Finns mourn loss of Finland's biggest success story, Nokia phones, to Microsoft

Nokia phones were long a source of national pride for Finns, but not any more with Microsoft buying the company's ailing handset business

PUBLISHED : Thursday, 05 September, 2013, 12:00am
UPDATED : Thursday, 05 September, 2013, 3:40am

Finland's biggest corporate success story is over and Finns are trying to make sense of what's left.

Liisa Hannula, a 26-year-old student teacher in Helsinki, has always had a Nokia phone. Now she says she might opt for a Samsung smartphone instead.

"Nokia is one of Finland's main brands and it's what I tell people abroad - that Nokia phones are from Finland," she said. "Now I can't say that any more."

The sale of Nokia Oyj's handset business to Microsoft sent shock waves through its home country, where the phones are a source of national pride and at one point were carried by 90 per cent of Finns.

After introducing its first handsets three decades ago, Nokia emerged as Finland's first major global corporation and symbolised the country's transformation into a technology-driven economy.

Nokia, based near Helsinki in Espoo, took off in the 1990s to become the world's largest mobile-phone maker.

At its peak in 2000, it generated about 4 per cent of Finland's gross domestic product.

That fell to about minus 0.2 per cent last year, an unsustainable position driven by heavy losses, according to Jyrki Ali-Yrkkoe, an economist at Helsinki-based researcher ETLA. The deal with Microsoft will help it generate as much as 0.3 per cent of GDP next year, he said.

"Nokia has been the flagship company in Finland even as its fortunes have waned," Ali-Yrkkoe said. "It's going to take some time for Finland to recover from the shock and get used to the new Nokia."

Nokia started as a wood-pulp and paper company in 1865 before expanding into rubber, electronics and eventually the telecommunications industry.

Once the world's largest smartphone maker, Nokia's market share topped 50 per cent before Apple's iPhone and Google's Android operating system were introduced about six years ago.

Nokia has lost more than 80 per cent of its market value since then and no longer ranks among the top-five smartphone makers in the world.

"Nokia is the most successful Finnish company of all time, which in its heyday brought Finland enormous amounts of well-being and international prestige, raising Finland's self-esteem," Economy Minister Jan Vapaavuori said. "The biggest impact is on an emotional level. It's the end of an era in Finland's economic history."

The timing of the deal, less than three years after chief executive Stephen Elop joined from former employer Microsoft, prompted several of Finland's biggest newspapers to speculate as to the motivation behind his job switch.

Ilta-Sanomat, the country's biggest tabloid, called him a "Trojan Horse" who assisted Microsoft all along. Elop, the first non-Finn to run Nokia, will now return to Microsoft.

"I wonder if everything is as we have been told," said Sirje Liemola, 56, who works as a saleswoman at a Helsinki department store. "Was the intent to drive Nokia down and then buy it cheap?"

Peter Wootton, a spokesman for Microsoft, based in Redmond in the US state of Washington, declined to comment.

Nokia became an icon after pioneering the mobile phone in the 1980s, a product that later helped pull its home nation out of a three-year recession induced by a banking crisis and the loss of its main export market as the Soviet Union collapsed. After contracting about 6 per cent in 1991, the economy grew 4.5 per cent on average from 1994 to 2000.

Elop said Finns were "rightfully proud" of what Nokia has stood for over the past almost 150 years as a "source of inspiration and strength".

Yet the company's failure to maintain its market dominance means "Finns have been distancing themselves emotionally from Nokia for some years", said Jyrki Alkio, editor in chief of the Tekniikka & Talous magazine, who has watched Nokia's ascent and decline over his 23-year career as a journalist.

"If this had happened three years ago, it would have been a shock. We have finally grown to accept that we are not Nokia and it doesn't define our identity."

Still, for decades Finland's national pride was rooted in Nokia's phones as much as it was in sports heroes like Formula 1 champions Mika Hakkinen and Kimi Raikkonen.

"Finns used to be known for Raikkonen and Nokia," said Liemola. "I heard what Elop said, that Finns should be proud. I think we were proud, and we would have been more so if Nokia had remained Finnish."

Nokia's 94 per cent share-price plunge from its 2000 peak left thousands of engineers looking for work after the company curtailed local development and moved production to Asia. Nokia's Finnish employment fell 40 per cent in the six years to last year, the Economy Ministry said.

Finland's economy is suffering its second recession in four years as weak export demand is exacerbated by an ailing forestry industry and the decline of Nokia.

But Finland should not throw in the towel just yet, said Alexander Stubb, minister for trade and European affairs.

"Never underestimate the implications of the Finnish sisu, in other words Finnish perseverance and courage," he said.

"There is huge potential in Finnish engineering and you will see that blossoming within the next few years."

Finland is trying to attract data centres to old paper mills, touting an electricity grid that suffered downtime only once in 30 years. Microsoft said yesterday it would invest about €250 million (HK$2.5 billion) in a new data centre in Finland.

The government negotiated with Microsoft "for a long time" to get the investment, Vapaavuori said.

Microsft is following in the footsteps of Google, International Business Machines and Russia's Yandex, which have all opened data centres in the country. Intel opened a research facility near Helsinki last year.

"We should look at the silver lining," Stubb said. "From now on we will have two huge information technology giants in Finland."

The shake-up will be good for the country, according to Ilkka Paananen, chief executive of Supercell, the maker of tablet games including Clash of Clans and Hay Day.

"Finland needed this," he said in a posting on Twitter. "Now let's all wake up and get to work. New opportunities are everywhere!"