University of Basrah

College of computer science & information technology

Zainab mohi oudah, Noor Mussa Neamah, zainab abd almeer jameel, hisham hussain Noorie

Causes of Nokia failure

How Microsoft Acquired Nokia

ABSTRACT
Nokia was able to consolidate its position as a leader in the global market in the field of mobile phones, as
its sales peaked in 2007, but it was unable to maintain this success for a long time, so the circumstances
forced it to sell its smart phone business as well as the patent license to Microsoft in 2013. We will discuss
in this paper. Research, which is a review of a group of research published in international sites, the
history of Nokia and how this company moved from glory to decline, and what are the reasons that led to
.this failure, how Microsoft acquired it, and what goals Microsoft achieved from this acquisition

Introduction
Nokia is a well-established global brand and is considered one of the basic components in the mobile
phone market in the nineties(A STUDE ON NOKIA MS.Neelu2014 ,SAGE.2019 ), , Nokia had a 70% share of
the smart phone market in 2007, leaving many competitors in view. Now this success began to fade after
the introduction of the Apple iPhone devices in the third quarter of 2007 And the emergence of HCI until
its total share has reached 39%, that the organizational management gaps of a company and the inability
to promote the spirit of harmony between employees and the sharing of information and decision-making
and motivate them to gain sufficient experience in the field of Business administration instead of
emphasizing them to increase productivity so that it makes the environment in which they work as a team
one of the reasons that caused the company to fall in 2008(Dr. Petronilla Mathooko.2014) it was unable to
continue and progress in the mobile phone market(IAJISPM 2014), The management made strategic
changes to restore the company to its position or compensate the losses at least among these changes.
Changing the CEO in 2010, but its deterioration was steady year after year and the market value decreased
from 110 to 15 billion euros (Ahmed Alibage.2018), which c Perhaps she would have to sell mobile phone
business to Microsoft on September 3, 2013 for $ 135 billion USD(Dr. Sanjeev Chaturvedi.2017) . The
process of product development, especially mobile phone companies, is the adoption of new innovations
that are attractive to all consumers, such as light weight and longer battery life. In terms of horizontal
innovations, they attract only a subset of the market, the most important thing is software innovations that
.are integrated (ECONSTOR, ITS 22 nd -25th june,2014)

One of the things that made Microsoft acquire Nokia is that it believed that increasing the sales of
smartphones would lead to an increase in the sales of smart tablets, which would help it to upgrade the
level of Windows phones in addition to that would help it to join the Nokia executive team to Microsoft
while it believed that it desperately needs to own a company for the devices Portable, Microsoft wanted
to compete with Apple and Google. However, it was unable to achieve any success in the field of
.smartphones (IJM & P, June - September 2014)

The aim of the study is to clarify the reasons for the failure of a company with an active innovation policy
and to demonstrate its struggle for the create competitive advantages and to maintain its role in the global
mobile phone market(ITS 22 nd -25th june,2014). That The problems were not the lack of innovation rather
it was lack of Accurate predictions, Nokia represented successful strategies in the field of smartphones,
and what made matters worse was that it made several decisions at a bad time, as Nokia’s market share
.declined(BUSSINESS HISTORY ,06 Jun 2019)

