Which business models does Nokia use?
Part IThe Story
The Pulp Mill That Learned to Die
On 12 May 1865, a mining engineer named Fredrik Idestam started grinding wood into pulp beside the Tammerkoski rapids near Tampere, in what was then a Grand Duchy of the Russian Empire. Three years later he opened a second mill a few miles west, near a town called Nokia, because the water there turned the turbines harder. In 1871 Idestam and his friend Leo Mechelin formed a company and named it after the second site. Nokia Ab made paper. For most of the next century it would be remembered, if at all, for pulp, rubber boots, car tyres and electrical cable.
In the fourth quarter of 2007, the same company sold roughly four out of every ten mobile phones on Earth. Its 2007 net sales were €51.1 billion and its operating profit was €8.0 billion. It shipped 437 million devices that year, and in that final quarter it held about half of the world's smartphone market. At its peak in 2000, Nokia accounted for about 4% of Finland's GDP, 21% of the country's exports and 70% of the market value of the Helsinki stock exchange. Its market capitalisation briefly touched roughly $290 billion in June 2000.
Six years after that 2007 peak, Nokia sold its phone business to Microsoft for €5.44 billion. Its annual revenue fell from €51 billion to €12.7 billion. Its Interbrand ranking slid from fifth in the world in 2009 to 98th in 2014. The company that had put a phone in a billion pockets became the most-cited cautionary tale in modern business.
And then it didn't die. In 2025 Nokia generated €19.9 billion in net sales, €2.0 billion in comparable operating profit and €1.5 billion in free cash flow, selling optical transport, IP routers, radio networks and patent licences to telecom operators, hyperscale cloud companies and governments. In October 2025 Nvidia paid $1 billion for a 2.9% stake. By May 2026 the shares had reached a 16-year high on the back of orders from AI data-centre builders — still far below the 2000 peak, but a long way from the sub-$2 share price of mid-2012.
Nokia's history is usually told as a story about the iPhone. It is better told as a story about what a company does after the thing that defined it stops working — something Nokia has now had to do at least four times.
By the Numbers
Nokia at 161
€19.9BNet sales (FY2025)
€2.0BComparable operating profit (FY2025)
~78,000Average employees (2025)
€4.9BR&D investment (2025)
26,000+Patent families
€2.8BAI & Cloud order intake (Q2 2026)
1865Year founded, as a pulp mill
Rubber, Cable and a Nine-Kilogram Phone
The Nokia that eventually conquered mobile phones was assembled from three unrelated Finnish industrial companies. In 1904, Eduard Polón's Finnish Rubber Works built a factory near the town of Nokia and borrowed its name for its products. In 1922, Nokia Ab, Finnish Rubber Works and Finnish Cable Works came under common leadership. In 1967 the three formally merged into Nokia Corporation, organised into four businesses: forestry, cable, rubber and electronics.
The electronics arm grew in an unusual hothouse. Finland's Cold War neutrality and its trade agreements with the Soviet Union made the USSR a major and highly profitable market for Nokia by the late 1970s, buying everything from telephone exchanges to robotics. At home, Nokia made military radios and gas masks for the Finnish defence forces.
In 1977 Kari Kairamo became chief executive and set out to turn a Nordic industrial group into a European electronics champion. He bought television makers Salora in 1984, Sweden's Luxor in 1985 and France's Oceanic in 1987, making Nokia the third-largest TV manufacturer in Europe behind Philips and Thomson. In 1988 Nokia bought Ericsson's information systems division and merged it into a computer unit called Nokia Data. After the buying spree, Nokia's revenue base was about $2.7 billion.
Tucked inside this sprawl was a small joint venture that almost nobody on the board cared about. In 1979, Nokia and Salora created Mobira to make radio telephones. In 1981 the Nordic Mobile Telephone (NMT) service went live — the world's first international cellular network and the first to allow roaming across borders. In 1982 Mobira launched the Mobira Senator, a car phone weighing about 9.8 kilograms. Nokia bought out Mobira in 1984, and in 1987 released the Mobira Cityman, its first truly portable handset.
The conglomerate could not hold. Kairamo died by suicide in December 1988. His successor, Simo Vuorilehto, began shedding units: Nokian Tyres split off in 1988, the rubber works in 1990, and Nokia Data was sold to Britain's ICL in 1991. Then the floor gave way. Finland plunged into its worst recession in living memory, and the collapse of the Soviet Union took a major customer with it. Nokia's operating result for 1991 was negative. Vuorilehto quit in January 1992.
Focused, Global, Telecom-Oriented, Value-Added
The board replaced him with Jorma Ollila, a 41-year-old former Citibank corporate banker who had joined Nokia in 1985 and had run the mobile phone unit since 1990 — the same unit he had argued against selling when others wanted to dump it.
— Jorma Ollila, quoted in a KDI School of Public Policy and Management case study on NokiaWe had unhappy Finnish shareholders and unhappy international shareholders. The only thing you could do is to start building a base for very meaningful stock performance.
Ollila and his team compressed the new strategy into four words — telecom-oriented, focused, global, value-added — and then did the unglamorous work of making it true. Nokia at the time had six business groups and around 20 divisions spanning paper, rubber, chemicals, cables, machinery, consumer electronics, computers, networks and phones. Almost all of it went. The power business was sold. The television business was sold to Semi-Tech in 1996, taking the Salora, Luxor, Finlux and Oceanic brands with it. What remained was mobile phones and the network equipment that phones connect to.
The timing was exceptional because Nokia had helped build the thing it was now betting on. It contributed to the development of the European GSM digital standard in the 1980s. On 1 July 1991, Finnish prime minister Harri Holkeri made the world's first GSM call, on a network built by Nokia and operated by Radiolinja. In November 1992 Nokia launched the Nokia 1011, the first commercially available GSM phone.
