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Headquartered in Espoo, Finland, Nokia Corp. is moving further away from the cellphone market that it once dominated.

More bad news for Nokia

Microsoft acquisition is next step in decline of former dominance

On the New York Stock Exchange, Nokia’s shares closed Tuesday at a mere 6 percent of their value in 2000, when the company was a cellphone industry leader. The Finnish company is selling its lineup of smartphones to Microsoft.

– Nokia, former star of the cellphone world, has seen its light further dimmed by the news Tuesday that Microsoft Corp. was buying its handset operations.

“This is naturally a big day of change in Finland’s industrial history,” Finnish Prime Minister Jyrki Katainen told reporters Tuesday after Microsoft’s $7.2 billion deal was announced.

“Every now and then, there comes a time when one has to re-evaluate things to get ahead in corporate life and the society. I want to believe that this is the beginning of a new era (for Nokia).”

A source of national pride, Finland’s Nokia Corp. had led the cellphone industry for more than a decade, reaching a peak of 40 percent market share in 2008. A long journey for the former paper maker and producer of rubber boots, which was founded in 1865 and was based in and named after a small town in the south of the country.

After 14 years as market leader, and providing a significant boost to the Finnish economy, Nokia failed to meet the smartphone challenge of Apple’s iPhone and Google Inc.’s Android operating system, and its dominance began to fade.

The company was also hit by a shift in electronics manufacturing from Europe and the U.S. to Asia and other low-cost regions. Asian competitors – particularly from China – were able to produce mobile technology at a fraction of the cost and selling price.

Then, two years ago, in an attempt to reverse the slide, Nokia teamed up with Microsoft, replacing its operating system with one based on Windows. The idea was to rejuvenate the company and claw back lost ground, but it took eight months – a long time in the cellphone world – to produce the first Nokia Windows Phone, and consumers didn’t warm to it.

Three years ago, it employed 123,000 people globally, but that has now dropped to 88,000, and its global handset market share has plummeted to 14 percent. Its share price has also dived, from $85.80 in 2000 to $5.23 Tuesday.

The irony is that at one time, Nokia was the smartphone pioneer, with a 50 percent market share in 2006. In 2003, it launched the Nokia 1100 phone – the best-selling mobile phone to date and a world top-selling consumer electronics product. Nokia had introduced a game console into a cellphone and later moved on to launch quality cameras into its handsets, in another popular move.

But its drive began to wane. Nokia managers failed to recognize the popularity of clamshell models and were slow with touchscreen phones, even though its engineers reportedly had developed a touchscreen model years before Apple and other competitors.

Jorma Ollila, who steered Nokia to its heights as CEO from 1992 to 2006, has said that the company was successful in that it was able to predict that the Internet would be “in everyone’s pockets,” but he acknowledged that Nokia had failed to develop the necessary ecosystems and technology to maintain its lead over rivals.

Ollila was succeeded by his close colleague, Olli-Pekka Kallasvuo, under whose guidance the company’s fortunes plummeted until he was fired in 2010 and replaced by the first non-Finn to head the company, Microsoft executive Stephen Elop.

After years of bad news for the acutely self-aware Finns, the latest Nokia development was taken mainly with disappointment but also a pinch of hope.

Microsoft CEO Steven Ballmer appeared to allay some Finnish concerns, announcing that the company would invest more than $250 million in a data center in Finland to serve European customers.

“We are certainly deeply committed to Finland. Finland will be the center of our phone, device, and research and development work,” Ballmer said at a news conference at Nokia headquarters in Espoo on Tuesday.

“We are beyond excited to have a strong and talented team join us in Finland with the expertise in hardware, supply chain management operations and more.”

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