In 2005, Nokia sold its billionth mobile phone, a budget-friendly device that went to a customer in Nigeria. By then, the company, based in Espoo, Finland, was making one of every three cellphones globally.
But just nine years later, the mobile-device maker offloaded its entire handset division to Microsoft for pennies on the dollar, compared to what it had been worth at its peak.
Nokia had risen from obscurity in the 1990s to become a worldwide cultural phenomenon by the turn of the millennium, its signature devices featured in TV shows and movies, announcing their presence with instantly recognizable Nokia ringtones.
As Nokia was becoming comfortable in the spotlight, the smartphone era arrived. And what came next was swift and brutal. But, as revealed in Nokia internal documents recently made public and interviews with key Nokia engineers from that era, the company saw it coming. Within 24 hours of Apple CEO Steve Jobs’s iPhone unveiling in 2007, Nokia was already weighing its options. They’d immediately recognized the threat. However, outrunning it was another matter.
What follows is Nokia’s story over 14 years, from 1998 to 2012, as the world’s top cellphone maker—how its devices defined their time, how the tech reshaped what phones could be and do, and how the company’s good fortunes in the handset business came to an end.
Nokia Was Once Unbeatable
The centerpiece Nokia devices, the ones that people probably think of when they see the words “Nokia phone,” were the 3210 and its cousin, the 3310. TechRadar has called the 3310 “the greatest phone of all time.”
Nokia’s 3210 phone, released in 1999, was an inexpensive device aimed at younger users. Colin McPherson/Alamy
Released in 1999 and 2000, respectively, the two devices sold more than 280 million units worldwide. Their most innovative hardware feature was the internal antenna—the first mass-market phone without even a stub or retractable aerial. “Consumers had the perception that it could not work well without an external antenna,” said Peter Røpke, a former Nokia senior vice president, in a 2016 interview with Slate.
The phones shipped with games, including the legendary Snake, one of the most popular pre-smartphone mobile games—in which a pixelated serpent eats and grows with every morsel consumed.
Nokia introduced no small portion of the world to texting. At the time of the 3210 and 3310, the prevailing texting standard was SMS (short message service), which allowed up to 160 characters per message. Nokia appended its own Nokia smart-messaging service to SMS, which allowed the sending of small bitmapped images across an otherwise text-only system. A rich-text messaging system that allowed visual images, audio, and video followed in 2002, leading to a multimedia messaging service (MMS) standard that remains in place today.
Nokia also enabled users to easily create and share ringtones on their devices. By 2000, Nokia’s custom-ringtone Composer app had popularized a new, short-form musical medium that the ringtone industry, at its peak, would transform into a billion-dollar marketplace in the United States.
Nokia introduced its 1100 phone in 2003 and ultimately sold half a billion units, making it the most popular cellphone in history. Paul Chesne/Donaldson Collection/Getty Images
A few years later, Nokia reimagined its mobile handsets, releasing the 1100 in 2003. The 1100 sold a half a billion units, more than any cellphone in history. It remains one of the best-selling consumer products ever. Much of the 1100’s success was due to its price tag—in the neighborhood of US $100, making it at the time Nokia’s most affordable device.
Also contributing to the 1100’s popularity were features designed for longevity and tough environments, including dust resistance, nonslip sides for better handling in rainy conditions, and a 400-hour standby battery life. The 1100 introduced a flashlight as well, which the user turned on and off by holding down the “C” key.
Where most device makers at the time were worried about camera megapixels and color screens, Nokia had leapfrogged its competition with a back-to-basics phone that could survive the rain, endure unreliable power grids, and light the way home.
Apple Launched the iPhone, Nokia Scrambled
On 9 January 2007, at the Macworld conference in San Francisco, Steve Jobs made a characteristically bold claim. “Today, Apple is reinventing the phone,” he said, soon pulling one of the first iPhones out of his pocket.
Apple CEO Steve Jobs famously launched the iPhone at the Macworld Conference in San Francisco on 9 January 2007. Nokia held a rapid-response meeting to the event the following day. Tony Avelar/AFP/Getty Images
Rumors of Apple entering the phone market had swirled since the iPod’s debut in 2001, but nobody had really reckoned with what that might mean.
“Executive summary: Apple iPhone is a serious high-end contender,” read a slide from a Nokia internal meeting held the day after Jobs’s keynote. (That slide is now in the company’s online archives, opened to the public last year.)
“User interface has been a big strength for Nokia,” it continued. “Nokia needs to develop touch [user interface] to fight back.”
Peter Bryer, at the time Nokia’s manager of strategic foresight, was part of that 10 January meeting, and he recalls that Jobs’s announcement wasn’t unexpected. But the iPhone’s extensive reliance on multitouch—save for a single home button on the front—did surprise the team.