The results compounded fast. Nokia's operating profit went from negative in 1991 to about $1 billion in 1995 and nearly $4 billion by 1999. Turnover rose fivefold between 1996 and 2001, from €6.5 billion to €31 billion. In October 1998 Nokia passed Motorola to become the world's best-selling mobile phone brand, and that December it made its 100 millionth phone. By 2000 it held about 30% of the global handset market — almost twice its nearest competitor — and a Reader's Digest survey named it Europe's most trusted brand.
Part of the edge was engineering and scale. Part of it was that Nokia understood phones were becoming fashion before its rivals did. The Nokia 5110 and 3210 came with swappable coloured "Xpress-on" covers aimed squarely at young buyers. Snake came preloaded. And Nokia built phones for people Western competitors barely thought about. The Nokia 1100, announced in August 2003, was a rugged, cheap candybar aimed at emerging markets; it sold more than 250 million units, making it the best-selling phone ever made. Nokia's one-billionth phone, sold in 2005, was a 1100 bought in Nigeria.
The Summit
When Ollila handed the chief executive role to Olli-Pekka Kallasvuo in June 2006 and moved to chairman, Nokia looked unassailable. It had co-founded Symbian, led by Psion, in 1998 to build an operating system for "smart" phones, shipped the Symbian-powered Nokia 9210 Communicator in 2001, and became Symbian's largest shareholder in 2004. It partnered with Carl Zeiss on camera optics in 2005 and launched the Nseries flagships. The Nokia N95, introduced in September 2006, packed GPS, Wi-Fi, 3G and a 5-megapixel camera and was a genuine hit.
In January 2008 Nokia reported results for 2007 that remain the high-water mark of the European technology industry. Net sales rose 24% to €51.1 billion. Operating profit rose 45% to €8.0 billion. The Mobile Phones unit alone earned an operating margin of 21.7%. Nokia estimated its share of the device market at 40% in the fourth quarter.
— Olli-Pekka Kallasvuo, Nokia Q4 2007 results announcement (January 2008)Nokia's excellent fourth quarter contributed to a year of high growth and increased profitability for the company, while our industry leading product portfolio drove our device business to an estimated 40% market share in the fourth quarter.
The iPhone had been on sale in the United States for six months by then.
How a Leader Loses
The popular version of the story says Nokia ignored Steve Jobs. The record is messier and more instructive. Nokia had shipped a Linux-based operating system, Maemo, on its 770 Internet Tablet back in 2005. In 2007 it launched Ovi, an umbrella brand for internet services including a music store; the Ovi Store for apps followed in 2008. In June 2008 it bought the rest of Symbian outright and set up the Symbian Foundation to open-source it. The same year it acquired Trolltech and its Qt developer framework. In October 2008 it announced the 5800 XpressMusic, its first phone on a touch-centric version of Symbian.
None of it cohered. The flagship N97 disappointed. Its successor, the N8 — the first phone on Symbian^3 — slipped by months. Symbian, designed for small screens and physical keypads, was increasingly hard for developers to love next to iOS and Android, and by late 2010 the Symbian Foundation was being wound down with Nokia as essentially its only remaining handset customer, Samsung and Sony Ericsson having moved to Android. In 2010 Nokia merged Maemo with Intel's Moblin to create MeeGo, which it planned to make its future smartphone flagship. That meant Nokia was, at one point, simultaneously maintaining Symbian, building MeeGo and running the Qt layer meant to bridge them.
Later accounts from researchers and former employees pointed to the organisation rather than the engineers. Many studies concluded Nokia suffered from deep internal rivalries within management. Some members of the Symbian team said upper management had rejected hundreds of proposed innovations during the 2000s, including a full rewrite of Symbian's code. One former employee described the company as run like a "Soviet-style bureaucracy". Global phone market share peaked at 38.6% in 2008 and then started sliding. The numbers that finally broke the spell were in the smartphone segment, where Android's volume was growing far faster than Nokia's.
On 10 September 2010 the board removed Kallasvuo and named Stephen Elop, head of Microsoft's business division, as chief executive — the first non-Finn to run Nokia. Five months later his internal memo to staff leaked to Engadget. It opened with a parable about a man on a burning North Sea oil platform who jumps into freezing water because staying means certain death. Then it turned on Nokia itself.
"The first iPhone shipped in 2007, and we still don't have a product that is close to their experience," Elop wrote. "Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable."
— Stephen Elop, internal memo to Nokia employees (February 2011)We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally. Nokia, our platform is burning.
The memo also contained the diagnosis that would define the next decade of the industry: the battle of devices, Elop wrote, had become a war of ecosystems.
The Jump
On 11 February 2011, Nokia announced a strategic partnership with Microsoft. Windows Phone would become its primary smartphone platform; Bing would be the default search engine; Nokia's maps would feed Bing Maps. Elop said Nokia had passed on Android because it could not differentiate there. Critics noted his Microsoft background. Nokia's shares fell 14% that day, the steepest drop since July 2009, as investors digested a plan that called 2011 and 2012 "transition years" during which Symbian would be phased out. MeeGo was effectively abandoned; the MeeGo-based Nokia N9 shipped later in 2011 to warm reviews and no future.
What followed was a slow-motion collapse. Demand for Symbian phones fell away once buyers realised Nokia's attention was elsewhere. The company posted a large loss in the second quarter of 2011, only its second quarterly loss in 19 years. The first Windows Phone flagship, the Lumia 800, arrived in November 2011. The Lumia 900 launched with AT&T in the United States in January 2012, and the Lumia 920 in September 2012 was widely seen as the first high-end Windows Phone that could genuinely compete. It was not enough. Nokia lost €1.1 billion in 2011 and €3.1 billion in 2012. By mid-2012 the share price was below $2. In June 2012 Elop announced another 10,000 job cuts and the closure of the Salo factory in Finland. The Finnish prime minister said the state would not subsidise the company.
