Can Nokia's new CEO Pekka Lundmark beat Huawei, Ericsson in 5G race?

WION New Delhi Jul 10, 2020, 09.09 PM(IST) Edited By: Palki Sharma

Nokia's new President and CEO Pekka Lundmark (C) shakes hands with resigning President and CEO Rajeev Suri Photograph:( AFP )

Story highlights

Nokia has faced problems with Alcatel-Lucent since acquiring it for $18 billion in 2016. On paper it was a good deal, in practice, however, it was complicated.

Hundreds of Nokia's employees have risen up in protest holding up t-shirts that read: COVID-19 spared me, but Nokia wants to kill me with CEO Rajeev Suri being a special target.

A placard with his photo said: "Suri, you're fired". Nokia plans to cull over 1,200 jobs at its French subsidiary Alcatel Lucent. Most of the layoffs will be carried out in the research and development division.

The unions are shocked that Nokia is doing it now at a time when the R&D is needed the most to catch up with Huawei and Ericsson which are Nokia's two strongest competitors in the 5G race.

History is repeating itself yet again for Nokia. The lack of vision had pushed Nokia out of the cellphone business with the telecom network business coming off the rails. Nokia has faced problems with Alcatel-Lucent since acquiring it for $18 billion in 2016. On paper it was a good deal, in practice, however, it was complicated. Several overlapping operations and products had to be shed-off and costs had to be cut.

It distracted Nokia in the 5G race and it stopped innovating - now it's losing. Huawei leads with 91 5G deals, Ericsson sits in second place with 81 deals with Nokia a distant third with 67 deals.

On the financial front, Nokia has been leaking money since the Alcatel-Lucent acquisition, also, due to poor investments in products. Ericsson, on the other hand, has been turning more profitable. Huawei is dominating despite security concerns but Nokia is losing its way.

It is eerily similar to how its cellphone business collapsed. In 2007, the global mobile phone sales crossed the $1 billion mark for the first time. Nokia had sold one out of two mobile phones that year that means half a billion mobile phones!

The Nokia 1100 had become the world's largest selling mobile phone with over 1.2 billion units sold since its launch in 2003. Forbes asked the perfect question when it made Nokia its cover story for one of the issues: Nokia - 1 billion customers: Can anyone catch the cellphone king?

The answer to this question came that very year - the iPhone!

Steve Jobs showcased the first iPhone in 2007 and within two years Nokia's button phones were out of fashion.

iPhone's super-fine touch screen changed everything and Nokia's share price plummeted below 10 dollars - a very steep fall from 40 dollars per share at its peak in 2007 and by 2013, iPhone sales were five times that of Nokia's. In the same year unable to adapt, innovate and compete with Apple, Nokia sold its mobile phone business to Microsoft.

Nokia's fall became a case study at business schools which was taught to young wanna-be executives as a cautionary tale. There were two reasons that led to Nokia's collapse - inferior technology due to lack of innovation and lack of vision among top-level managers.

Nokia is committing the same mistake in the 5G race. So, CEO Rajiv Suri will be replaced by Pekka Lundmark, if the new CEO can beat Huawei and Ericsson given Nokia's current situation it will be one of the greatest business stories of all time.