Nokia’s road to Redmond


11, 2011

Author Edward // in News

I am writing this article by touch-typing on my iPad with keyboard dock and near me lies my iPhone but until recently I was running a blog and podcast about Windows phones known as “”. Until recently I was a fanboy of Windows phones.

Until recently I would never use fruitphone iPhone as primary cellphone. However once I learned that Nokia is about to license Windows Phone, I had to get rid of and was kind enough to buy it. Now it’s official: Nokia is licensing Windows Phone big time – it will be their primary smartphone operating system… so now I can tell you a story about Nokia, a story how they ended up becoming bitch of Microsoft. Story how I see it.

Nokia corporation might be traded on stock markets in various countries, including UK and USA, but it’s headquartered in Finland a country located east of Sweden and west of Russia, a country that’s located so far east that it’s even more east than so called East European countries. Don’t believe me? Just look at the map! Finland for 700 years was a province of Sweden (important from Nokia’s point of view, because Nokia always wanted to beat Swedish Ericsson and did it in the end – just like Samsung always wanted to beat Sony – Japan was also occupying Korea like Sweden was occupying Finland) and after that, for 100 years Finland was a province of Russia that granted Finland independence. This info is vital to set the scene, so that you understand better current situation of Nokia. By the way: ironically at one point in history Nokia wanted to sell itself to Ericsson but Ericsson after short pondering declined.

In the middle of Finland, not at the seaside but near the city of Tampere, there is a river called “Nokia” and even small city called “Nokia”. Hence the name of the company! Nokia company (corporation) is over 100 years old. They were starting with such industrial products like paper production and rubber products like tires. Even to this day there is other company in Finland called “Nokian” that sells tires. Particularly those tires with spikes that are needed when temperature is tens of degrees before freezing point as it often happens in Finland. In Finland if your tires don’t have spikes you just glide on the ice and hit nearby forest or reindeer.

Maybe you have heard of the term “Finlandization”? It means influence that one powerful country might have on other smaller country. This term comes from Finland because Finland, while it was not occupied by Russian army as other nations in that part of Europe in 1945-1989, it had strong ties with Soviet Russia aka Soviet Union. These ties were so strong that in case of World War 3, Finland would be on side of Russia, not USA. And if somebody is president of some country for more than 30 years, then he is a dictator, like we can learn from Egypt, right? So was Kekkonen – a Finnish president/dictator that was friendly towards Soviet Russia and was ruling Finland in socialist-like style for over 30 years.

Then Soviet Union has collapsed. Soviet Union was one of main outlet markets for many Finish companies and also for Nokia (that was at that time making even TV sets). All of a sudden Finnish companies, including Nokia, needed to find other markets or close down.

Seeing what is going on, Finland decided to join European Union. The time when Finland joined European Union coincides exactly with the time when Nokia corporation has started to rise to the power. Being in European Union, Finland could have factories in Germany etc and Finland could move and sell goods without customs fees. What is however most important for this particular fairytale: European Union, unlike USA, decided to have one and only one standard of digital cellular telephony – GSM. It so happened also that GSM has become the de facto global standard for cellular telephony of second generation (2G, where 1G = analog cellphones). Nokia, having strong position in European Union, managed to master production of GSM phones, and when it became global standard, Nokia had head start that made Nokia what it is now: the number one, the biggest, maker of cellular phones in the world. Interesting factoid: when GSM networks were being started for the first time in European Union, since Finland is so far east, since Finland has such remote time zone, the time to switch GSM in Finland was 1-2 hours ahead of other European countries, so also here Nokia had little, symbolic, but vital head start, because Finland could claim that GSM was switched first there, even if time difference was merely 1-2 hours.

And so fat years for Nokia commenced. While hardly known in USA, Nokia managed to achieve 40% of global cellphone market at its peak. Europeans perceived Nokia as “home brand” because Finland was located in European Union and Asians thought that Nokia is Japanese because of Japanese-sounding name. All was good.

Nokia corporation however had (and still has) 10 levels of hierarchy from CEO to usual regular employee so it was not fast in reacting to changing market situation. It all started with mobile Internet. Nokia was late to GPRS and indeed first Nokia phones with GPRS were not first to market and in fact years behind competition. No problem said Nokia honchoes because we are Nokia, we are better, we don’t have to be first, we can be best. The same situation repeated later inside of Nokia with first UMTS/3G phones and many other things like multi-touch etc.

At some point in time the PDAs or personal digital assistants became popular and Palm corporation was making fantastic little Palm pilots and such. Time was ripe to think about combining PDA and cellphone into one device – a smartphone. And Nokia having vast resources resulting from economy of scale, decided to release such device and call it “Nokia Communicator”. Nokia was in search for operating system for this ginarmous cellphone that looked like micro-notebook with QWERTY keyboard and big internal display and small external display. At first they decided to use GEOS which essentially was running on Intel compatible 386-like processor. It was not super-great but it worked and Nokia was even claiming to have first smartphone although in reality it was Kyocera with their Palm OS based smartphone that was first to market (they same false claims also Finland itself was doing: Santa Claus in reality is not from Finland but from Turkey, Sauna was not invented in Finland but Russia was using Sauna thousand years before Finland).