Ollila stepped down as chairman in May 2012. His replacement was Risto Siilasmaa, the founder of security software firm F-Secure. Siilasmaa later told BCG that when he took the chair, Nokia was planning the biggest layoffs in its 150-year history, that revenue had fallen 26% in his first quarter, and that net operating losses exceeded $2 billion in the first six months of the year. He set seven "golden rules" for the board, including one that any meeting without laughter was a failure.
— Risto Siilasmaa, interview with BCG (2016)One of my favorite sayings is that bad news is good news, good news is no news, and no news is bad news.
On 3 September 2013 Nokia announced it would sell substantially all of its Devices & Services business to Microsoft. Microsoft paid €3.79 billion for the business and €1.65 billion for a ten-year licence to Nokia's patents — €5.44 billion in total, in cash. About 32,000 people were expected to transfer. The operations being sold had generated €14.9 billion, almost half of Nokia's 2012 net sales. More than 99% of votes cast at an extraordinary general meeting approved the deal. Siilasmaa described the decision as rationally correct but emotionally difficult; analysts broadly agreed that Nokia would have faced a cash crisis without it. The sale closed in April 2014. Microsoft wrote the assets off the following year.
The Part of Nokia Nobody Was Watching
While the phone business burned, the piece of Nokia that would survive was going through its own near-death experience.
In 2006 Nokia had agreed to combine its network equipment business with Siemens'; the joint venture, Nokia Siemens Networks (NSN), launched in 2007. The joint venture struggled against Ericsson and against fast-rising Chinese rivals Huawei and ZTE. In November 2011 its chief executive, Rajeev Suri, announced a restructuring that narrowed NSN's focus to mobile broadband and services, put other businesses up for sale or run for value, and cut about 17,000 jobs — roughly 23% of a 74,000-person workforce — with a target of €1 billion in annual savings by the end of 2013. Suri called the layoffs "regrettable but necessary". He also stated plainly what the business would now be for.
— Rajeev Suri, Nokia Siemens Networks strategy announcement (November 2011)We believe that the future of our industry is in mobile broadband and services — and we aim to be an undisputed leader in these areas.
In July 2013 Nokia bought out Siemens' stake for about $2.2 billion. The purchase proved decisive: during the phone business's collapse, the networks unit provided much of Nokia's income, and once the handset sale closed it was most of what Nokia had left. Suri became Nokia's chief executive in 2014. The company that remained had revenue of €12.7 billion and about 57,500 employees.
Suri used the Microsoft proceeds and the rest of the portfolio to make one enormous bet. In August 2015 Nokia agreed to sell its HERE mapping business to a consortium of BMW, Daimler and the Volkswagen Group's Audi for €2.8 billion. In April 2015 it had already agreed to buy French rival Alcatel-Lucent for €15.6 billion in an all-stock deal, with Nokia shareholders owning 66.5% of the combined company. Suri argued the combination would give Nokia an edge in developing 5G. The deal closed in January 2016. That year Nokia's revenue nearly doubled, to €23.6 billion, and its headcount passed 100,000 again.
Alcatel-Lucent brought fixed broadband, IP routing, optical networking, a submarine cable business with its own fleet of cable ships, a majority stake in a Chinese joint venture, Shanghai Bell, and — the part that made headlines — Bell Labs, the research institution where the transistor, information theory and Unix were born. Claude Shannon had published his founding paper on information theory there in 1948.
Nokia also found a way to keep its name on phones without making them. In 2016 it signed a long-term brand licensing deal with HMD Global, a Finnish start-up founded by former Nokia executives, which began selling Nokia-branded Android phones and a revived 3310 in 2017.
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Nokia's Reinventions
Key moments across 160 years
1865
Fredrik Idestam opens a pulp mill on the Tammerkoski rapids near Tampere; a second mill near the town of Nokia follows in 1868.
1967
Nokia Ab, Finnish Rubber Works and Finnish Cable Works merge to form Nokia Corporation.
1982
Mobira launches the Mobira Senator car phone for the Nordic NMT network.
1992
Jorma Ollila becomes CEO and refocuses the group on telecommunications; Nokia 1011 becomes the first commercial GSM phone.
1998
Nokia overtakes Motorola as the world's best-selling mobile phone brand.
2007
Record year: €51.1 billion in net sales and an estimated 40% device share in Q4.
2011
Stephen Elop's "burning platform" memo; Nokia adopts Windows Phone. Nokia Siemens Networks launches a 17,000-job restructuring.
2013
Nokia buys out Siemens' stake in NSN and agrees to sell its phone business to Microsoft for €5.44 billion.
2016
Alcatel-Lucent acquisition closes, bringing Bell Labs into Nokia.
2021
New operating model with four business groups takes effect under CEO Pekka Lundmark.
2025
Infinera acquisition closes; Justin Hotard becomes CEO; Nvidia invests $1 billion; Nokia takes full ownership of Nokia Shanghai Bell.
2026
Two-segment structure takes effect; AI & Cloud sales more than double year on year in Q2.
Five Years in the Wilderness
Being the second- or third-largest telecom equipment supplier turned out to be a harder business than the Alcatel-Lucent thesis implied. From 2016 through 2020 Nokia's revenue hovered between roughly €22 billion and €24 billion while it posted net losses in four of those five years. Integration was long; the merger that closed in January 2016 was not fully complete until November. Some bets from the period were quietly unwound. Nokia paid $191 million for French connected-health company Withings in 2016, wrote it off, and sold it back to a co-founder in 2018. OZO, a professional virtual-reality camera announced with a $60,000 price tag, was discontinued in 2017.
The more serious problem was 5G. Nokia announced its own ReefShark 5G chipsets in January 2018, but the market perception that it trailed Ericsson in 5G stuck. In 2020 Verizon awarded a $6.6 billion 5G network contract to Samsung, a vendor that had barely registered in Western radio networks before. Outside China, where Nokia had failed to win any 5G radio business, the company warned its radio market share could dip below 27%.