Methodology and Short History of Nokia

Nokia was able to cement its position as a global market leader in the field of mobile phones with sales
peaking in 2007 in June 1998, Nokia, Ericsson, Motorola and Psion founded Symbian Ltd. Which became
the developer of Symbian OS. The Nokia 9210 Communicator was the first Symbian OS phone released in
the year 2000. The adoption of Symbian as the main software platform for Nokia is the starting point for
our historical analysis as the success of Nokia in the early 2000s is due to the success of this operating
system. The company's main strategic focus during the early 2000s was the expansion of the mobile audio
market and consumer multimedia business. For example, in 2004 alone, Nokia introduced 36 models of
mobile devices (Nokia Annual Report 2004. p. 31), in all price ranges with a variety of functional features.
Market penetration was impressive - Nokia sold its billionth phone in 2005, and its maximum global market
share reached 39% in early 2008 (Table 1) Soon the situation in the mobile device market began to excite.
For the first time in its recent history( Dr.Juha_Antti , Dr.Jari_Ojala , Dr.Henrikki_Tikkanen) But she
suffered in the end Continuous deterioration un890til it completely failed to compete in the smartphone
market (Ahmed Alibage.2018) .So In the latter half of 2008, Nokia's share in the global mobile device
market began to decline. In just two years, Nokia's operating profit has shrunk by more than 40%, and in
2011 the company was in the red. Thus, past successful performance in established markets did not
guarantee continued success in the growing sectors, especially in smartphones. Although in early 2008,
Nokia was still the market leader in this high-value segment of the market: its flagship N95 smart device,
launched in the spring of 2007, outperformed its competitors, especially the first generation iPhone 3. In
2008, Hardware & Services business unit accounted for nearly 70% of the company's net sales. By 2013,
business unit revenue had shrunk to only a third compared to its peak year, but still accounted for over
40% of total revenue. Mobile network unit. However. It has not experienced a similar decline in its
business (Table 1 ) Cooperation between Microsoft and Nokia has strengthened and the two companies
have announced plans to “form a broad strategic partnership that will use complementary strengths and
expertise to create a new global mobile ecosystem” (Microsoft press release, February 10, 2011). In
contrast to the previous strategic decision, a decision was made to adopt the Windows Phone operating
system as the primary platform for Nokia smartphones for a period of (at least) three years. This means
TMT has publicly acknowledged that its intense focus on Symbian OS and later Me ego were major
.strategic mistakes

