From Bankruptcy To Billions: The Rebirth Of Nokia

0:00 In 2008, Nokia generated over $76 billion 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. 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. Chapter 1: Signs of Weakness Setup Nokia was the king of the mobile industry, and as it grew, so did they. Their revenue in 1996 was $7.5 billion, but in 2008, it was 10 times

0:51 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. (Show Steve Jobs iPhone press conference). 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. Tension Though that’s not how things played out. Leaked internal reports show that Nokia

1:36 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 known for their reliability, but soon that bulky durability was seen less as a selling point, and more of a drawback. People now wanted something sleek, with a touchscreen. Smartphones had changed the industry forever. They watched consumers flock to these new smart phones. Soon, competitors began offering their own smartphone to market. In 2008, HTC and Google released the T-Mobile G1, with the first version of the Android operating system.

2:27 By this time, Nokia executives realized they had underestimated the iPhone. So how did they respond? Resolution / Payoff (Show clip: 0:04-0:16) (Show clip: 0:02-0:07) The N97 was Nokia’s response. It had a 5 megapixel camera, a slide-out keyboard, twice the storage space as the iPhone, a GPS system, and most importantly: a touch-screen. They were so confident, 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

3:15 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 was a colossal failure, and it was at this point that Nokia realized they needed to make a change. This change came from their newest CEO. Chapter 2: The Man Who Destroyed Nokia Setup In September 2010, Nokia announced their new CEO would be Stephen Elop. Elop was previously the head of Microsoft’s business division. Because of his leadership, he pushed Microsoft to develop the office suite, and to move into cloud technology.

4:01 Elop produced record profits for Microsoft, and he was known as a “change agent”. Nokia was 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

4:50 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 midrange, 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, ecommerce, advertising, search, and many other things.” Nokia, our platform is burning. We are working on a path forward — a path to rebuild our market

5:36 leadership. I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future. (All of this comes from this book) While motivating, unfortunately, this speech caused plenty of problems. It attacked Nokia’s products and value proposition, and exaggerated Nokia’s challenges from problem to crisis. Despite the security, the speech was 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. Tension Symbian needed to go, but the question was, what would replace it. This would be the most

6:21 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, the windows phone. The speech fanned the flames aboard the platform to new heights, there was no time to reopen the negotiations with Google. After the Burning Platform speech, switching to Windows Phone was the only choice the board could make. (source) Elop, with his deep relationship with Microsoft, established a strategic partnership. Nokia would provide the hardware, R&D, and marketing, and use the Windows OS exclusively. In February 2011, Elop announced Nokia’s new strategy to the world. Symbian would

7:07 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, compared to €227 million in profit in 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. Resolution / Payoff

7:56 Nokia’s phones were doomed from the start. The interface was unique, but too unique. Users had to essentially re-learn 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 Nokia. The Windows OS required both phones to use a single-core processor, while competitors were operating on duel or quad cores, meaning Nokia was leagues behind in speed and power. They also had small storage space, 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

8:41 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 Elop’s focus on this point in his 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 using Windows, even though it was clear it was a poor choice. If they adopted 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

9:28 final decision for the Nokia Microsoft partnership was made the night before the world reveal. (source) During their entire lifespan, “between November 2011 and April 23, 2014, 52 million Lumia smartphones running the Windows Phone operating system were sold.” For comparison, it took Samsung two months to match this number. The Nokia Microsoft partnership was a colossal failure. All of this drew attention back to Stephen Elop. Suspicion of his loyalty and competence was at its peak. 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 & services division for $7.2 billion. With the deal, Elop became president of the Mobile Devices

10:18 Group at Microsoft. But worst of all, he took many of Nokia’s leadership with him. “Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution”. Before Elop joined Nokia, they had 33% market share. When he left, they had less than 3%. The partnership was a loss for 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 to win the cloud. Nokia, on the other hand, was left

11:05 with nothing. They had suffered a cumulative €4.9 billion 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. Chapter 3: A White Knight Setup 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 it’s 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. He had seen it all, and was the

11:56 leader Nokia needed 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 needed to pivot, the question is: to what? The answer came from Suri’s old sector. “With our three strong businesses—Networks, HERE, 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.” (source) Suri was the opposite of Elop. His strategies weren’t flashy or risky, and some might even consider them boring. But they were

12:43 focused on one thing: Stability. and we can see that clearly in his first action. Tension Confidence in Nokia was at an all time low. 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. Nokia began investing into their new strategy. In 2015, they acquired Alcatel-Lucent for $16.6 billion. The reason? This firm owned

13:28 the prestigious and historic Bell Labs, one of the most prestigious 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 were 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 then, things began to turn for Nokia. In 2018, After several years of investment and research, Nokia revealed their biggest breakthrough yet: Reefshark. Computer chips

14:17 specifically designed for 5G. It wasn’t their first, but Reefshark was a massive leap forward. Their bandwidth could reach 84 Gbit/s, 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. Resolution / Payoff Nokia soon began supplying to giant firms like AT&T and Vodafone. And by 2020, they had secured 100 commercial 5G agreements. By late

15:02 2024, this has risen to over 300. 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. Today, Nokia is 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.

15:49 Grand Payoff 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 never reached the same heights since. Conversely, Rajeev Suri has saved the company he’d been so loyal to. His long-term vision, foresight, and emphasis on financial stability had allowed Nokia to survive. Both Elop and Suri made bold decisions, but they couldn’t be more different. CTA 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.

16:35 But until then, I’m Hari, and I’ll see you guys on the next one.