International Business : Company Has Made a Long Walk From Boots to Cellular Phones : Technology: Finland’s Nokia has produced nearly a fifth of the world’s 55 million mobile telephones.
Nokia Group is not a household name in the United States, but over the course of 30 years, the Finnish company has gone from being a manufacturer of rubber boots to the second-largest mobile phone producer in the world.
The company, which makes consumer electronics, telephones and other high-tech goods, trails U.S. firm Motorola Inc. in the global mobile phone market. But it’s No. 1 in Europe.
“We were in the right place at the right time,” says Lauri Kivinen, vice president of the company’s mobile phones division. “We got into global telecommunications early, and now we’re firmly on the information superhighway.”
Analysts say credit for its success goes to streamlined management, farsighted training programs, innovative design and its president, Jorma Ollila.
Nokia, which sold 5 million phones in 1994, has teamed with Tandy Corp. to jointly become No. 2 in the U.S. market, ahead even of big Swedish rival Ericsson. This year Nokia will supply handsets to AT&T.; And it’s selling phones in Japan under newly liberalized telecommunications laws there.
The company, which was started in 1946 as a boot factory in this town of 30,000, has made nearly a fifth of the 55 million mobile phones in use worldwide today.
With its experience in setting up a Nordic mobile phone network--one in 10 Scandinavians now uses a mobile phone--Nokia helped develop the Global System for Mobile Communications, or GSM. The system will let customers make or get calls anywhere on the globe over their own phones.
“Nokia has a very strong position both in GSM handsets and the GSM infrastructure,” says Neil Barton, a senior financial analyst at Merrill Lynch in London. “It has benefited from the tremendous uplift in the mobile phone industry, and its outlook is excellent.”
For January to August, 1994, Nokia’s revenue was $3.8 billion, up 40% from a year earlier. Its telecommunications group grew 54% and the mobile phone sector 64%, the company says.
It is said that rebel lawmakers in Russia switched on their Nokia mobile phones in 1993 after President Boris Yeltsin cut off phone lines to Parliament. The story may be true, but company officials note that Russia is still only a tiny market these days compared to the rest of Europe.
While Finland is still struggling with 17% joblessness, Nokia hired 4,000 people this year. Its work force in mobile phones and telecommunications grew 40%.
Analysts believe the world’s phone frenzy--25 million were sold in the past year alone--will grow even faster as people start plugging them into portable computers and fax machines.
To secure future production, the company has held extravagant recruiting and retraining programs, says Ollila, 44, Nokia’s chief executive since 1992.
Ollila has gained a Wunderkind reputation since taking over. He has streamlined the company, concentrated on mobile phones and telecommunications and brought in young managers to keep the company sharp as it grows into a huge force.
Since he took over, profits have soared, lifting Nokia stock seventeenfold, to $70 a share.
But as Nokia and its market expand, growing pains are surfacing--in everything from the stock market to the labor supply in Finland, which is about to join the European Union.
Nokia commands 30% of trade on the Helsinki Stock Exchange, leading some to wonder whether it has undue influence in the small country.
“It’s pulling other companies along in its wake,” one broker says. “There’s nothing much anyone can do about it.”
Nearly half of Nokia’s shares are owned by foreigners, and Finns have worried that the company’s success will be felt mostly abroad.
“We have a Finnish heart and soul, but the emphasis is to be flexible and international,” Ollila insists.
More hurdles loom. Ollila says the fast growth continues to strain Nokia’s supply of parts and labor, which could hurt the company’s drive into Western Europe and Asia.
Undaunted, Ollila keeps looking ahead. His pick for the future: palmtop computers linked by mobile phones.
“We aren’t far off,” he says, “from a palmtop that can store information, receive TV pictures and can also be used as a telephone.”
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International Business
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