Nokia is Back, Sort Of, But Let’s Not Rewrite History

Nokia will formally re-enter the smartphone market in early 2017 with a family of Android-based handsets. But make no mistake: This is not the Nokia of old.

More important, had Nokia chosen Android over Windows phone in 2011, it would have failed even faster than it did. So let’s get that bit of revisionist nonsense out of the way.

Nokia was once the largest maker of phones, and smartphones, in the world. But like so many companies of its ilk—we can count Microsoft, Motorola, Palm, RIM/Blackberry and many others here—Nokia stumbled badly in responding to the iPhone and then never recovered. In Nokia’s case, this involved sticking with its outdated Symbian OS for too long, belatedly starting a project called Meego to replace it, and basically believing that just being Nokia gave it the edge it needed over Apple.

Nope.

Three years too late, Nokia finally hired an outsider, Stephen Elop, to clean up its mess. What Elop found was a company mired in the past, and he penned his infamous “Burning Platform” memo—and leaked it to the press—in a bid to convince the company that it needed a drastic change in order to survive, let alone thrive. It was already too late, of course, the damage having already been done by Nokia’s slow-moving and insular CEOs of the past and a hubris-laden corporate culture that led employees to believe they could do no wrong.

Elop deserves credit for quickly identifying what was wrong with Nokia and then moving decisively to try and fix the problems.

His first big decision was to choose a next-generation mobile platform. He scrapped Meego, and correctly determined that Android was a non-starter, noting that had Nokia chosen Google’s platform, it would have been lost in a sea of Android-based smartphones. “The single most important word is ‘differentiation’,” he later said, explaining his decision. “Entering the Android environment late, we knew we would have a hard time differentiating.”

So Elop chose Windows phone. Looked at with hindsight, many revisionists and Nokia loyalists claim this was the wrong decision. But Windows phone was a Hail Mary Pass for a company that was already living on borrowed time, and it was Nokia’s only shot at succeeding. Aside from the technical and design promises that came with choosing Windows phone, Nokia could benefit from financial help from Microsoft. And as a partner in the development of the OS, Nokia could actual impact Windows phone at a deeper level than any company outside of Microsoft. It was, in short, the right decision because it was the only decision that could have saved Nokia.

(The theory that Elop, a former Microsoft executive, was a “Trojan Horse” sent to Nokia to force Windows phone on it is disproven by the fact that the entire management organization at the company made the platform decision collectively. That said, there is little doubt that Elop’s close relationship with Microsoft’s upper management made this deal easier to swallow. If anything, Nokia got a sweeter arrangement than would have been possible otherwise, and it benefited financially from Windows phone and associated licensing more than Microsoft did during this time period.)

What no one understood at the time was that Nokia was going to get smaller no matter what happened. Smaller from a market share and usage share perspective, and smaller as a corporate entity: Elop laid off Nokia 11,000 employees in 2011, and another 10,000 in 2012. During this time, Nokia announced and launched its Windows phone efforts, and then released a series of remarkable smartphones—including the Lumia 920, 1020, 1520, and others—that truly did differentiate from what was offered by Android and iPhone.

But Nokia wasn’t successful, wasn’t ever going to be successful, and as it continued to lose market share and money, it was forced to consider other options. It briefly offered a range of Android-based devices as a volume play in emerging markets, and then finally succumbed to the inevitable, and Elop explained to Microsoft that Nokia would no longer be able to stand on its own.

Microsoft faced two possibilities, both horrible: It could allow Nokia, which produced over 80 percent of all Windows phone handsets, to abandon the platform and then fail as a company. Or it could purchase Nokia at great cost—over $7 billion—and take on its enormous employee base, worldwide manufacturing capabilities, and product lines.

The former decision was a certainty: It would have killed Windows phone as a platform. The latter was a risky bet, as Nokia was clearly in a downward spiral with no end in sight. The only good news is that Microsoft, unlike Nokia, could absorb the impact.

So Microsoft chose the latter. And Elop came back to the software giant to run a devices group that would include Nokia’s various assets.

Mr. Elop is hated by Nokia loyalists both inside and outside the company because they incorrectly believe that he was the reason for Nokia’s downfall. So much so that Elop routinely received death threats during his tenure at Nokia and later at Microsoft, and he was forced to travel with two bodyguards as a result.

But if Elop betrayed anything, it was Microsoft, not Nokia: As the Nokia-based hardware business continued to lose sales, market and usage share, and money, Microsoft’s upper management quickly realized that Elop had orchestrated the sale of a lifetime: As noted, Nokia was always going to fail. The only question was whether Nokia or Microsoft would be the one to pay the price, both literal and figurative. Once the full measure of this disaster was realized, Elop was let go. And Microsoft abandoned the consumer smartphone market forever, writing off over $10 billion to date to cover its losses. It also laid off the vast majority of former Nokia employees who had come to Microsoft. Worse, Stephen Elop had received about $15 million in bonuses for orchestrating the sale of Nokia to Microsoft, a fact that still rankles many.

In my view, however, Elop is still a hero. He was given an impossible task and did more than I believe anyone else could have to try and turn around Nokia. As important, Elop intimately understood all of the products that Nokia produced, and he could speak effortlessly and eloquently about any of them, at any time, off the cuff. In my many years covering Microsoft and the surrounding ecosystem, I have very rarely found any executive, let alone a CEO, with this deep level of product knowledge. Elop didn’t just lead Nokia, he was a fan of Nokia and its products, and it showed.

Thinking about the new Nokia’s plans to re-enter the smartphone market, I can’t help myself: I’m still interested, and curious, and I still wonder something wonderful is possible. The pragmatic side of my personality says no, that Nokia—I want to write that as “Nokia” as this company has nothing to do with the Nokia we all cared about so much—is just doing what so many former greats—Atari, Polaroid, whatever—have done by slapping its name on products that will be manufactured by others.

It’s not that bad, you may argue: Nokia will design the devices, after all. But that’s what Blackberry is doing too, and that company isn’t making a comeback either. Worse, “Designed by Nokia” doesn’t have much cachet in 2016 when you realize that the designers who made such special products for the company are long gone. That magic is never going to be rekindled, sorry.

But I’m a sap. I’m looking forward to their phones, will no doubt waste hard-earned money acquiring them. I’ll try to be realistic about it. But it’s Nokia. Sort of. And you just never know.