Nokia was already aware of multitouch technology, Bryer notes. In 2006, the U.S. computer scientist Jeff Han had given a celebrated TED talk about it, demonstrating a multitouch screen, which could sense multiple fingers on the screen at a time, not just one. Bryer remembers his colleague Timo Partanen, then Nokia’s director of market and competitor analysis, getting excited about Han’s demo.
In 2006, the NYU research scientist Jeff Han showed off a new multitouch interface technology as part of a popular TED talk. By the end of the decade, multitouch—in which multiple fingers can interact with a touchscreen at once—would play a key role in smartphones from Apple, HTC, and Palm. Steve Jurvetson/Flickr
“Timo burst into the room, saying, ‘You’ve got to see this TED video of this guy using multitouch,’” Bryer recalls. “We both thought that was cool and that’s the future. Then I looked at the sponsors of the presenter’s research, and among them were Nokia and Microsoft.”
And yet it took Nokia years to develop a phone that used multitouch. “Remember, Nokia is based in Finland,” he says. “It’s very cold in Finland. They wear gloves for six months of the year, including the executives. They didn’t think a device like that would work.”
Winter gloves were no obstacle to operating the chunky buttons on Nokia phones, a design priority perhaps stemming from the company’s Finnish culture and headquarters. Erol Gurian/laif/Redux
Partanen was also at Nokia’s post-iPhone launch meeting, and recalls that there was little concern in the room. “We felt okay,” he says. “This is yet another competitor launching a great product. But we had no doubt that, if it’s successful, we would do the same. We will launch similar products.”
In November 2008, Nokia released the 5800 Xpress Music, a year and a half after Apple had launched its iPhone. Shaun Curry/AFP/Getty Images
That similar product ended up being the Nokia 5800 XpressMusic, known as the Tube, released in 2008. “The idea was to focus on streaming videos and television,” Partanen says. “So we made a phone with a similar form factor to the iPhone [that was] optimized for streaming content.” But the 5800 was “delayed, delayed, delayed, delayed,” he says. “It didn’t materialize in the way it was planned. It was released as a watered-down version.”
Critics skewered the 5800’s “outdated” feature set and “ancient” S60 operating system, which ran on top of Symbian OS, an open-source mobile platform Nokia had recently acquired. The 5800 sold reasonably well for its time, reaching around 8 million units in its first year alone. But it did not feature multitouch.
“I think that started to be the point when everybody realized that, hey, this is by far more difficult than earlier competitive issues we’ve had,” Partanen says.
Nokia finally released its first device with multitouch in 2010, three years after Jobs’s splashy iPhone announcement and four years after Han’s TED talk demo.
How Android Ate Up the Low-End Market
Nokia had long owned the low end of the cellphone market, with its sturdy, no-frills devices suited for that segment. So the years immediately following the iPhone’s launch saw the Finnish firm continue to thrive as it kept turning out simple, rugged devices.
As one review of the Nokia 1200—successor to the 1100—put it in October 2007, “This handset chucks away all the fancy features you’ve come to expect on a modern mobile, leaving you with a pared-down feature set that’s easy for tech novices to get their heads around.”
Two cellphone users in Nairobi, Kenya in 2013 exchange a payment on a Nokia 1200 phone via the M-Pesa Mobile Money Market, a popular online banking service. Trevor Snapp/Bloomberg/Getty Images
The 1200 kept the 1100’s dust-proofing, flashlight, and long-lasting battery, and added features aimed squarely at the developing world. The 1200 was the first to include call-time tracking and a multiuser phone book, allowing owners who planned to lend their device to set up call limits based on time or cost. This feature helped enable what Nokia researchers called kiosks—informal pay-per-call services, in which an enterprising phone subscriber charged neighbors and family members by the minute for use of the device.
In 2006, Nokia studied how Ugandans used their Nokia phones in rural and remote areas. An internal company slide deck from the time reveals just how keyed-in Nokia was to its lowest-income users. “Village phone operators are often women,” the slide deck notes. “And there tend to be a lot of children around. (Phones need to suffer considerable abuse from chewing, dust, sweat, etc.)”
“A unit of phone time is 60 seconds,” another slide states. “But to avoid accidentally going over that time and incurring extra costs, kiosk operators shorten the unit to 57 seconds, allowing a three-second margin of error. Shared mobile used as phone kiosk must show call time.”
Nokia’s familiarity with its market couldn’t protect the company forever, though.
Nokia sought out user input around the world for the company’s device designs, including hosting “Open Studio” contests soliciting users’ sketches of their dream cellphone. Shaul Schwarz/Getty Images
That’s because the iPhone wasn’t Nokia’s only looming smartphone competitor. In September 2008, the first Android phone went on sale—the HTC Dream, which was also sold as the T-Mobile G1.
