Finland Cheers Nokia’s Uphill Battle for Smartphone Comeback

  • Economy never recovered from sale of unit, loss of jobs
  • ‘It was such a great brand. Good to promote Finnish design’

Finland, locked in a downward economic spiral since Nokia Oyj’s fall from atop the smartphone world, cheered the announcement that handsets bearing the company’s badge will reappear, and with them the possibility of much-needed jobs.

The country, which eked out 0.5 percent growth in 2015 after three years of recession, took a massive hit when Espoo-based Nokia surrendered to Apple Inc. and Samsung Electronics Co. in 2014 and sold its flagship handset business to Microsoft Corp.

With it went thousands of jobs: the new owner condensed staffing at the Finnish mobile-phone unit to less than 1,000 from the more than 24,000 Nokia employed in its heyday in 2000.

“It was such a great brand,” said Helena Arvola, a 51-year-old laboratory technician from the town of Kuopio. “I’d like to try one. It would be good to promote Finnish design, maybe it could be nice thing.”

Nokia emerged in the late 1990s as Finland’s first major global corporation and symbolized the country’s transformation to a technology-driven economy. At its peak in 2000, the company generated about 4 percent of gross domestic product in the country of 5 million, and its market valued reached about 300 billion euros ($337 billion). It is now valued at 27 billion euros.

Today, Finland is struggling to cut wages and make itself more competitive, squeezed by generous labor deals struck during Nokia’s go-go days that made the country’s exports more expensive compared with Germany or Sweden. Unemployment in Finland hovers above 9 percent, as the country also grapples with a paper-industry slump and falling trade with neighbor Russia.

Robert Haigh, director at London consultancy Brand Finance, calculates the value of Nokia’s brand -- the intangible assets behind the name, rather than physical property -- at $3 billion. That compares with $146 billion for Apple, $1.4 billion for HTC and $258 million for BlackBerry.

The Nokia name benefits from its association with Finland, Haigh said. Consumers see it as representing reliability and trustworthiness -- qualities reflected in long battery life and solid phone casings.

Yet a comeback won’t be easy in a market dominated by Google’s Android software and Apple’s iPhone. No other global handset maker has fallen from the top and managed a successful rebirth. Brands buried in the mobile phone graveyard include former Nokia competitors Siemens and SonyEricsson.

“Of any of the fallen mobile brands, Nokia is probably the strongest,” said Daniel Gleeson, an analyst at IHS in London. "But they’re wading into an ultra-competitive market."

Nokia should look for opportunities in emerging markets like India, which is dominated by Samsung and inexpensive local brands like Micromax Informatics Ltd., Gleeson said. Nokia might also find opportunities in Europe, where it’s one of the only home-grown brands that managed to challenge U.S. and Asian giants, he said. Urban hipsters in London, Paris and Berlin carry around old-fashioned Nokia phones as a retro fashion statement.

"It’s also tied up with the nostalgia that people have for the dumb-phone era," Haigh said.

Last year, Nokia dropped out of a list of the world’s 100 most valuable brands compiled by consultancy Interbrand, after placing 98th in 2014. In 2015 the list was topped by Apple and featured smartphone makers Samsung, Sony, Huawei Technologies Co. and Lenovo Group Ltd. Alphabet Inc.’s Google, developer of the Android operating system, placed second.

Safe Bet

Nokia is dipping a toe back in the risk-free way -- by licensing its brand to a Helsinki-based company run by former Nokia managers, HMD Global Oy, which will invest $500 million to produce the mobile phones and tablets. Nokia won’t have a financial stake but is set to collect fees from brand licensing and intellectual property.

Chinese brands like Huawei have shown that it’s possible to challenge the leaders despite a late entry into the smartphone business. In the first quarter Huawei shipped 8.2 percent of smartphones globally, according to research firm IDC, trailing only Samsung and Apple.

No one expects the new Nokia to re-establish itself as a market leader right away, said Ramon Llamas, an IDC analyst.

“By deploying Android on its devices, it wades into extremely competitive waters led by Samsung and a large flotilla of Chinese vendors,” Llamas said. “More realistically, I’d expect a moderate first showing, far behind the market leaders.”

Kari Lehtonen, a 52-year-old sales representative who only owned Nokia devices until 2006 and now has an iPhone, illustrates the challenge. He’s hopeful the new push will bring revenue, money and clients to Finland. But getting him to buy one of the phones will take convincing.

“They would need an ecosystem, cloud services, browsing and e-mail services,” Lehtonen said. “Before I am ready to switch myself, there must be a reasonable path from my current ecosystem to the new one -- and a reason to do so. Only a mobile phone for me is not enough.’’

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE