Nokia: Lesson in how high-tech flyers can fall fast

Nokia: Lesson in how high-tech flyers can fall fast
Headquarders of Nokia Solutions and Networks's in Espoo in Finland on October 29, 2013. Finnish mobile phone manufacturer Nokia announced a net loss of 91 million euros (US$125 million) in the third quarter as sales continued to spiral downwards.

HELSINKI - In just five years Nokia fell from dominating the mobile phone industry to abandoning the handset business, a swift fall from grace with lessons for market leaders.

The story of Nokia, now at the toughest stage of the restructuring cycle, is a particularly salutary business case about the fast-moving, high-risk, high-reward, tech sector for hip consumer goods.

The rapid decline, which is ending with the 5.44 billion euro ($7.5 billion) sale of the mobile phone division to Microsoft, owed much to Nokia growing too big, too fast and its management getting drunk on their own success, analysts say.

Looking back after years of Apple iPhone dominance, some may have difficulty in recalling that Nokia, in its heyday in 2007 took more than 50 per cent of the world market for early smartphones.

"They had become arrogant at Nokia and as a result they were too slow to react to changes in the world around them," Petri Rouvinen, a researcher at the economic think tank ETLA, told AFP.

The technology of the iPhone upended the mobile handset business. It also highlighted the critical importance in any business, but particularly in the high-tech sector, of getting the timing right.

Not only did the iPhone, with its touch screen, become a hot fashion item worldwide, but also the operating system with paid-for applications invented a new revenue stream for Apple.

When Google's Android took off in 2009, it became clear that handset manufacturers had lost dominance to the operating systems which generated revenue from applications sold to users.

Commenting on the business lessons, Rouvinen said: "Since 2007 it's no longer possible to consider telecommunications, consumer electronics and computers as separate sectors. Now there's just one industry and it's digital."

That is where Apple had an all-important lead: it brought the right hardware and software together at just the right time.

"If Apple had shut down its heavily loss-making PC business in 2000, it would never had been able to launch iPod, iTunes, iPad etc," said Kuittinen.

Nokia's management was aware that a digital revolution was underway but in a recent book it's former chief executive Jorma Ollila said the company peaked too soon -- investing heavily in smart phone technology before operators were ready to offer services.

Analysts said another lesson is to have the appropriate expertise on the board. They said that Nokia had suffered from a culture of sycophancy towards Ollila -- at the helm for 14 years until 2006.

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