Nokia’s rule over the mobile phone market
Nokia clearly ruled the mobile phone market from the late 1990s until 2011. Only Motorola, and to some extent Samsung, provided legitimate competition to Nokia in that time period. Nokia’s success at that time can be attributed to its shrewd marketing strategy and its broader distribution across the world. The company found major success in emerging markets (EEM), as well, where the company could attract users with low-cost products.
But from 2011 onwards, Nokia began to decline as Samsung Electronics (SSNLF) emerged as the leader in the mobile phone market. Meanwhile, Apple (AAPL) was remaining an important player in the mobile phone market’s more profitable smartphone segment. Nokia then tried to resurrect its fading good fortune by replacing its Symbian OS with Microsoft’s (MSFT) Windows Phone platform.
Microsoft’s mistake with Nokia
Overall, Nokia has failed to match the innovation that was needed in the smartphone market, and none of its efforts have really helped reverse its fortune. The above chart shows how Nokia managed to maintain its market share above 30% till 2010, but it declined sharply afterward. Nokia got some respite, however, when Microsoft bought its Devices and Services business in 2014 for $9.4 billion.
With the Nokia acquisition, Microsoft tried to compete with the duopoly of Google’s (GOOG) Android and Apple’s iOS in the smartphone operating system. However, this acquisition proved to be the biggest mistake that Microsoft ever made. Microsoft took a massive impairment charge of $7.6 billion on this acquisition in 2015, and then subsequently admitted that the Nokia acquisition was a failure.
Now let’s jump back to the Motorola story.