Clearly Nokia communicator and other smarter phones from Nokia needed better operating system.

At some point in time Nokia was carrying out serious talks with Palm to buy it, to put Palm OS into Nokia communicator. How I know it? Once upon a time I was on yacht at Mobile World Congress (3GSM) in France with vice president of PalmSource and he told me that story in details. In the end Nokia decided not to buy Palm but go elsewhere instead, closer to Finland: to UK!

Nokia had divisions also in UK, where many people were using Psion PDAs powered by EPOC operating system. Fancy that! – Finns from Nokia thought and they formed an alliance with Psion to create, based on EPOC, an operating system especially for smart phones – Symbian. Symbian was invented also to stop big evil Microsoft: cellphone manufacturers feared that they will become just OEM (Original Equipment Manufacturers) that merely make hardware powered by Microsoft software like it happened in PC market, they feared of commoditization. So to stop big evil wolf aka “Microsoft” they formed Symbian.

At the beginning Symbian was thought of as true alliance of cellphone manufactures. An open alliance. But in reality it was an alliance of dinosaurs to prevent newcomers from beating them. Similarly like it was with stupid WAP – an akward standard for mobile Internet invented by dinosaurs to sell costly infrastructure and to prevent pure-Internet newcomers
from entry to the club.

Later it became clear that majority of Symbian-powered cellphones is manufactured by Nokia and Symbian de facto has become a puppet of Nokia. Nobody wanted to believe it for long time, until Nokia actually purchased 100% of Symbian. Clearly other manufacturers have seen what is going on: Symbian was giving privileged access to new releases to Nokia, so for a manufacturer to pick Symbian was like fighting fire with fire – made little sense. So no wonder one after another manufacturers were abandoning Symbian.

Nokia was putting Symbian into cellphones with various form factors and Nokia managed to leverage their popularity in regular cellphones to new exciting smartphones so in the end Symbian has become the number one smartphone operating system in the world.

Nokia was complacent and self-confident, nothing could shaken their leading position in the cellphone market – both regular smartphones and cellphones. All was good.

Similarly like Nokia also dinosaurs were thinking 65 million years ago, shortly before big meteorite hit Earth and caused dramatic change of conditions (less food, clouded skies, etc) so that dinosaurs, being too big, couldn’t survive.

In the year 2007 Apple corporation unveiled iPhone. It was meteorite -like event that changed everything. iPhone was to Nokia what meteorite was to dinosaurs. At that time smartphones were not having touchscreens or only resitive touchscreens that required pressing them hard to get any reaction. iPhone had changed everything – thanks to capacitive touchscreen you didn’t have to press hard to get reaction and thanks to multitouch you could zoom in and out fast and reaction times were super short even though iPhone was powered by slow processor.

It took Nokia 3 years to realize what hit them. While stock price of Apple was raising dramatically since release of iPhone, stock price of Nokia was sinking like Titanic, and market share of Nokia in smartphones started to dwindle rapidly. If you would buy Nokia stock in 2007, you would lose plenty of money by now. If you would buh Apple stock in 2007, you would earn a lot off it.

In meantime also Microsoft expressed similar dinosaur-like behavior: having quite strong position in smartphone market at that time, Microsoft couldn’t believe that iPhone could endanger them and Steve Ballmer was laughing out iPhone as too expensive and lying that nobody makes money off iPhone. Market share of Windows Mobile was dwindling even faster than market share of Symbian and Microsoft even had to re-start development of Windows Phone 7 in 2008 practically from scratch after realizing, that this what they developed was pathetically bad compared to iPhone.

Since years Nokia had mini-tablet form factor that was powered by Maemo operating system based on Linux. It was not mainstream project but these tablets had some strong fans. Nokia failed however to transfer this know-how to cellphones. Later on, Maemo evolved to MeeGo operating system (developed in cooperation with Intel) – MeeGo, that Nokia wanted to make their main operating system. However the problem was that Symbian was too clumsy to innovate around it and MeeGo developments were much too slow compared to amazing pace that Apple dictated.

In meantime Google has launched Android operating system. Android started slowly with very clumsy handset made by HTC, but due to big power of Google super-corporation, Android managed to develop rapidly and to become the only serious contender against almighty iPhone. Since Microsoft was slacking horribly with development of Windows Mobile aka Windows Phone, to compete with iPhone, manufacturers had no choice: they had to turn to Android. Since Google hires the best code monkeys on the planet, and Microsoft focuses more on marketing than on programming, it was manifest destiny: Google’s Android has beaten not only Microsoft Windows Mobile / Windows Phone but also iPhone and recently also Symbian itself. It happened 2 years ahead of analyst predictions.