Nokia Corporation 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net sales(EUR) 533 29 371 29 191 34 121 41 058 51 710 50 984 40 446 42 659 38
Employees 359 51 505 55 874 58 483 68 262 112 829 125 123 132 130
553 427 050
Global mobile device 38% 32% 33% 36% 38% 39% 34% 32% 26%
market share
) )Table 1
Meanwhile, the senior management team outsourced the development of Symbian to Accenture and
halted further investments in MeeGo after the launch of the first and only flagship device, the MeeGo (N9)
in September 2011. Consequently, Nokia released its first Windows Phone-powered smartphones in the
fall of 2011. Under the brand new Lumia (Nokia press release, October 26, 2011). In September 2013,
after two years of close cooperation between Nokia and Microsoft. The two companies announced that
Microsoft will buy Nokia Devices & Services, license Nokia patents, and license and use Nokia Map services
(Microsoft press release, September 3, 2013 (Dr.Juha_Antti , Dr.Jari_Ojala Dr.Henrikki_Tikkanen)).Nokia
dominated the smartphone market, mainly due to the Symbian OS, and with the introduction of N95,
Nokia's market share jumped in two months from 33% to 36% (Talouselämä30 / 2009). In 2007, Apple
launched the iPhone and Talouselämä wrote ( 30/2009) "Apple started to devour Nokia while it is alive in
the United States". In 2010, the year Android and iOS made major advances in the market, Nokia
appointed its new CEO, Stephen Elop. In 2011, Elop announced the transition from Symbian to Windows
phone. OVI Store is integrated into Windows Phone Store. Since then, sales have fallen, many factories
and R&D facilities have closed, employees have laid off the need, and the market value has fallen
dramatically, from 110 billion euros to 15 billion euros in 2012.In 2013, it was announced that Microsoft
would acquire a company. Nokia Mobile Phones, deal closed in April 2014. The division of Nokia phones
and the licensing of the Nokia patent group for 10 years, transferred to Microsoft Mobile Inc. For € 5.44
billion. Nokia, or what remains of Nokia, will focus on mapping applications (here), infrastructure (Nokia
solutions and networks) and on developing and licensing advanced technologies, so for now, the end of the
successful Nokia phone manufacturing story (ECONSTOR, ITS 22 nd -25th june,2014)We, we follow a
historical position in solving problems and explaining ambiguities by gathering evidence that produces an
understanding of processes, mechanisms and outcomes. Using a review of traditional narrative literature
to summarize the available literature set and draw conclusions regarding the issue of the issue, in addition
to providing a comprehensive background to understand current knowledge of the problem and
highlighting the implications of the new research. We started collecting data from multiple sources by
searching for information related to the social, economic and industrial history of Nokia. Information was
gathered with a focus on Nokia's history, including published academic papers, magazine and newspaper
articles, past conferences, as well as the company's official history and annual reports. Moreover, we
considered the use of available statistical data and logical reasoning to deal with the potential subjectivity
of the qualitative analysis of previous studies. The analysis, use multiple data sources to understand; How
its success story continued until it began to decline in 2008. As the company went through a mess of
continuous deterioration in its financial performance, as shown in Figure 1 below [4]. According to [16],
Nokia’s collapse from the top of the smartphone pyramid is due to three factors. ; (1) Less technical
capabilities compared to competitors (such as Apple), (2) a high level of self-satisfaction, and (3) failure of
the leadership to see the upcoming disruption, especially Apple's iPhone. Another perspective is that the
failure factors were: (1) Executives ’inability to understand the market accurately, (2) Deviation in working
methods, and (3) Lack of teamwork [8]. However, to identify and identify the gaps in Nokia's previous
strategies that led to its disappearance from the mobile phone industry, multiple aspects will be discussed
in the following sections ( Ahmed Alibage.2018)Most of the data used in the study is secondary data
gathered from articles, news reports, and press releases published on the web before and after the
purchase of Nokia phones by Microsoft. These sources are very recent. The analysis is similar to the
content analysis. Key words and phrases were identified from secondary sources in relation to (1) the
reasons for the breakdown of Nokia, (2) general views about the transaction in the market, (3) the
similarities and differences between business and past models regarding merger & acquisition activities of
competitors in the market, (4) Specific reasons for Microsoft to buy Nokia, (5) Impact on stakeholders.
Additionally, the Microsoft-Nokia deal is analyzed using the following theories / prior research regarding
the carrier mergers and acquisitions. (1) Synergy trap hypothesis: It states that before and immediately
after the announcement of the acquisition, the share price of the acquiring company is adversely affected
and the share price of the target company is positively affected. (MYEONG-CHEOL et al., 2002). (2) Ethical
behavior: Ethical behavior in mergers and acquisitions is closely related to employee job performance (LIN;
WEI, 2006). ( IJM & P, June – September) But what are the reasons that have led Nokia to fail to
understand the major disruption in the (mobile) communications industry in the past decade? What made
her unable to respond and retaliate? In this research we will look at why Nokia has not been able to
continue its dominance and capture a fair share of the smartphone market ( ECONSTOR, ITS 22 nd -25th
.june,2014)

In this research we have adopted 13 published papers from 2013 to 2019 in accredited sites and I
.summarized these researches

Previous Studies
We will mention the most important things that scientists have addressed in previous research into the
reasons for the failure of Nokia and the acquisition of Microsoft

A group of scholars mentioned in a research paper on the reasons for the acquisition on 3.September
2013(ETLA) Symbian's decline in market share after 2011 was part of Nokia's strategy to switch over to
Microsoft's operating system, so he needed something quick. After Nokia Council lost faith in Windows OS
strategy, and in binding contractual obligations, Microsoft acquires Nokia mobile and smart device
business units, including Nokia's design and operations team, all related production facilities, sales and
marketing functions, and activities. related to. In total, Nokia has transferred 32,000 employees to
Microsoft, of whom 4,700 are in Finland. But it doesn't get: a non-exclusive patent for 10 years, the right
to trademark Nokia for years, and certain rights in relation to HERE services. Nokia is restricted in using its
own brand in mobile devices for 30 months or until the beginning of 2016, but the announced
announcement today does not prevent Nokia from making portable devices with other brands. The cash
.price of the deal is € 5.44 billion (of which licenses and future options are € 1.65 billion

