The Exit: Nokia Leaves the Phones

On Thursday, the company that once sold more phones than anyone on Earth announced it was leaving the business that made it a household name. Nokia agreed to sell its mobile phone division to Microsoft for about seven point two billion dollars, and the deal marked the end of an era that had lasted for more than a century. The announcement is the September 2013 story, and the story is the lesson: the companies that win the future are the ones that are willing to walk away from the past.

The Exit is the subject of this article: how Nokia fell from the top of the phone world, why Microsoft bought what remained, what the deal means for both companies, and what it says about the courage required to change course. The agreement was announced on Tuesday, September 3, and the reaction was a mix of nostalgia and pragmatism. This is the story of the exit, and the story is about the moment the Finnish phone giant chose the future over the legacy.

1. The Announcement

The announcement came on a Tuesday, and it was the end of a long decline. Microsoft said it would acquire Nokia's Devices and Services business, the unit that made the phones, for about five point four billion euros, roughly seven point two billion dollars. The price included about three point eight billion for the phone business itself and about one point seven billion for a ten year license to Nokia's patents. Around thirty two thousand Nokia employees would transfer to Microsoft with the deal.

The deal had been rumored for months, and the rumors had made the announcement almost anticlimactic. The company that had once been the largest phone maker in the world was selling its phones to a software company, and the sale was the admission that the comeback had not worked. The announcement was short, and the meaning was enormous: Nokia was getting out of phones. The phones had made Nokia, and the phones had been the problem for years.

2. The Empire

The empire was the context of the exit, and the empire was once the greatest in the history of mobile. Nokia had started in 1865 as a paper mill, and it had become a conglomerate, and in the 1990s it had bet everything on mobile phones. The bet had worked beyond anyone's imagination: by the late 1990s and the 2000s, Nokia was selling more than forty percent of the phones in the world, and the Nokia name was synonymous with the mobile phone itself. The company had made phones for every market, from the simplest to the smartest.

The empire had been built on hardware and distribution and brand, and the ingredients of the empire had become its weaknesses. The company had dominated the era of the feature phone, and the era had ended with the arrival of the smartphone. The iPhone appeared in 2007, and Android appeared in 2008, and both were built on software platforms that Nokia could not match. The empire was the setup, and the setup made the fall historic.

3. The Decline

The decline was the story of the years before the deal, and the decline was brutal. Nokia's smartphone platform, Symbian, had been the world's most popular smartphone system, and it had been outmaneuvered by iOS and Android. The company's response had been a series of experiments: new systems, new partnerships, new leaders, and none of them had worked. By 2011, the board had brought in Stephen Elop, a former Microsoft executive, and Elop had told the company the truth in a memo that became famous: the company was standing on a burning platform.

Elop's answer had been a bet on Windows Phone, and the bet had been a gamble from the start. Nokia had stopped building its own systems and had adopted Microsoft's, and the Lumia phones had won praise from reviewers and almost no share from the market. The Windows Phone bet had kept Nokia in the smartphone race without winning it, and the race had been the decline. The decline was the reason the sale made sense, and the reason made the sale inevitable.

4. The Buyer

The buyer was the company that had been Nokia's partner in the gamble, and the buyer had its own reasons. Microsoft had bet its mobile strategy on Windows Phone, and Windows Phone had bet on Nokia's hardware, and the two companies had become dependent on each other. The acquisition was the logical next step: Microsoft would own the hardware and the software together, the way Apple owned both. The deal was the marriage of the partners, and the marriage was the strategy.

The timing was also part of the story. The deal was announced days after Steve Ballmer had said he would retire as Microsoft's chief executive, and the acquisition was one of the last moves of his era. Microsoft was paying billions for a business that was losing money, and the payment was the price of the belief that the mobile future still belonged to the company. The buyer was the believer, and the belief was the bet.

5. The Keepers

The keepers were the parts of Nokia that were not for sale, and the keepers were the future of the company. Nokia would keep the network equipment business, known as NSN, which made the gear that ran the world's mobile networks. It would keep HERE, the mapping business that powered navigation systems around the world. It would keep the patent portfolio, thousands of patents that would earn royalties from every smartphone maker, including the ones that had beaten Nokia in the market.

The keepers were the argument that the exit was not a surrender but a strategy. The company that was leaving the phone business was keeping the businesses that did not depend on winning the consumer market, and the businesses were the future. The networks, the maps, and the patents were the foundation of a new Nokia, a Nokia that sold to companies instead of consumers. The keepers were the plan, and the plan was the future.

6. The Reaction

The reaction to the deal was a mix of nostalgia and pragmatism, and the mix was the mood of the moment. In Finland, the deal felt like the end of a national story: Nokia had been the pride of the country, the proof that a small nation could build a global giant, and the pride was being sold to a foreign software company. The newspapers wrote obituaries for the Finnish phone era, and the obituaries were written with affection.

The pragmatists saw the deal differently. Nokia's phone business had been losing money, and the sale brought in billions of dollars and removed the drag on the company's future. The shareholders had been punished for years, and the deal was the first good news in a long time. The reaction was the tension between the heart and the head, and the tension was the human part of the story.

7. The Lesson

The lesson of the exit was about the courage to walk away, and the courage was the rarest quality in business. Nokia had spent a century building its identity around the products it made, and the products had stopped working, and the company had chosen to stop making them. The choice was painful, and the pain was the proof that the choice mattered. The companies that survive the changes of their industries are the companies that can abandon the past before the past destroys them.

The lesson was also about the difference between the brand and the business. The Nokia name would live on, licensed to the company that bought the phones, and the name was worth something real. The company that kept the networks, the maps, and the patents had a future that the company that kept only the name would not have had. The lesson was that the exit was not the end of the story; it was the beginning of the next chapter. The lesson was the courage, and the courage was the strategy.

8. The Future

The future of Nokia was the future of the keepers, and the future was being built on the day the phones were sold. The network business was the quiet giant of the telecom world, and the mapping business was in every car that navigated, and the patents were the tollbooth on the road that every smartphone traveled. The company that had sold its famous business was keeping its valuable businesses, and the valuable businesses were the future.

The future of Microsoft was the future of the bet, and the bet would be tested in the years ahead. The company that bought the phones was buying the hardware that its software needed, and the hardware would have to win a market that had already chosen its winners. The future was uncertain, and the uncertainty was the honest part of the story. The exit is the September 2013 story, and the story is the lesson: the companies that win the future are the ones that are willing to walk away from the past. Nokia walked away, and the walking was the beginning.

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