CASE # 8
NOKIA COMPANY
We all remember Nokia
as the company that once dominated the mobile-phone industry but subsequently
had to exit that business. What is easily forgotten is that Nokia has radically
and successfully reinvented itself several times in its 150-year history. This
makes Nokia a prime example of a “serial transformer.” In 2014, Nokia embarked
on perhaps the most radical transformation in its history. During that year,
Nokia had to make a radical choice through continue massively investing in its
mobile-device business (its largest) or reinvent itself. The device business
had been moving toward a difficult stalemate, generating dissatisfactory
results and requiring increasing amounts of capital, which Nokia no longer had.
At the same time, the company was in a 50-50 joint venture with Siemens—called
Nokia Siemens Networks (NSN)—that sold networking equipment. NSN had been
undergoing a massive turnaround and cost-reduction program, steadily improving
its results. When Microsoft expressed interest in taking over Nokia’s device
business, Nokia chairman Risto Siilasmaa took the initiative. Over the course
of six months, he and the executive team evaluated several alternatives and
shaped a deal that would radically change Nokia’s trajectory to sell the mobile
business to Microsoft. In parallel, Nokia CFO Timo Ihamuotila orchestrated
another deal to buy out Siemens from the NSN joint venture, giving Nokia 100
percent control over the unit and forming the cash-generating core of the new
Nokia. These deals have proved essential for Nokia to fund the journey. They were well-timed, well-executed moves at
the right terms. Right after these radical announcements, Nokia embarked on a
strategy-led design period to win in the medium term with new people and a new
organization, with Risto Siilasmaa as chairman and interim CEO. Nokia set up a
new portfolio strategy, corporate structure, capital structure, robust business
plans, and management team with president and CEO Rajeev Suri in charge. Nokia
focused on delivering excellent operational results across its portfolio of
three businesses while planning its next move to a leading position in
technologies for a world in which everyone and everything will be connected. Nokia’s
share price has steadily climbed. Its enterprise value has grown 12-fold since
bottoming out in July 2012. The company has returned billions of dollars of
cash to its shareholders and is once again the most valuable company in
Finland. The next few years will demonstrate how this chapter in Nokia’s
150-year history of serial transformation will again reinvent the company.