Nokia had 2 options: to further develop their home-grown operating systems Symbian and MeeGo or to adopt one of established operating systems. Since Steve Jobs is back as boss of Apple, he stopped any software licensing to other hardware manufacturers (when he was out Mac OS was running on clones! oh horror!), so there is no way that Apple will license iOS to anybody. The only choice for manufacturers, realistically, is to pick Android or Windows Phone.

Since Nokia realized that Symbian is too clumsy and development of new MeeGo is going much slower than expected, Nokia decided to adopt some foreign non-Nokia operating system.

Clearly Google’s Linux-powered Android was never an option, because Nokia already was developing Linux-based operating system – MeeGo, and because culture of Google is so much different than Nokia. At one time high-level Nokia manager even said that Nokia adopting Android would be like Finnish boys peeing in pants to get warm in cold water. Apart from that, actually Nokia thinks of itself as “Microsoft of cellphones” and is dreaming and wants similar monopoly-like position in cellphones as Microsoft has in personal computers.

The fact that Nokia didn’t pick Linux-powered Android is also ironic because Linux was invented by Swede born and initially living in Finland – Linus Torvalds. Clearly “Finnish Linux” should have preference over “foreign Windows-something” but that’s not how bureaucracy thinks…

In recent years director of board of Nokia is Jorma, former CEO, who from behind the scenes is de facto ruling Nokia. At one point in 2010 he decided that Nokia can’t wait for MeeGo so it has to license Windows Phone.

Microsoft always wanted to put their Office communicator software and possibly other office software into Nokia’s Symbian smartphones simply to leverage sales of ultra-costly server software that is very very profitable to Microsoft. Very profitable: billions of dollars a year in pure profits. Not peanuts like Microsoft was getting from Windows Mobile. During meetings of Microsoft and Nokia about this one-sided (that software for Symbian would be developed by Microsoft only, Nokia needs only to stand there and smile) cooperation, a nice Canadian manager of Microsoft fall into eye of Jorma – it was Stephen Elop. Jorma decided to pick Elop as Nokia CEO to lead transition to Windows Phone and Steve Ballmer perceived Elop as a perfect Trojan Horse and Ballmer started to understand that having “his men” at top of other companies is crucial to cooperation.

Elop being good puppet, played out the scenario very well. Unfortunately for Nokia maybe even too well, because Windows Phone, instead of becoming temporary stop-gap until development of MeeGO will be finished, is becoming primary smartphone operating system for Nokia and Nokia’s innovation is being killed and many thousands of Nokia employees are being fired.

Nokia has been relegated to OEM role, the original equipment manufacturer role that it feared in past so much that it created Symbian alliance (see above). Now Symbian will be killed off and replaced by Windows Phone – what an irony, considering that its inception was actually inspired by Microsoft, by desire to combat Microsoft.

Nokia’s road to Redmond was paved by hatred towards Microsoft. Now Microsoft achieved what it wanted and Nokia admitted defeat by licensing Windows Phone. Yes, Nokia is getting special rights in this alliance (like HTC previously had, like earlier access to new releases etc) but in the end Nokia has no exclusivity in this relationship as HTC, Samsung and LG also make Windows Phone cellphones, so in the end it is huge victory for Microsoft and big defeat for Nokia.

As far as I am concerned one is for sure: I will continue using my iPhone and have no plans whatsoever to use any other cellphone. One might argue: I could go for Android because it’s so good nowadays. But then I am thinking what happened to Windows Phone and Nokia, and I have a feeling that in 2 years, seeing how low sales of Nokia-made Windows Phone are, Nokia will fire Trojan Horse Elop and Nokia will pick Android after all. I don’t want to change my cellphone again, so I stay with iPhone. Aha, aha, I like it.

* * * * *

What future brings? Thanks to Trojan Horse Elop, Windows Phone has bright future. Microsoft is releasing soon Windows 8 too, that will be able to run also on ARM processors, so Windows phones powered at core by Windows 8 will be possible. Just recently Microsoft started sales of Kinect – a full-bobody motion sensor that allows you to control games without the need to actually touch controller, but just by moving your body. Kinect is huge hit – actually it is biggest hit in consumer electronics ever, even bigger than iPad. Windows 8 will offer native support for Kinect. Clearly with future Windows Phone cellphones one will be able therefore to control them not just by (multi)touch but also via “Kinect Mobile” i.e. just by waving your hands/fingers in the air. With Kinect Microsoft has proven that it still can innovate and with convincing Nokia to adopt Windows Phone, Microsoft gained relevance in mobility. Future of Microsoft is bright.

What will happen to Nokia? After failure of sales of Windows Phone cellphones, Nokia will try to save itself by Android in 2 years, but it will be too late. However Nokia will not be purchased by Microsoft, but instead some no-name Chinese manufacturer will buy Nokia for peanuts to get foray into European market, to get “Nokia” brand. Nokia is finished. Not that I care.

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