As mentioned by the scientist( Dr.Tuha-Antti ,Dr.Jari Ojala and Dr.Henrikki Tikkanen) in a research they
conducted in 2003 _ 2013 Nokia started crises in the big transformation to the big shift in the company in
September 2013, after the start of commercial cooperation between Nokia and Microsoft, and the
companies announced that Microsoft and our devices will license its business and devices from Nokia,
license Microsoft patents, and license an official letter from Nokia (press release from Microsoft,
September 3, 2013) due to technological disruption and the emergence of new market powerhouses with
serious problems for Nokia - Apple and Android have taken over the smartphone market that was
originally dominated by Nokia's Symbian devices, making Nokia a follower. Moreover, other external
factors, such as cooperation with network operators and other system partners, were important elements
.of the competitive position

As for the world Netra Pal Singh in September 2014 Microsoft acquired Nokia to "accelerate its share and
profits in phones, to create a first-class Microsoft phone experience for its users, to prevent Google and
Apple from preventing application innovation, integration, distribution and economy. Microsoft shares fell
by up to 6% on the afternoon of the deal date, reducing Microsoft's market value." With $ 15 billion, as
investors protested the acquisition of a poorly performing and marginalized company, the expert
community came up with many reasons responsible for the deals between Microsoft and Nokia. In
summary, the most important of these are listed below. To compete better with Android. The deal It will
bring 32,000 Nokia employees to the Microsoft Board of Directors. It will transform Microsoft into a true
multinational company with all tax flexibility (CRINGELY, 2013). (4) Acquiring a global brand and trying to
alienate Nokia. This is a milestone in Microsoft's efforts to break Apple and Google's Grip on the
Smartphone Business (WILLIAMS, 2013). Help Microsoft make more money per phone, reduce redundant
marketing efforts and access the source code for mapping software from Nokia. The deal will protect the
.future of the Windows Phone platform, make it more competitive, and can give impetus to innovation

And between the two worlds Jianzhong jia , Yuchan Yin in 2015 in summary the reason Nokia's rapid
transition from glory to challenge was indeed its loss of leadership in the mobile phone industry. Especially
in the era of the mobile Internet, it was unable to launch Star products that meet the requirements of the
.mobile Internet. In the face of the rapid development of Apple and Android phones

The most important thing that the scientist mentioned Rajni Kamboj in February 2016 It took Nokia a long
time to enter the highly productive and booming smartphone market. But the reason it was so slow to
react to the new competition, the company lost much of its huge market share one day.Whereas, Nokia
was losing its charm in the final high-end phones. Nokia also provides cash allowances that use a skimming
pricing strategy. Promote advertising - through television, signature panels, billboards, radio, newspapers,
rad. Strengths Many consumers often choose Nokia more than any other brand because of the reliability,
.durability and creativity that they offer. Their phones provide it

