If you live in the US, then it is hard to believe how dominant Nokia was in mobile. For a time, one in every three mobile phones sold was a Nokia. But they were never a major force in the US for various reasons. But they built a million phones a day back when the market was around a billion phones per year. The story of how Nokia rose from a forest product company to a leader in mobile phones has been written about many times and is a business school case-study. But, like many other manufacturers such as Blackberry (then called RIM), they underestimated the impact of the iPhone. The mobile world changed in one hour in 2007 when Steve Jobs got on the stage and announced three new products: The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. And the third is a breakthrough Internet communications device. Of course they turned out not to be three devices, but just one. And a bewildered Starbucks barista named Hannah Zhang became the first recipient of a real call from an iPhone when Steve placed, and then canceled, an order for 4000 lattes to-go live on stage at YBCA. If you have never watched it, here is the video of the entire keynote, a piece of history captured in a little over an hour. So what happened? Let’s start the story in 2008. Under Nokia’s then CEO Olli-Pekka Kallasvuo, Nokia had their first decline in revenue and profits. Handsets were still very profitable, it was their networking division which was struggling (ironically, that networking division is now the largest in the world, having swallowed Siemens’ networking business, Motorola’s networking business, and Alcatel-Lucent). Nokia’s board brought in Stephen Elop from Microsoft to be CEO. In a period of three years, Elop cratered Nokia’s handset business. At the start of his tenure, Nokia’s handset business was split 50:50 between smartphones and feature phones (AKA dumb phones). Dumb phones fell by a half during his tenure, which might be expected if everyone was switching from Nokia feature phones to Nokia smartphones. But they were not. Smartphones went down even more, by two thirds. All this during a period when the mobile business was experiencing very strong growth. One of the really dumb things Elop did was to announce in early 2011 that future Nokia phones would no longer use their internal operating system Symbian (which was probably not up to running a modern competitive smartphone, which he also announced) but would use Microsoft’s Windows Phone. This turned out to be a bad decision for a couple of reasons. The first is that when the announcement was made, Nokia didn’t actually have any Windows-based phones available. And if the CEO says the current operating system is not up to scratch, the customers believe him. Have you heard of the Osborne effect? It even has its own Wikipedia page . If you are old enough, you might remember that Adam Osborne had a very successful product, the Osborne 1, which was the world’s first “portable” computer (it only weighed 24 lbs). He announced that the next product would be compatible with the IBM PC. Unfortunately, it hadn’t been built, but the promise of it was enough that nobody in their right minds would buy an Osborne 1 in the meantime, and the company went bankrupt before it could deliver. Well, a similar thing happened to Nokia. While waiting for those Windows-based phones to show up, sales of other smartphone products went down dramatically. People who were loyal to Nokia and wanted a smartphone couldn’t get one so they either went to Apple or (mostly) to Samsung. Suddenly Nokia was losing money in smartphones, something it had never done before, and losing a lot of money overall. And look at the date the trouble started, almost exactly to the day when the Windows Phone announcement was made. But coming from Microsoft, Elop made another mistake. He brought in sales and marketing executives from Microsoft that he had faith in, but they all made the same mistake given their background. If you are selling PCs, then you build a good one and people go to Fry’s or Amazon or wherever and buy it. Mobile is not like that. It is mediated by the carriers. Even Apple, when it came out with the iPhone, couldn’t just pile up boxes in its own stores and sell them with a line around the block, they had a exclusive deal with AT&T since you can’t sell a mobile phone without at least one carrier signing on. In the US, this is especially true since most handset sales take place through the carrier’s own stores. The carriers hate Microsoft. They could look at the PC industry and see that control of the industry was lost to Microsoft (and Intel) and they were not going to let that happen to them. Prior to Elop and his team arriving, Nokia had the best carrier relationships in the world. Afterwards, not so much. Eventually, Microsoft purchased Nokia’s handset business (leaving them with networks and mapping) in 2013 (deal closed in 2014) for $7.2B or so. But in some ways that made things worse, since now the carriers were even less likely to want to work with Microsoft since they were not just the software supplier, they were the hardware supplier, too. The business continued to bleed away. With the obvious exception of Apple, the mobile industry had standardized on Android, and the Windows Phone market share went down to insignificant. Conspiracy theorists surmise that Elop was “sent” by Microsoft to Nokia with two goals. First, to switch Nokia to Windows Phone so that their huge market share would jump-start Windows Phone and other manufacturers would want to follow. Second, having done that to deliver Nokia’s smartphone business to Microsoft with a pink bow on top. Well, both those things happened but that doesn’t make any of it a success. Almost exactly a year ago, Microsoft realized that the acquisition had been a huge mistake. They wrote down the acquisition by $7.6B (around the acquisition cost) and laid off thousands more people. In May this year, Microsoft gave up on the feature phone business and sold it all to Foxconn (the company that famously manufactures the iPhone, among other products) for $350M. They said they would continue to develop Windows Phone and support the Lumia smartphone brand, but it seems to me only a matter of time before they will be forced to give up on that too. They won’t be coming back from their miniscule market share. So why did I add “and maybe rise again” to the title to this post? Because just last month, Nokia announced that it would return to the smartphone business. Under the terms of the sale of the handset business to Microsoft, Nokia was barred from using the Nokia name to sell mobile phones, since Microsoft had a period of exclusivity. That period is up this year. CEO Rajiv Suri announced that Nokia could design the smartphone (it still has resources in house, and after all the layoffs there are probably plenty of the old team left in Finland who could be rehired). Nokia doesn’t have its legendary manufacturing facilities since Microsoft got those so it would license the design and the Nokia name to as yet unnamed partners. Maybe even, ironically, Foxconn, who could presumably also put the Nokia name back on the feature phone business it just bought from Microsoft. Nokia feature phones were legendary in places like Africa and South America for robustness and that name probably still has a lot of brand equity in emerging markets where smartphones are too expensive (for now). Moreover, just as the carriers decided Microsoft would not be a success, maybe they will decide Nokia will be. This story is not over yet. Thanks to Tomi Ahonen who created the graphs from Nokia data and makes them freely available on his blog . 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