In March 2020 Nokia named Pekka Lundmark, a former Nokia manager who had gone on to run Konecranes and Fortum, as its next chief executive. In October 2020 he announced the first phase of a new strategy: the company would drop "end-to-end" as a strategic principle and reorganise from January 2021 into four business groups — Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies — each with its own profit-and-loss responsibility and a mandate to lead its own market. Lundmark said stakeholders had told him Nokia's operating model was too complex. Mobile Networks' first job was a turnaround; Nokia guided that it would earn a comparable operating margin of around zero in 2021.
The reset worked well enough to steady the company. Revenue climbed to €24.9 billion in 2022, and Nokia exited Russia after the invasion of Ukraine, a market it said was under 2% of 2021 sales. In February 2023 it replaced its logo for the first time in nearly 60 years, explicitly because people still associated the old one with phones.
Then operator spending turned down. In October 2023 Nokia reported a 20% drop in third-quarter sales, with North American sales down 40%, and announced a programme to cut €800 million to €1.2 billion in gross costs by the end of 2026. Headcount would fall from about 86,000 to between 72,000 and 77,000 — up to 14,000 jobs. Six weeks later AT&T picked Ericsson for a five-year Open RAN programme worth up to $14 billion, which meant ripping out Nokia radio equipment across much of its network. Nokia's shares fell to a three-year low. Lundmark called the decision disappointing and said Nokia remained committed to Open RAN.
Following the Traffic
The pivot that has defined Nokia's latest chapter was hiding in its least glamorous division. Optical networking — the equipment that moves light through fibre between cities, across oceans and inside data centres — was a roughly $2 billion business for Nokia in 2023. The customers buying the most of it were increasingly not phone companies but cloud providers wiring up ever-larger data centres.
In June 2024 Nokia agreed to buy Infinera, a San Jose optical specialist with about $1.6 billion in 2023 sales, for $6.65 a share, an enterprise value of about $2.3 billion. The deal added optical semiconductors and a strong position in pluggable coherent optics for data-centre interconnect, and it increased Nokia's exposure to webscale customers, which the company called the fastest-growing segment of the market. It closed on 28 February 2025, with a target of more than €200 million in operating profit synergies by 2027.
Eighteen days earlier, Nokia had surprised the market by announcing that Lundmark would step down and be replaced by Justin Hotard, the head of Intel's Data Center and AI Group and a former Hewlett Packard Enterprise executive. Nokia's chair, Sari Baldauf, cited his expertise in AI and data-centre markets as critical to the company's future growth.
— Pekka Lundmark, Nokia leadership transition announcement (February 2025)Leading Nokia has been a privilege. When I returned to Nokia in 2020, I called it a homecoming, and it really has felt like one.
Hotard moved fast. On 28 October 2025 Nvidia agreed to invest $1 billion in new Nokia shares at $6.01 each, taking a 2.9% stake, alongside a partnership to put Nokia's 5G and 6G radio software on Nvidia's accelerated computing platform — so-called AI-RAN — and to explore using Nokia's switching and optical technology in Nvidia's data-centre architecture. Nokia's shares posted their biggest jump in more than a decade.
At a Capital Markets Day on 19 November 2025, Hotard collapsed the four business groups into two. Network Infrastructure — optical, IP and fixed networks — was designated the growth segment, aimed at the AI and data-centre build-out. Mobile Infrastructure combined radio networks, core software and the patent business, renamed Technology Standards. Four units that no longer fit, including fixed-wireless customer equipment and microwave radio, were moved into a separate Portfolio Businesses segment pending decisions on their future. A defence incubation unit was created. The old targets — including a comparable operating margin of at least 13% — were replaced by a single one: €2.7 billion to €3.2 billion of comparable operating profit by 2028, up from about €2.0 billion. In December 2025 Nokia also bought out its Chinese partner in Nokia Shanghai Bell, taking full ownership of what had been China's first Sino-foreign telecom joint venture.
The first results under the new structure were encouraging. In 2025 Nokia booked more than €2.4 billion of orders from AI and cloud customers. In the second quarter of 2026, net sales rose 8% to €4.8 billion; Optical Networks grew 20% and IP Networks 16% at constant currency; sales to AI and cloud customers more than doubled to €446 million; and AI and cloud order intake in the quarter alone reached €2.8 billion. In July 2026 the company agreed to lease a former NXP semiconductor fab in Chandler, Arizona, to produce indium phosphide optical components from 2027.
— Justin Hotard, Nokia Q2 2026 results (July 2026)As AI evolves, trusted connectivity becomes even more critical and we are delivering market leading innovation that helps customers differentiate and capture value in this new era.
Still Standing in the Cold
The recovery is real, but it is not a return to the 2000s. Nokia's 2025 net sales of €19.9 billion were about 39% of its 2007 level. The Mobile Networks business earned a segment operating margin of just 2.8% in 2025. The AI-RAN partnership with Nvidia was, as of September 2026, still in trials: Nokia named eight operators evaluating it, ranging from proofs of concept to live field tests, with none yet committed to commercial rollout. Even after the 2026 rally, the shares traded roughly 80% below their June 2000 high.
What Nokia has become instead is a company with three distinct engines: a fast-growing optical and IP business riding data-centre construction, a mature and cyclical mobile radio business competing with Ericsson and — outside the West — Huawei, and a patent-licensing operation that earns operating margins around 70%. Bell Labs, which celebrated its centenary in 2025, the same year Nokia turned 160, is preparing to move from its 80-year-old campus at Murray Hill to a new site in New Brunswick, New Jersey.
