Nokia’s fall from king of the mobile market to bargain buyout is a tale of hubris

The news that Microsoft has bought Nokia's phone business is the end of an era for the mobile market.

Although it may not have invented the mobile phone – that honour goes to Motorola – Nokia was easily one of the most identifiable brands in the business. At one time, it accounted for about 40 per cent of the market. Six years and several competitors later, Nokia looks set to disappear from the average high-street mobile phone shop.

The change won’t happen immediately, but it’s a fair bet that Irish consumers will find the Nokia branded phone a rarer sight in 2014 as Microsoft completes its purchase.

The Windows Phone maker is taking over the Lumia and Asha brands, meaning the Nokia brand will no longer appear on new handsets in those ranges once the deal
is done.

It will continue to licence the Nokia brand for its “feature” phones, which are usually sold in lower-cost markets such as Africa, for the next 10 years. But in western Europe, the company is likely to continue to concentrate on its smartphone and mid-range phone brands – Lumia and Asha – as it seeks to boost its Windows Phone software. It is a different approach to that which Google took after it bought Motorola in 2011. The Motorola brand has remained untouched to a large extent, although Google’s influence can be seen in its most recent Moto X handset.

It’s been a steep fall from grace for Nokia. Before iPhone and Android handsets were a reality, the brand had built up a reputation as the king of the phones. It eventually conceded that title in 2012, and although it is still the second-biggest mobile phone maker in the world, it has slipped from the top five in the more lucrative smartphone market.

Switching allegiance
In 2007 the iPhone was launched, and the battle between Apple and Google that ensued meant the once-victorious Finnish phone maker was left floundering in their wake, as even fiercely loyal followers of the brand switched allegiance to the newcomers.

Even Taoiseach Enda Kenny was forced to swap his Nokia 6310 – one of the company’s business-series phones – for an iPhone after the handset met with a watery end.

When you look at the mobile market these days, Nokia's heyday seems a long way off. The company began making mobile phones in 1981. In 1992, it launched its first digital handheld GSM phone, the Nokia 1011. By 1998, Nokia was the world leader in the mobile phone market, where it would remain for about a decade. It churned out phone after phone and consumers bought them in their millions. In 2003, it released what later became the world's best-selling phone,
the 1100.

There were a few exceptions along the way. The N-gage gaming phone, which hit the market in 2003, failed to satisfy both phone users and games fans, and never lived up to Nokia’s sales plans.

There were some experimental devices that had varying degrees of success, such as dispensing with keypads or trying out different formats for the traditional phone interface. But it all pointed to a company that didn’t seem to be afraid to take risks with design, even if they didn’t always work out quite as it hoped.

Baffling
That made it all the more baffling that Nokia could have got it so wrong when it came to the smartphone revolution. A lack of ability to keep up with the market saw it gradually slip from consumers' list of must-have brands, and it has struggled to get back.

Microsoft's decision to buy Nokia's handset business probably didn't come as much of a shock to many in the industry. Former Microsoft executive Stephen Elop was behind the decision to ditch Symbian as Nokia's operating system for its smartphones, moving to Windows Phone in a much-publicised deal in 2011.

Still behind
Since then, Windows Phone has edged up to a 9.2 per cent share of smartphone sales – an improvement but still behind iOS and Android. Despite that, Elop, now head of Microsoft's expanded devices unit, seemed confident that the platform could become a third player in the market.

“Achieving our goal of becoming the third ecosystem is becoming very real,” he said, but added that the company would have to accelerate.

The announcement that Microsoft was buying the devices and services divisions was viewed by varying analysts as a bargain for Microsoft and a good move for both firms.

But just because Nokia is exiting the mobile phone business, it doesn’t intend to disappear completely. The company is hanging on to its mapping and networks business for now.

Nokia’s heritage goes back further than the mobile phone era. The company has almost 150 years of history, spanning everything from paper mills and rubber boots to car tyres. Reinvention is in its blood.

That was the key message the two companies tried to project, both in an open letter and at the press conference held yesterday.

“Today marks a moment of reinvention,” the letter said.

Just how successful Nokia will be in reinventing itself once more remains to be seen.