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business newsCompanies That Almost Weren't: Nokia
Folding the paper business opened new opportunities.
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In 1865, Fredrik Idestam, a mining engineer by trade, imported wood-pulping technology from Germany -- a new, cheaper process that produced the raw material for paper from wood. It was Finland’s first commercially successful wood pulp mill -- and the origin of Nokia. Idestam earned himself the eventual distinction as the father of Finland’s paper industry.
A few years later, Idestam built a second mill by the Nokianvirta river, the place that gave Nokia its name. In 1871, with his close friend Leo Mechelin, a statesman and Finland’s most prominent public figure in the late nineteenth century, Idestam named his company Nokia. In 1902, Nokia Ab added electricity generation to its business activities. These plants gradually developed into an industrial conglomerate.
Two separate events, however, would ultimately fortify Nokia’s path. In 1898, Eduard Polón founded Finnish Rubber Works and in 1912, Arvid Wickström started Finnish Cable Works. At the end of the 1910s, shortly after World War I, Nokia was nearing bankruptcy. Finnish Rubber Works purchased Nokia, fearing that the rubber plant would lose its electricity supply should Nokia shut down operations. Then, in 1922, Finnish Rubber Works acquired Finnish Cable Works.
These three companies -- Nokia, Finnish Cable Works, and Finnish Rubber Works -- officially merged as the Nokia Corporation in 1967. At the time, Nokia was the smallest of the three. The new Nokia Corporation had five businesses: rubber, cable, forestry, electronics, and power generation. It was Finnish Cable Works, having entered the electronics market in the 1960s, that set the groundwork for Nokia’s entrance into telecommunications.
In the 1980s, Nokia set sail in the telecommunications business. It introduced its first car phones in 1982 and the first mobile phones for the Nordic Mobile Telephone (NMT) service -- the world’s first international cellular service. The Mobira Cityman 900, its first mobile phone, had a price tag of 24,000 Finnish marks, or approximately $8,000. (See a photo here.)
Its other divisions still went strong, but in the early 1990s, the company decided to focus exclusively on telecommunications and sold its rubber, cable, and consumer-electronics divisions. While about a quarter of its business had still been in Finland, this decision pushed it into a global market where it was somewhat inconspicuous.
The following decade shaped the brand seen today -- a company that has about 123,000 employees in over 100 countries and controls 38 percent of the cell-phone market.
Still, it's not invulnerable. Nokia's marketing head recently told a German magazine that the company needs to speedily boost its offering of mobile Internet solutions, a domain that Apple (AAPL), Google (GOOG), and BlackBerry (RIMM) are already carving up, and that it didn't rule out a sale of its core handset manufacturing business in the long term. It could be a bitter fight, but it's one in which Nokia has experience. After all, cell phones might be viewed as indispensable today as paper was when Fredrik Idestam set up his mill 145 years ago.
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