Nokia still has a museum-worthy archive of reasons it should not exist. It was a paper company, then a rubber and cable company, then a TV maker, then the world's phone company, then a distressed network vendor. Each time, the thing that kept it alive was not loyalty to what it had been. It was a willingness — sometimes early, sometimes almost too late — to sell the old identity and bet the proceeds on the next one.
Part IIThe Playbook
Nokia's 160-year record is unusually useful because it contains both textbook successes and textbook failures, often made by the same institution within a few years of each other. The principles below are drawn from specific decisions in that record.
The principles
- 1.Sell the conglomerate to fund the conviction.
- 2.Help write the standard you plan to win.
- 3.Design for the hardest customer first.
- 4.Four platforms is zero platforms.
- 5.Make bad news travel faster than good news.
- 6.Sell the business, keep the patents.
- 7.Protect the unit nobody is watching.
- 8.Restructure toward something, not just away.
- 9.Follow the traffic, not the customer list.
- 10.Treat trust as a product feature.
Principle 1
Sell the conglomerate to fund the conviction.
When Jorma Ollila took over in January 1992, Nokia had about 20 divisions and an operating loss. Its new strategy fit in four words — telecom-oriented, focused, global, value-added — and the hard part was that "focused" meant selling almost everything else. Tyres and rubber had already been spun out; the power business, cables and finally televisions followed. By the late 1990s the company that had once made gas masks and toilet paper did two things: phones and networks. Operating profit went from negative to about $4 billion within eight years.
The same move reappears in 2013–2015: sell phones to Microsoft for €5.44 billion, sell HERE maps for €2.8 billion, and use the balance sheet to buy Alcatel-Lucent. And again in 2025, when Hotard moved four units generating about €0.9 billion in sales, and losing money, into a "Portfolio Businesses" segment to decide their fate.
Benefit: Concentration frees capital, management attention and engineering talent for the one bet that matters. Nokia's GSM run in the 1990s was possible because it stopped funding televisions.
Tradeoff: Divestitures are irreversible. The conglomerate's diversity was also a hedge, and after 2014 Nokia had no consumer business to cushion a telecom downturn — which is why the 2023 slump in operator spending hurt so much.
Tactic for operators: List every business line and ask whether you would buy it today at its current price if you did not already own it. Anything that fails that test is funding someone else's focus — probably a competitor's.
Principle 2
Help write the standard you plan to win.
Nokia did not merely sell GSM phones. It helped develop the GSM standard in the 1980s, built the network on which the world's first GSM call was made in July 1991, and shipped the first commercial GSM handset in November 1992. It went on to contribute to 3G and LTE. That position compounded in two ways. First, Nokia was ready to manufacture at scale the moment the standard went live. Second, every essential patent it contributed became a royalty stream. Today Nokia reports more than 26,000 patent families, including more than 8,000 declared essential to 5G, and its licensing unit earned €1.5 billion in 2025 at a segment operating margin of about 70%.
Benefit: Standards participation turns R&D into two assets at once: time-to-market for your own products and licensing income from everyone else's. Nokia still collects royalties on phones made by companies that displaced it.
Tradeoff: Standards bodies are slow, political and consensus-driven, and writing the standard does not guarantee winning the product market built on it. Nokia co-authored the rules of mobile and still lost the smartphone.
Tactic for operators: If your industry runs on shared protocols, staff the working groups with senior engineers, not junior delegates. The people who draft the specification end up shaping what is cheap to build and who gets paid for it.
Principle 3
Design for the hardest customer first.
The Nokia 1100 was built for buyers in markets Western phone makers treated as an afterthought: tough, cheap, simple and long-lasting. It sold more than 250 million units, the best-selling phone in history, and Nokia's one-billionth handset was a 1100 sold in Nigeria. At the other end of the market, Nokia's swappable Xpress-on covers turned the 5110 and 3210 into fashion items for teenagers. In both cases Nokia started from a specific customer's constraints rather than from its own engineering roadmap.
Benefit: Products built for demanding conditions travel. A phone designed for dust, heat and patchy power works everywhere, and it gives you distribution in markets competitors cannot reach profitably.
Tradeoff: Optimising for the customers you already serve can blind you to a new customer defined by a new product. Nokia's strength in affordable feature phones did not help it see that the iPhone had redefined what a phone was for.
Tactic for operators: Pick your most constrained user — least money, worst connectivity, harshest environment — and build the version that works for them. Then, separately, keep a team whose only job is to ask which customer does not exist yet.
Principle 4
Four platforms is zero platforms.
Between 2005 and 2011 Nokia shipped or developed Maemo, Symbian in several incompatible generations, MeeGo with Intel, and the Qt framework intended to span them, while also running the Ovi services layer. Each had defenders inside the company, and later accounts describe management rivalries and hundreds of rejected proposals, including a full rewrite of Symbian. When Elop finally chose, in February 2011, he chose a platform Nokia did not control — Windows Phone — and killed MeeGo just as the N9 was winning praise. Nokia went from hedging across too many platforms to depending on a single outside one.
Benefit: A single committed platform aligns developers, partners and internal teams, and lets a company iterate faster than rivals still arguing about direction.
Tradeoff: Commitment is only as good as the choice. Nokia's eventual all-in bet on Windows Phone concentrated its resources but tied its fate to an ecosystem with too few apps and too few buyers.
Tactic for operators: If you are funding more than one answer to the same strategic question, set a date by which one of them wins and the rest are shut down. Choose the platform whose ecosystem you can influence, not just the one with the best technology today.
Principle 5
Make bad news travel faster than good news.
Nokia's collapse was not caused by a lack of information. Its engineers had touchscreens, app stores and Linux-based operating systems in development before or alongside Apple. What the company lacked was a management system in which unwelcome information reached decision-makers quickly and changed decisions. Elop's memo was, at its core, an attempt to force that information into the open: "We poured gasoline on our own burning platform."
