Finland’s largest IT company is once again in a situation where it has to make important strategic decisions.
Nokia is facing big decisions. Jyrki Vesa
Mobile phone networks have become a stumbling block for Nokia. The problem is big, because it is currently the company’s largest business group.
The market is not growing, and the competition is fierce. Even if 5g networks are available for sale, there will be even fewer of them below the line.
The situation is not new for Nokia. The company’s previous problem was mobile phones. The business became unprofitable at first and later became loss-making. The phones were finally sold at the count’s time to Microsoft for 5.4 billion in 2013. Three years later, Microsoft shut down the entire phone business when it couldn’t get it up and running.
Analysts are leaning towards the position that the company must also make big moves in the mobile phone networks. Selling the business is starting to look like an even more likely option.
It’s about how many times Nokia has to reinvent itself during its history. In the late 1980s, Nokia was Europe’s largest television manufacturer and the company was known for its MikroMikko computers. At that time, phones were a side business for Nokia.
However, Nokia decided Jorma Ollilan management to focus on the telephone business in the early 1990s. MikroMikot and the computer business were sold to the British ICL, which later merged with Fujitsu. Television production drifted into a loss and was finally shut down in the mid-1990s.
Big decisions are ahead again. However, Nokia’s situation for the future is promising. At the end of last year, the company had net cash of 4.3 billion, which enables acquisitions if necessary. In the current economic climate, you can find something to buy quickly.
Nokia has traditionally built its next cornerstone on emerging technology, which it already has expertise in. If Nokia were to sell the mobile phone networks, the company would be left with two business areas in which it could invest alongside technology licensing: network infrastructure or cloud and network services.
Network infrastructure is currently Nokia’s most profitable business and approaches mobile phone networks in size. However, there would be a rocky road ahead and a fight against IT giants.
The cloud and online service business is still small. Last year, its turnover was about a third of the turnover of mobile phone networks. However, the cloud and online service business relies on software. If the business takes off, it can scale quickly and become very profitable.
CEO of Inderes Mikael Rautanen raised the scenario in 2020, where Nokia would sell a large part of its networking equipment business and focus on the software business. The remaining Nokia would be smaller, but would again operate in a growing market, where margins would potentially be higher. The software business would be supported by the technology licensing business.
– The company’s new future is built on the software market of telecommunication solutions, serving telecom operators and the IoT market of large companies, Rautanen envisioned four years ago. He had already presented a similar idea in 2016.
The idea of Nokia as a software company is starting to look like an increasingly likely option.