With annual revenue of $26.6 billion, over 103,000 employees and a ranking of 466 on Fortune’s Global 500 list, Nokia (NYSE:NOK) is considered to be the largest company in Finland. Sounds impressive, but it’s a far cry from where the company stood at the start of the decade.
The past 10 years have not been kind to the Finnish telecommunications giant, and its global standing has slipped significantly. However, with a big stake in 5G networking and the Nokia name once again appearing on smartphones and updated classic feature phones, will the 2020s be the decade of Nokia’s big comeback?
2010s: Nokia Comes Out Strong
Nokia started 2010 as the global leader in the surging smartphone market. Fully one third of all smartphones sold in 2010 — 33.1% of them — were made by Nokia, and its sales of the decade’s hottest devices were up over 48% on the year. The company shipped over 100 million smartphones to kick of the decade. In comparison, Apple (NASDAQ:AAPL) shipped 47.5 million iPhones and Samsung notched just 23 million.
In 2010, Nokia sat at number 120 on the Fortune Global 500 list, with annual revenue of just under $57 billion.
2010s: Stumbling, Badly
What happened to cause Nokia to fall so hard from its position of smartphone dominance and the high global ranking it held in 2010? One word: Android. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google was pushing Android, its mobile operating system, and consumers were clamoring for it. Smartphone vendors like Samsung were on board, but Nokia stubbornly refused, choosing instead to stick with Symbian to power its smartphones.
That strategy was disastrous. And the solution wasn’t any better. Still determined to avoid Android, in 2011, Nokia joined forces with Microsoft (NASDAQ:MSFT), adopting Windows for its Lumia smartphones. By 2012, with global smartphone sales at 1.6 billion units, Nokia’s shipments had fallen to just 35 million units for a 5% global market share. In comparison, Apple shipped 135.8 million iPhones. Samsung shipped 213 million Android-powered Galaxy smartphones. By 2014, it was over. Nokia exited the smartphone business, selling it for $7.2 billion to Microsoft.
From there, Nokia leaned heavily on its networking business, but there were other ventures. Notably, the company tried to wring some money out of Apple, launching patent lawsuits in 2016. The company won a one-time settlement from Apple as a result. Nokia used some of that cash to try entering the wearable health devices market, where Apple was making a splash with the Apple Watch. Nokia bought French health startup Withings for $191 million in 2016. In 2017 it took a $164 million write-down on the business. In 2018, it gave up, selling Withings back to its founder.
As the decade wound to a close, Nokia’s primary sources of revenue were networking equipment and patent licensing.
Going Into 2020
As we enter into a new decade, the company is looking to put the disastrous 2010s behind it. The company signed licensing deals with a Foxconn spinoff that has seen the return of the Nokia name on mobile phones. That includes a lineup of mid-range Android smartphones, and modern redesigns of classic Nokia feature phones including the 2720 flip phone. Nokia won’t be seeing Apple level profits from this venture, but licensing fees at $11 to $23 per device will add up.
The bigger story for Nokia as we enter the next decade is 5G. The company’s networking division is rolling out end-to-end 5G solutions for telecoms, as they race to launch the next generation cellular network. With Chinese competitors like Huawei facing bans in many countries, Nokia is in a great position. In addition, the company stands to make money as part of the expected consumer surge to upgrade to 5G smartphones. Its 5G patents mean it will collect licensing fees of roughly $3.50 per smartphone sold.
The past 10 years have seen Nokia battered, and it has become arguably the biggest casualty of the smartphone era. It goes into 2020 with its name once again on smartphones and retro feature phones, a strong patent portfolio, and a networking business poised to profit in a big way from the 5G rollout. Barring any major miscalculations, look for the Finnish company to once again begin climbing that Fortune Global 500 list.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.