While the iPhone was aimed mostly at early adopters and affluent users who could afford to drop hundreds of dollars on a new phone, Android phones were, within a couple of years, aiming at the same low-cost, global user base Nokia was selling to.
“I think it’s fair to say Android is the one that disrupted the market more for Nokia,” Bryer says. “Most of Nokia’s successful devices were not on the high-end market. But then, when Android came along, it started to fill that lower end and eventually took that market away from us.”
An executive from Nokia India in 2010 holds the company’s 5530 Xpress Music and 5230 phones, both of which had touchscreens, although only the 5530 had Wi-Fi. Sam Panthaky/AFP/Getty Images
With two emerging competitors in the low end and high end, the Finnish device maker responded with a device that split the difference—and satisfied neither camp.
Released in 2009, the Nokia 5230 attempted to be a low-priced, touchscreen (though not multitouch) competitor to both the iPhone and Android. It sold an impressive 150 million units, doing especially well in developing countries.
But the 5230 didn’t have Wi-Fi—one of the biggest complaints at the time. In the developing world, Wi-Fi connections were still rare, so the lack of Wi-Fi made some sense. But the rest of the world was not pleased.
“We had such a big gap and dominant position,” Bryer says. “Which does maybe create a level of comfort which you should never get.”
How Nokia Lost the Smartphone Race
By the beginning of the 2010s, Nokia could have still drawn from the company’s labs, which were regularly spinning out new technologies and innovations. However, the Finnish handset maker ultimately failed to turn its R&D into viable new product lines in response to the emerging smartphone threat.
Nokia’s predicament had precedent—Kodak, dominant in film photography, had actually invented the digital camera in 1975 but failed to commercialize it before digital imaging made its core business obsolete.
“The technology coming from our R&D teams was cutting edge,” says Gordon Murray-Smith, director of services and ecosystems intelligence from 2008 to 2011. He recalls attending annual R&D innovation days that showcased work on self-healing materials and flexible screens, long before those technologies were seen elsewhere. “But why was Nokia not able to commercialize some of that really interesting and innovative activity more than it did?”
Nokia desperately needed an injection of life to change its fortunes. The company’s first non-Finnish CEO, Stephen Elop (a Canadian fresh off a two-year stint on Microsoft’s leadership team), did not mince words.
In an internal memo from February 2011 that was soon leaked to the media, Elop wrote, “The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”
In 2011, Nokia released the N9, a smartphone with a Linux-derived operating system. Within a year, Nokia had pivoted toward its Windows Phone-powered line of Lumia devices. Munshi Ahmed/Bloomberg/Getty Images
Elop oversaw the 2011 launch of a Linux-based smartphone, the Nokia N9. The N9 ran on a distribution of Linux called MeeGo. Reviewers at the time praised the new smartphone direction the Finnish phone maker had taken. “Possibly the most beautiful phone ever made,” wrote one reviewer about the N9 for Engadget.
But the N9’s accolades did not ultimately carry the day. Nokia announced its Lumia line of phones the same year—a direct pivot away from MeeGo toward the Windows Phone. It would be the last major strategic turn Nokia would take as a cellphone manufacturer. From this point forward, a succession of C-suite decisions all but sealed the fate of Nokia’s iconic line of phones.
In 2013, Microsoft announced its bid to acquire Nokia’s handset operations. After the sale went through the following year, it rebranded the division Microsoft Mobile. But the year after that, Microsoft decided it had made a costly mistake, writing down $7.6 billion—nearly what it paid for Nokia’s handset division—and laying off nearly half of the former Nokia staff it had inherited.
In 2016, Microsoft sold its feature phone assets to HMD Global. The latter still sells Nokia-branded phones—budget-friendly devices as well as nostalgia reproductions of models from Nokia’s glory days. What remained was a brand name, some intellectual property, and two decades of hard-won lessons about what it takes to stay on top—and what it costs when you can’t.
“When you look at the players in the world of smartphones today, any of those players would struggle ever to achieve 14 consecutive years of being No. 1,” says Murray-Smith.
Partanen says there was a downside to Nokia’s mobile-phone dominance. “Often, being the first mover is not necessarily the best position,” he says. “Being a quick follower is the best position.”
The company itself ultimately survived, even if the transition wasn’t painless. Nokia’s revenues, which peaked in 2007, fell sharply through the mid-2010s before the company refocused on a decades-old business line—telecom infrastructure—that many had forgotten Nokia was even in. Nokia now ranks among the world’s top three suppliers of 5G network equipment, serving carriers across more than 125 countries, alongside Ericsson and Huawei. Although the company could never quite crack the smartphone, it now plays a key role in providing the network backbone those smartphones run on.
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