Risto Siilasmaa's rules for the board after 2012 were designed around the same problem. He asked directors to assume good intentions, to be data-driven, and to treat bad news as the most valuable kind. His book on the period is subtitled "The Power of Paranoid Optimism", and its argument is that imagining the worst-case scenarios in detail is what allows a leader to be optimistic. "The more paranoid we are, the harder we will continue to labor to shift the probability curve in our favor and the more optimistic we can afford to be," he wrote.
Benefit: Organisations that reward early warnings get more time to react. The Microsoft sale was negotiated while Nokia still had something to sell.
Tradeoff: A culture of constant alarm can exhaust people and paralyse decisions. Siilasmaa's own framing pairs paranoia with optimism because either one alone is corrosive.
Tactic for operators: In every leadership review, ask for the three things most likely to go wrong this quarter before discussing what went right. Measure managers partly on how early they surfaced problems, not just on whether problems occurred.
Principle 6
Sell the business, keep the patents.
The 2013 Microsoft transaction was structured with care. Microsoft paid €3.79 billion for the handset business and a separate €1.65 billion for a ten-year licence to Nokia's patents, with an option to extend it in perpetuity. The patents themselves, and Nokia's chief technology office, stayed with Nokia. That decision is why Nokia Technologies still exists: it earned €1.5 billion of net sales in 2025, €1.9 billion in 2024 when catch-up payments landed, and remains one of the company's steadiest sources of cash. Nokia also kept the brand and later licensed it to HMD for phones.
Benefit: Separating intellectual property from operations lets a company exit a losing product business while retaining a share of the entire industry's economics.
Tradeoff: Licensing income is lumpy and contentious. Major renewals can involve lengthy negotiations or litigation, and revenue swings with contract timing, as the 22% drop in Nokia Technologies' sales from 2024 to 2025 shows.
Tactic for operators: Before any divestiture, inventory the assets that are valuable to many buyers rather than just one — patents, brand, data, standards positions — and structure the sale so you license them rather than hand them over.
Principle 7
Protect the unit nobody is watching.
In 2011, when every headline was about Symbian and Windows Phone, Nokia Siemens Networks was quietly cutting 17,000 jobs and refocusing on mobile broadband. By 2013 that unit supplied much of Nokia's income, and Nokia spent about $2.2 billion to own it outright while its phone business was still losing money. Rajeev Suri, who ran the restructuring, became group CEO. A decade later the pattern repeated: optical networking, a roughly $2 billion sideline in 2023, became the core of Nokia's AI and data-centre strategy once Infinera was added.
Benefit: Business lines outside the spotlight can mature without the pressure that distorts flagship products, and they become options when the flagship fails.
Tradeoff: Under-watched units can also be under-invested units. Nokia's optical business needed an acquisition to reach the scale its new strategy required.
Tactic for operators: Review your smallest profitable units once a year as if you were a buyer. Ask what each would need to become your core business, and fund at least one of them beyond its current returns.
Principle 8
Restructure toward something, not just away.
Nokia has run more large restructurings than most companies of its size: the 1990s divestitures, the 2011 NSN overhaul, the 2012 phone-business cuts, the 2021 operating model, the 2023–2026 programme that targeted up to 14,000 jobs and reached the top of its €800 million to €1.2 billion savings range, and further cuts in 2026 as it integrated its Chinese operations. The ones that worked came with a clear destination. Suri's 2011 announcement cut deeply but also said R&D investment in mobile broadband would increase. The 2023 programme was followed by the Infinera deal and the 2025 strategy, which moved resources toward AI and cloud customers.
Benefit: Cuts paired with a reinvestment thesis tell employees, customers and investors what the company is becoming, not just what it is abandoning.
Tradeoff: Serial restructuring erodes institutional memory and morale, and the best engineers are often the first to find other jobs. The 2012 phone-business cuts bought time but not a strategy.
Tactic for operators: Write the reinvestment plan before the cost-cutting plan, and make it at least as specific: which teams grow, which products get funded, which customers you intend to win with the savings.
Principle 9
Follow the traffic, not the customer list.
For most of its networks era, Nokia's customers were telecom operators. But the fastest-growing source of network traffic in the 2020s is data-centre and AI workloads run by cloud companies. Nokia's response was to reorient: buy Infinera to scale in data-centre optics, bring in a CEO from Intel's data-centre business, partner with Nvidia, and reorganise so that Network Infrastructure — optical, IP and fixed — became the designated growth segment. By mid-2026, AI and cloud customers were placing multi-year orders, and Nokia reported that nine of the ten largest hyperscalers use its optical networks.
Benefit: Following where demand originates, rather than who has historically paid you, lets an equipment maker grow even when its traditional buyers are cutting spending.
Tradeoff: New customers bring new competitors and new expectations. Cloud companies negotiate hard, build some technology themselves, and can shift suppliers quickly; AI-driven demand may also prove cyclical.
Tactic for operators: Map where the volume flowing through your products is actually generated, one or two steps beyond your direct customer. If the fastest-growing source is someone you do not sell to, build a sales motion for them now.
Principle 10
Treat trust as a product feature.
Nokia's national origin mattered little when it sold phones. In network infrastructure it matters a great deal. With Huawei and ZTE effectively shut out of many Western networks, Nokia's pitch has increasingly been built around being, in Hotard's phrase, "the trusted western provider of secure and advanced connectivity." It has launched a dedicated defence unit, built on its US federal business, and is investing in optical component manufacturing in Arizona. The same logic works in reverse: Nokia exited Russia in 2022 and has limited exposure to China's domestic 5G market.
Benefit: In security-sensitive markets, provenance and governance can outweigh price and even raw performance, narrowing the field of credible competitors.
Tradeoff: Geopolitical advantages are granted by governments and can be withdrawn by them. A market defined by politics is also a smaller market, and it caps growth in regions where the politics run the other way.
