that Nokia had approached a number of potential suitors for Here, including taxi booking app maker Uber and various private equity outfits. A group of German car makers has also reportedly shown interest.
For me, it feels a little like BT’s oft-mentioned decision to spin off its O2 mobile arm in 2001.
It’s not too much of a stretch to imagine 15 years from now sitting at my keyboard (or whatever touchscreen monstrosity has replaced it) writing a news piece following Nokia’s multi-billion-euro acquisition of a major global map maker or similar.
On the other hand, given Nokia’s gift for reinvention, the Finnish firm could have turned its attention back to wellies by then.
NOKIA: MASTER OF REINVENTION
1865
Fredrik Idestam set up his first wood pulp mill in Tammerkoski Rapids in south western Finland. A second mill follows on the Nokianvirta river, inspiring the brand name Nokia, launched in 1871.
1967
Nokia merges with rubber boots maker Finnish Rubber Works and telephone and power cables company Finnish Cable Works to form Nokia Corporation. The company has five businesses at this time: rubber, cable, forestry, electronics and power generation.
1982
Nokia introduces a car phone based on the NMT-450, first generation analogue mobile standard.
1987
Nokia launches its first handheld mobile phone, the Mobira Cityman 900, based on NMT-900.
1989-1996
Nokia divests its non-telecoms businesses.
1991
Nokia’s first GSM call over the Radiolinja network in Finland.
1992
The 1011 launches, Nokia’s first GSM phone.
1996
The Nokia 9000 Communicator is released, Nokia’s first smartphone.
1998
Nokia overtakes Motorola to become the world’s biggest mobile phone maker.
2000
Launch of the Nokia 3310. 126 million units were sold before its retirement in 2005.
2005
Nokia sells its 1 billionth mobile phone.
2006
Nokia and Siemens announce plan to merge their networks businesses to create Nokia Siemens Networks (NSN). The JV officially launches in 2007.
2008
Nokia pays $8.1 billion for map maker Navteq.
201 1
Nokia winds down Symbian operating system in favour of Microsoft’s Windows. NSN announces a major restructuring to refocus on mobile broadband. 17,000 jobs will go.
2012
Here unveiled as new name for Nokia Maps.
2013
Nokia buys Siemens’ 50% stake in Nokia Siemens Networks for €1.7 billion and renames the unit Nokia Solutions and Networks.
2014
Nokia closes €5 billion-plus sale of its devices business to Microsoft, names networks chief Rajeev Suri as its new CEO, and re-badges NSN as Nokia Networks.
2015
Nokia announces €15.6 billion acquisition of major networks rival Alcatel-Lucent. Initiates strategic review into future of Here.
