Monday, Aug. 11, 2003

Nokia

By JORMA OLLILA

The emphasis in 1992 was very clear: we would not be able to grow in the technology business unless we divested ourselves of the bulk of the paper, rubber and cable production businesses and used the cash to prioritize the development of technology.

In 1996, we ended up with telecom infrastructure and mobile phones. The year 1993 was a breaking point because we took the essential decision to focus on very few areas, essentially wireless. We took a view that the breaking down of trade barriers, together with the regulatory changes in telecom, changed the picture. 1993 was a breaking point; we took the decision to focus essentially on wireless

There was a discontinuity that presented growth opportunities in the wireless area. Our proposal before the board was that the growth opportunity was huge. The board gulped a little and said, 'O.K., that looks fine. But are you sure about the growth opportunity?' We said, 'Yes, we are.' But they wanted a second opinion.

Boards are conservative, so we had an outside consultant to give a little bit of guidance, which confirmed our view. We were very confident that we were barking up the right tree. We were even surprised by how right we were. In fact, the reality was even better.

NOKIA FACTORIES When Nokia was formed in 1967, the firm had nothing to do with mobile telephones. Half of its business involved making electrical cables; a quarter making tires and rubber footwear; the rest was paper production. Two-thirds of its products were sold in Finland. In the late '80s, the company decided to concentrate on technology, with such products as TV sets and personal computers. The Nordic countries had become early pioneers in a new technology called cellular phones and Nokia moved into that market. By the mid-'90s, the company had sold off its rubber, paper, TV and computer businesses in order to concentrate on mobile phones and infrastructure. It was a smart choice. Globalization opened up world markets to successful exporters, mobile phones boomed, and the company now has a 38% share of the world cell-phone market. Its success both reflects and helped propel the digital revolution in Europe. Last year, Nokia had sales of €30 billion with profits of €3.4 billion. Its market capitalization is €70 billion, and it makes almost all of its money outside Finland. — Charles P. Wallace