Tactic for operators: If you sell into critical infrastructure, invest in the unglamorous signals of trust — supply-chain transparency, local manufacturing, certifications, audit rights — before buyers ask for them. They become part of the product.
Conclusion
The Company That Keeps Leaving
Nokia's playbook resolves into a single, uncomfortable habit: it survives by leaving. It left paper for rubber and cable, the conglomerate for telecom, phones for networks, and is now leaning away from operator radio toward data-centre optics. The failures in its history — Symbian, the platform sprawl, the late jump to Windows Phone — came when it waited too long to leave something. The successes came when it left while the old business could still pay for the move.
That habit is not the same as agility, and it is not free. Every exit cost jobs, identity and, in Finland, a measure of national pride. But the alternative is visible across the technology industry in companies that stayed loyal to their defining product until it defined their decline. Nokia at 161 is smaller than it was at 142. It is also still here.
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Part IIIBusiness Breakdown
The Business at a Glance
Vital Signs
Nokia Corporation — FY2025
€19.9BNet sales (+3% reported)
10.2%Comparable operating margin
€1.5BFree cash flow
45.1%Comparable gross margin
€4.9BR&D investment
~130Countries of operation
€2.1–2.6B2026 comparable operating profit outlook
Nokia Corporation is a Finnish network technology company headquartered in Espoo and listed in Helsinki and New York. In 2025 it reported net sales of €19.9 billion, up 3% on a reported basis, comparable operating profit of €2.0 billion and free cash flow of €1.5 billion. Reported operating profit was much lower, €885 million, reflecting restructuring and acquisition-related charges. The company employed about 78,000 people on average, including roughly 33,000 in Europe, 18,300 in India, 10,000 in North America and 7,200 in Greater China.
From 1 January 2026 Nokia reports two primary operating segments — Network Infrastructure and Mobile Infrastructure — plus a Portfolio Businesses segment for units under review. Its outlook for 2026 calls for €2.1 billion to €2.6 billion of comparable operating profit, and its longer-term target is €2.7 billion to €3.2 billion by 2028. In the first half of 2026 comparable net sales were €9.25 billion and comparable operating profit €735 million, up 28% year on year; Nokia ended the second quarter with €2.8 billion in net cash.
How Nokia Makes Money
Nokia sells network equipment, software and services to telecom operators, cloud and AI companies, enterprises and governments, and licenses its patent portfolio to device makers. The table below uses the four segments Nokia reported for 2025, the last full year under the old structure.
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Revenue Breakdown
FY2025 segment net sales and operating margins
| Segment (2025 structure) | What it sells | FY2025 net sales | Segment operating margin |
|---|---|---|---|
| Network Infrastructure | Optical transport, IP routing and switching, fixed broadband access | €7.99B (+23%) | 9.8% |
| Mobile Networks | Radio access network equipment and services for 4G and 5G | €7.81B (-4%) | 2.8% |
| Cloud and Network Services | Core network software, automation, enterprise and managed services | €2.61B (+1%) | 13.0% |
| Nokia Technologies | Patent and technology licensing | €1.50B (-22%) | 70.6% |
Network Infrastructure is now the growth engine. Its 2025 sales rose 23%, helped by the first full year of Infinera, and in the second quarter of 2026 it grew another 12% at constant currency to €2.04 billion, led by Optical Networks (+20%) and IP Networks (+16%). Fixed Networks declined slightly as Nokia de-emphasised lower-margin customer-premises fibre products. Much of the growth comes from AI and cloud customers building data-centre interconnects; Nokia expects roughly half of the €2.8 billion in AI and cloud orders booked in Q2 2026 to turn into revenue within twelve months. Supply, not demand, is currently the main constraint.
Mobile Infrastructure, the new segment combining radio, core software and patent licensing, reported €2.68 billion of sales in Q2 2026, up 6%. The radio business is large but low-margin and tied to operator capital spending cycles; the core software business is smaller and more profitable. Folding the licensing business into the same segment pairs the cyclical radio unit with a high-margin cash generator built on the same 3GPP standards.
Technology Standards (formerly Nokia Technologies) collects royalties from phone makers and other device manufacturers that use Nokia's standards-essential patents. It reported a contracted annual run-rate of about €1.4 billion at the end of 2025. Revenue swings with the timing of large renewals, which is why 2024 (€1.93 billion) was well above both 2023 (€1.09 billion) and 2025 (€1.50 billion).
R&D is the largest cost line after cost of sales: €4.9 billion in 2025, roughly a quarter of net sales. Nokia says it has invested more than €160 billion in R&D since 2000.
Competitive Position and Moat
Nokia is one of a small number of global suppliers of telecom network equipment. Industry analysts at LightCounting counted it among the tier-one networking equipment vendors alongside Cisco, Ericsson, Huawei and ZTE in 2023, with about 11% of global networking equipment sales. Its competitive position varies sharply by product.
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Competitive Landscape
Where Nokia meets its main rivals
| Rival | Where they compete | Dynamic for Nokia | Status |
|---|---|---|---|
| Ericsson | Mobile radio networks, core | Won AT&T's $14B Open RAN programme in 2023, displacing Nokia equipment | Direct rival |
| Huawei | Radio, optical, fixed, IP | Restricted in many Western networks; dominant in China, where Nokia has little 5G radio share | Regional rival |
| Samsung | Mobile radio networks | Won a $6.6B Verizon 5G contract in 2020 | Challenger |
| Cisco | IP routing and switching | Incumbent in routing; Nokia is pushing into data-centre switching | Direct rival |
| Ciena | Optical transport | Larger optical specialist; Infinera narrowed the gap | Direct rival |
Nokia's advantages fall into four categories:
1. Standards-essential patents. More than 26,000 patent families, over 8,000 of them declared essential to 5G, produce licensing income from across the device industry and give Nokia a seat at the table in 6G standardisation.
