Posts Tagged ‘corporate evolution’

Nokia adapts genetically while Microsoft drops the “Nokia” brand

October 24, 2014
Nokia NMT900 1987

Nokia NMT900 1987

A few days ago Microsoft announced that it was dropping the “Nokia” brand and would continue with “Lumia”.  My first mobile phone ever was an NMT900 in 1988 or ’89. My first five mobile phones were all Nokias. It felt like the end of an era. As if some well loved species was going extinct.

Irish IndependentFor many of us it’s a name synonymous with mobile phones, but Microsoft is now officially axing the Nokia brand in favour of its own Lumia range of Windows smartphones.

The tech giant bought Nokia’s mobile division back in April for $7.2bn along with a 10-year deal to use the Finnish company’s name on smartphones. Now, however, it seems Microsoft wishes to push its own Lumia brand, the most successful iteration of the company’s Windows Phone OS – rival to Google’s Android and Apple’s iOS systems.

The company actually began life in the 19 century as a single paper mill in what was then part of the Russian Empire. It grew into an industrial conglomerate with interests in everything from galoshes to gas masks, with the push into electronics only coming in the 1960s.

From the 1980s to 2000s it had a string of mobile hits (including the famous 3310 – one of the best selling mobile devices of all time, with more than 126 million units sold worldwide) but failed to keep on top of its smartphone competitors.

Windows Phone meanwhile continues to struggle against iOS and Android, with global market falling to 2.5 per cent. Microsoft will be hoping that Nokia’s ever-popular range of capable, low-end devices will eventually shuffle users in developing markets onto its OS, but nothing looks like it will shake Android and iOS in the high end.

But there is no need to be sad.

The brand is not going extinct. It is adapting and changing with the times. The company started with a paper mill and only enetered electronics in the 1960s. Now it has adapted and has returned to profit  – demonstrating the benefits of genetic evolution over stagnating conservation.

The Register: Nokia reported strong results on Thursday even after giving long-suffering shareholders a dividend and taking the hit of a one-time charge.

Profits rose to €353m on earnings of €3.3bn, up from €2.9bn a year ago. 

With the Windows Phone albatross thrown to a reluctant new owner, Nokia is now three divisions: network equipment (Nokia Networks), mapping (HERE) and IPR licensing (Nokia Technologies), but with €2.6bn of income, Networks provides most of the meat.

Nokia Networks sales rose 13 per cent year on year, based on LTE sales into China and North America, the company said. HERE grew 12 per cent, and IP licensing nine per cent to €152m; Microsoft is now a more important licensee. 

The company paid out €1.372bn in dividends and recorded a goodwill charge of €1.2bn against HERE’s profits, the latter reflecting a new evaluation of the division at €2bn.

The HERE charge reflected, “an adjustment to the HERE strategy and the related new long-range plan”. Nokia also spent €220m buying back shares.

Nokia made a string of mapping acquisitions in the Noughties, the largest of which was Navteq for $8.1bn (€5.6bn at the time). The company defended its continuing investment in HERE, declaring that “we continue to believe we have an opportunity to create significant value with the HERE business, as connected cars become more pervasive and as enterprises deploy new location-services to improve their productivity and efficiency”.

Despite all the charges, the company still has €5.4bn in cash and assets.

For a corporation to change its genetic code and shift away from a previously successful habitat and move into new territory is not easy. It needs changes to corporate competences and culture and shape and size – and many of the changes are painful. But Nokia seems to be well on the way to reinventing itself – again.

It is a lesson from the corporate world which should be taken to heart by all so-called conservationists. In the corporate world, continuing with a failing strategy, or a failing habitat or living in past glories does not help survival. It is genetic adaptation (from paper to tyres to gas masks to phones to networks) which provides Nokia with a new future. Similarly, in the animal world, trying to freeze failing species into a failed strategy in an artificial habitat is pointless. Genetic adaptation not stagnating conservation is the way to go.

 


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