The clearest world Dr.Sanjeev Chaturvedi in September 2017 The main reasons behind Nokia’s failure are
1. Nokia executives ’misperception of the market precisely
This means that companies should pay more attention to products as well as consumer needs, so that
product innovation must take the real needs of consumers into account.
2. Nokia has valued the hardware business a lot and neglected the software business over a long period of
time.
3. Nokia mobile phone operating system was Symbian, which was very popular in machine age and wins
big market share for Nokia. However, in the era of smartphones, Symbian defects gradually appeared and
eventually became the biggest obstacle to the development of Nokia mobile phones.
4. Nokia lacks teamwork. The biggest mistake Nokia made was its refusal to cooperate with other mobile
phone manufacturers in its business.
5. Nokia has been subject to a series of attacks since 2012. It has been under pressure from many events,
including several high-profile events.
6. Nokia announced the layoffs of 10,000 global employees on June 15, 2012, along with the sale of Nokia's
headquarters for € 17 million On December 5, 2012; Finally, Nokia sold the company's mobile phone
business to Micro-soft on September 3, 2013.
The most prominent transformations in Nokia that came in the world's research (Ahmed Alibage10-
8.2018), The most notable change occurred between 1990 and 1996 when a fruitful shift in the business
model took place to save the company from near bankruptcy and stabilize it on the path to becoming one
of the world's greatest corporate success stories for more than a decade and a half. In 2005, Nokia
brought together some researchers from NRC and academia to share ideas about the future of sensor
networks. In this brainstorming, the researchers discussed how the phone can act as a user interface and
gateway to existing sensor networks. In fact, the smartphone category was officially announced as part of
Nokia's strategy regarding mobile phone business unit at the annual 2005 year. Port due to the adaptation
of various features and the rapid development of mobile devices. (Unreleased) Turbulence Phase -
Deterioration of Nokia In June 2007, Apple launched the first iPhone 3G, making clear differences in
technical specifications compared to the Nokia N95. N95 features such as a small non-touch screen,
complex interface, slow Symbian OS, and customizing apps not easy to use compared to those of the
iPhone have proven that the iPhone outperforms. Although the iPhone has been criticized for lack of 3G
support and poor camera quality, the large touch screen and the iOS system have captured the
imagination of the users, thus, it shortened the time of competition and bypassed. Nokia has clearly failed
to realize that users are no longer interested in power, but instead in ease of use.
The causes of the crisis are summarized from the research of the Ame Beentjes
The most important cause of the crisis is the great competition in the market for mobile phones and
smartphones. Nokia has tried all kinds of new developments but failed to create a positive attitude in the
event of a crisis. They tried it out with many different options but the competition was way too big in the
end. This eventually led to the complete acquisition of the Nokia mobile business. Nokia was the market
leader in mobile devices.

Notes and Concluding

The purpose of this research can be summarized as follows: Although Nokia has time to respond to market
changes and the technological ability to counter-attack its competitors, it has failed to do so despite the
organizational structure that is designed to prepare Nokia to respond to the market, Nokia tried In several
ways to re-impose its control on the market, this hegemony made it a global company and brand, leaving
behind many competitors, but it failed to create a positive situation in the event of a crisis. . This ranking
achieved by Nokia could not deprive it after the emergence of its competitors from Google and Apple in
2007 and the emergence of the Android operating system, when the operating system was a big reason for
keeping people away from Nokia smartphones, so Nokia was interested in making its phones more
powerful and sobriety and did not care about the organization and software During this period, Nokia was
unwilling to challenge itself. Nokia was adhering to the model around which cell phones revolved primarily
around contact with people. In addition, the lack of a spirit of familiarity and cooperation between
employees and managers at work. The weakness of Nokia during the period in which Micro Soft needed to
acquire a weak company, according to its belief, will increase its strength and prosperity when the Nokia
staff joins it and the purchase deal was concluded in 2013, Microsoft acquired business units for mobile
phones and smart devices from Nokia, Including the Nokia design and operations team, all related
production facilities, sales and marketing functions, and related activities. Nokia announced the layoff of
10,000 global employees on June 15, 2012, along with the sale of Nokia headquarters for € 17 million on
December 5, 2012; Finally, Nokia sold the company's mobile phone business to Micro-soft on September
.3, 2013

In this research, we first presented the stage of prosperity and success for Nokia, and the most important
thing that it presented in the mobile phone market at that time. Then we dealt with the most prominent
reasons and mistakes that it committed against itself, until this company entered into decline and failure
after all these successes it presented in addition to a chart that clarifies these stages, and we also
.mentioned the strategies that made Microsoft buy Nokia

We also dealt with the most prominent studies and conclusions reached by a group of research
.published in international sites

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