2. Installed base. Nokia says its networks support more than 4.4 billion mobile subscriptions and that 15 of the world's 20 fastest 5G networks use its radio equipment. Replacing network equipment is expensive and disruptive, which makes existing relationships sticky — although AT&T's swap to Ericsson showed that stickiness has limits.
3. Breadth in transport. Few vendors combine optical, IP routing, fixed access and submarine-grade optics. That breadth matters to cloud builders who want fewer suppliers for data-centre interconnect; Nokia reports that nine of the ten largest hyperscalers use its optical networks.
4. Trusted provenance. Being a European supplier with no Chinese ownership, and a growing US manufacturing and federal presence, is a qualifying condition in many government and critical-infrastructure tenders.
Where the moat is thin: Mobile radio is the weak spot. It is Nokia's second-largest business but earned a 2.8% segment margin in 2025, faces a larger rival in Ericsson in the West and Huawei elsewhere, and has lost marquee operator contracts at Verizon and AT&T. Open RAN, which lets operators mix vendors through open interfaces, cuts both ways: it gives Nokia a route into new accounts but also weakens the lock-in of any single vendor's installed base.
The Flywheel
Nokia's current strategy links its research, standards, product and licensing businesses into a single reinforcing loop.
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The Nokia Flywheel
How each link feeds the next
Step 1
Research and standards work creates IP. Roughly €4.9 billion a year of R&D, including Bell Labs, produces technology that Nokia contributes to 3GPP and other standards bodies, generating standards-essential patents.
Step 2
Patents and early product readiness win contracts. Having helped shape the standard, Nokia can ship compliant radio, core, optical and IP products early, winning operator and cloud contracts.
Step 3
Deployments build an installed base and data. Equipment in the field generates upgrade, software and services revenue for years, plus operational insight that informs the next product generation.
Step 4
Licensing and product cash fund the next generation. Royalties from device makers and profits from infrastructure fund R&D for 5G-Advanced, 6G and AI-native networks, restarting the cycle.
The flywheel turns slowly — a wireless generation lasts about a decade — and it can stall at Step 2 if products arrive late, as Nokia's early 5G radios did. The AI and cloud push adds a second, faster loop: optical and IP products sold to data-centre builders generate cash and scale that do not depend on the operator spending cycle.
Growth Drivers and Strategic Outlook
1. AI and cloud connectivity. The clearest driver. AI and cloud orders exceeded €2.4 billion in 2025 and reached €2.8 billion in the second quarter of 2026 alone, with sales to these customers up 105% year on year. Nokia guides for Network Infrastructure sales growth of 12–14% in 2026 at constant currency, and 18–20% for the combined IP and optical businesses.
2. Optical component capacity. Demand for optics currently outstrips supply across the industry. Nokia is investing in new fab capacity, including a leased facility in Chandler, Arizona, planned to produce indium phosphide components from 2027.
3. AI-RAN and 6G. The Nvidia partnership aims to make mobile networks software-upgradable from 5G-Advanced to 6G on accelerated computing hardware. Nokia launched what it called the industry's first commercial AI-RAN platform in July 2026 and is running trials with operators across four regions. Commercial adoption is the open question.
4. Defence and mission-critical networks. A dedicated Nokia Defense incubation unit, built on Nokia Federal Solutions in the United States, targets secure communications for the US, Finland and allied countries.
5. Cost and portfolio simplification. Nokia reached €1.2 billion in gross savings from its 2023–2026 programme, expects about €200 million of synergies from integrating Nokia Shanghai Bell, and is deciding the future of its Portfolio Businesses units. Delivering the 2028 profit target depends on these savings landing while the growth businesses scale.
Key Risks and Debates
1. Mobile radio profitability. The radio business is large, competitive and barely profitable. If operator spending stays flat and Ericsson continues to take share in North America, Mobile Infrastructure could drag on group margins regardless of AI-driven growth elsewhere.
2. AI demand durability. Much of Nokia's recent growth comes from data-centre construction by a small number of very large buyers. If AI infrastructure spending slows or those buyers bring more networking in-house, the growth story would weaken quickly. Supply constraints also mean customers are placing long-term orders now, which could flatter near-term order intake.
3. Licensing volatility. Technology Standards earns high margins but depends on periodic renewals with a small number of large licensees. The 22% revenue drop in 2025 after a catch-up-driven 2024 shows how much timing matters.
4. Execution under constant restructuring. Nokia expects about €800 million of restructuring charges in 2026 alone, covering the tail of the 2023 programme, the China integration and new cuts in Europe. Reported operating profit was negative in the second quarter of 2026 because of the faster pace of restructuring. Repeated reorganisations risk losing the engineers the growth strategy depends on.
5. Geopolitics. Nokia's Western "trusted vendor" position is valuable but granted by policy. Changes in US-China relations, European industrial policy or export controls could alter the competitive map in either direction.
Why Nokia Matters
Nokia matters because it is the rare technology company that has been both the textbook example of disruption and a working example of recovery from it. The disruption lessons are well known: a dominant company with better hardware, a huge R&D budget and early versions of the right ideas still lost because it could not commit, could not hear bad news and did not grasp that devices had become ecosystems. The innovator's dilemma is rarely illustrated so completely.
The recovery lessons are less often told. Nokia survived because, at several points, it was willing to sell what it was in order to fund what it could become — the conglomerate in the 1990s, the phone business in 2013, and now, gradually, its dependence on telecom operators. It kept the assets that were valuable to everyone, above all its patents. And it kept backing the quieter businesses that later became the core.
Whether Nokia's AI-era bet pays off is still an open question in 2026. But the company has already outlived the story that was supposed to be its obituary. The mill on the Tammerkoski is long gone. The name it gave the company is on fibre-optic systems inside data centres that did not exist a decade ago.
