Twitter
Advertisement

Nokia sells ‘HERE’ in another quest to transform itself; is it succeeding yet?

Nokia today announced its agreement to sell its mapping and location services business, HERE, to a consortium of leading automobile companies – Audi AG, BMW Group and Daimler AG.

Latest News
article-main
Representational image
FacebookTwitterWhatsappLinkedin

Nokia on Monday announced its agreement to sell its mapping and location services business, HERE, to a consortium of leading automobile companies – Audi AG, BMW Group and Daimler AG.

The transaction values HERE at an enterprise value of 2.8 billion euros, with a normalized level of working capital, and is expected to close in the first quarter of 2016, subject to customary closing conditions and regulatory approvals.

"With this step, we complete the latest stage of Nokia's transformation. We integrated the former Nokia Siemens Networks, divested our Devices and Services business, and have now reached (an) agreement on a transaction for HERE that we believe is the best path forward for our shareholders, as well as the customers and employees of HERE.” said Rajeev Suri, President and Chief Executive Officer of Nokia.

In 2013, Nokia sold its famed mobile business to Microsoft for over $7.2 billion, but the sailing hasn’t been smooth since. Microsoft, last month, wrote the business down by $7.6 billion. 

Nokia, on the other hand, has been transforming itself as the backbone of telecommunications. 

The company has decided to buy Alcatel-Lucent for 15.6 billion euros to compete with Ericsson -- the industry leader, and Chinese Huawei. 

After the merger is complete, Nokia is to become the world’s second largest telecom network gear maker. 

Even as the merger news hasn’t caught fancy of analysts and investors, Nokia is sure that its next wave of business transformation will come from this segment. 

The company has reported a 9% growth in its net sales in the telecom network gear market this year, from $3.21 billion as against the same quarter of last year. 

The numbers are only to improve after the merger is complete. 

“Going forward, we will focus on our planned combination with Alcatel-Lucent. Once that is complete, Nokia will be a renewed company, with a world-leading network technology and services business, as well as the licensing and innovation engine of Nokia Technologies," said Rajeev Suri, President and Chief Executive Officer of Nokia.

Nokia's proposed combination with Alcatel-Lucent is expected to close in the first half of 2016, subject to customary closing conditions and regulatory approvals, and will create an innovation leader in next generation technology and services for an IP connected world.

The Nokia Story

What started out as a paper mill in 1865, the company made telecommunications as its flagship business in the 1990s, tracking it as a need of the hour.

Nokia first entered the telecommunications business in 1960. By 1982, it had introduced the first fully-digital local telephone exchange in Europe, and the world’s first car phone for the Nordic Mobile Telephone analog standard.

It was, however, in the early 1900s that the company decided to make telecommunications its core business. With that, it also established a goal of being the global market leader.

To focus on this goal, Nokia divested all the other businesses it had dabbled in – including paper, personal computer, rubber, footwear, chemicals, power plant, cable, aluminium and television businesses.

By 1998, it was the world leader in mobile phone manufacturing, a position it enjoyed for more than a decade.

Nokia had closed 2006 with 48% market share under its wing, with 28 million devices shipped, according to this Bloomberg Business report. This was despite the fact that the company had underperformed in North America and in the enterprises market.

Nokia ruled the roost till the Apple iPhones and Androids of the world came along.  

Apple launched the first iPhone in June 2007; in the third quarter of 2007, Nokia's market share was 48.7%.

By the third quarter of 2012, the company's market share had slipped to just 3.5%. 

In 2011, Nokia signed up with Microsoft to use the latter's Windows phone platform, to develop an alternate operating system to compete with Android and iOS. In less than two years, Microsoft bought out Nokia's devices and services unit. The transaction was initially announced in September 2013, and was completed by April 25. 2014.

This merger was touted as a tie up of the Windows phone with the largest hardware supplier.

Brad Smith, Microsoft's Executive Vice President had noted that the acquisition will help Microsoft “accelerate” its “innovation and market adoption” for Windows Phones.

When the two companies came together, Microsoft CEO Steve Ballmer had called it “a bold step into the future”.

He even cited the Lumia 1020 as an example of what the two companies can produce together.

AT A GLANCE
Clashes between Apple and Nokia
  • In October 2009, Nokia filed a lawsuit against Apple claiming that the latter had infringed on 10 of its patents, which covered a wide range of wireless technologies.
  • Apple immediately filed a counter-suit against Nokia, accusing the company of 11 patent infringements. The rift between the two companies continued for a good two years, and finally ended in June 2011, when Apple agreed to make a one-time payment of $600 million to Nokia. The two companies even agreed to cross patenting.

As part of the deal, Stephen Elop, Nokia's former CEO and other executives moved to Microsoft Mobile subsidiary.

Stephen Elop caused a huge stir in the industry when his "burning platform" memo sent to his staff in February 2011, leaked into the press.

In the memo, he mentioned the dangerous situation that the world's leading mobile phone company was facing. Nokia was compared to a person standing on a burning oil platform in the smartphone market. Platform was referred to the operating systems such as Symbian, Apple iOS and Google.

On July 8, Satya Nadella, CEO, Microsoft Corporation announced Elop's departure from the company.

It was Elop who had first made the decision to switch Nokia phones to the Windows platform, arguing that it will differentiate it from the other Android phones. He faced a lot of criticism from employees of the industry when he announced to let 11,000 employees go in 2011. In the year that followed, another 10,000 layoffs were in order. The reason -- several facilities had to be shut down due to budget cuts.

Elop was criticised by Nokia's shareholders due to the lack of the numbers brought in by the newly-produced Windows Phone. Despite this, he chose to stick by his decision and stay with Windows.

With the merger between the two companies, he took the position of executive vice president of Microsoft.

In April 2014, Nokia's devices and services business became Microsoft mobile.

Only time will tell whether Nokia's new business part will yield the same success it once saw as a telecommunications devices and service provider, or not. 

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement