NOKIA SOLD THE PHONES AND SURVIVED

In June 2012 a share in Nokia cost less than two euros, and all three of the big rating agencies had marked the company’s bonds as junk. On the morning of 3 September 2013 the share rose by more than a third in early trading in Helsinki, to 4.10 euros, on the news that the company would sell its telephones.

To see why anyone cheered, it helps to begin with the name, which is older than any telephone. Nokia is a town on a river in Finland, and in 1868 a mining engineer named Fredrik Idestam opened his second pulp mill there. Three years later the company he formed with a partner took the town’s name. A rubber works that used it for its galoshes followed in 1898, a cable works in 1912, and in 1967 the three were folded into a single Nokia Corporation, which went on to make paper, tyres, boots, cables, computers and televisions, and lost money on the televisions.

Dismantling came in instalments. The tyres were separated in 1988, the paper division sold in 1989, the boots separated in 1990, the computers sold in 1991 to a British firm called ICL. The televisions went later, in 1996, to a company called Semi-Tech. Jorma Ollila is the man remembered for the whole business, and four of those five sales were behind him before he arrived.

The tyre business still has its head office in the town of Nokia and still sells winter tyres under a brand called Hakkapeliitta, introduced in 1936. It is the only branch of the family that kept both the name and the town.

On 1 July 1991 Harri Holkeri, a former prime minister of Finland, placed what is counted as the first call on a GSM network, to the deputy mayor of Tampere. It lasted a little over three minutes, and the reception, he said, was like talking to someone in the next room. That year the Soviet Union, which had taken about a quarter of Finnish exports, came apart, the economy shrank and the country stayed in recession until 1993. Nokia was losing money. In January 1992 the board, after what one history of the company calls a long and bitter struggle, replaced its chief executive with Ollila, a former banker who had run the mobile phone division since 1990, and he settled the question of what the company was for. It would make telephones, and Ollila, who had advised against selling the mobile division, was now in a position to keep it.

It turned out to be the best answer of its kind. The first commercial GSM handset, the 1011, reached the shops in November 1992. In 1998 Nokia passed Motorola as the largest maker of mobile phones in the world, and at the peak, in the last quarter of 2007, it sold two of every five phones on the planet. In 2000 it had accounted for four per cent of Finland’s national output, a fifth of its exports and seven tenths of the market value of the Helsinki exchange. In 2007 the company was valued at 110 billion euros, and on 17 July 2012 at 6.28 billion. By 2012 it was a drag on the economy, paid no tax, and was being outsold in its home market by Samsung.

Stephen Elop, who presided over the last stretch of that, had arrived from Microsoft in September 2010. In February 2011 he sent his staff a memo, which soon found its way into the press, about a man who woke one night to an explosion on an oil platform and found himself choosing between the flames and a plunge of thirty metres into freezing water. We too, the memo said, were standing on a burning platform. The jump, when it came, was into the arms of the company Elop had left three years before, and he went back to it himself with the handsets.

Risto Siilasmaa took the chair in May 2012, when, as he later told it, the company was planning the biggest layoffs of its hundred and fifty years. He told a conference in Helsinki in 2015 that the talks with Microsoft broke down four times, and that on one occasion, after he and Steve Ballmer had agreed a deal, Microsoft’s board turned it down. He had made it a condition of the talks, he said, that Microsoft lend Nokia money whether or not the handsets were sold, so that Nokia could buy the rest of the networks joint venture from Siemens. He asked for two billion euros, and Ballmer agreed to one and a half. The whole of the networks business, he thought, was going at a price well below what analysts had expected. Nokia bought the business it kept, in other words, with the help of the company that was buying the one it sold.

Nine weeks before the handsets went, on 1 July, Nokia had agreed to pay Siemens 1.7 billion euros for the half of Nokia Siemens Networks it did not already own. On 2 September it agreed to sell the phones to Microsoft for 5.44 billion, of which 3.79 billion was for the devices business and 1.65 billion for a licence to the patents. In the space of a summer it bought one business whole and sold another whole, and investors, who are seldom moved by a company’s modesty, were moved. Siilasmaa, who was also acting chief executive that week, told American radio that the deal made sense rationally and that “emotionally, it gets complicated.” It is unusual for a chairman to say so on American radio, and it is the nearest this story comes to humility. The industry, he added, was turning into a duopoly whose two leaders were building financial momentum at a scale not seen before, and Nokia lacked the cash to keep up with either. About 32,000 people were to go with the phones.

Selling is the one act in corporate life that obliges the seller to hear the market’s opinion of his work in a single number. A buyer receives a press conference and a larger company. A seller receives a figure, and the figure is either more than the business is worth to him, in which case he has been paid for his modesty, or less, in which case he has been paid for nothing. In 2013 the number arrived as a rise in the share price of more than a third, which is as near to a verdict as the profession offers.

Ballmer, who had announced in August that he would retire, called the purchase “a bold step into the future” and the next big phase of his company’s transformation. The transformation was left to his successor. Microsoft closed the purchase on 25 April 2014, for slightly more than the figure first announced, and fourteen months later, on 8 July 2015, wrote 7.6 billion dollars off the value of the phone business, with as many as 7,800 jobs to go. In May 2016 it sold the remaining feature phone side, with about 4,500 employees and a factory in Hanoi, to a subsidiary of Foxconn and to HMD Global, a Finnish start-up backed by former Nokia executives, for 350 million dollars.

Three prices, then, for one business: 5.44 billion euros, a write-off of 7.6 billion dollars and 350 million dollars at the end. Only the first had been paid to Nokia.

Back in 2013 the contract had kept Nokia from selling phones under its own name until the end of 2015, which is the sort of clause that nobody weighs closely when it is signed. By the time it expired the buyer had written the business down and was looking for the exit, and the new owners of 2016 took the name back on a licence, with Nokia keeping a seat on the board. The networks and the patents had stayed at home all along, and in 2016 Nokia completed its purchase of Alcatel-Lucent to make the networks larger.

By the spring of 2026 the company had become a seller of optical networking equipment to the builders of artificial intelligence data centres, and it reported first-quarter profit well above what analysts had expected. On the morning of 23 April its shares in Helsinki were trading at their highest level since April 2010. In April 2010 Nokia still made phones.