Nokia bets it all on a wireless future

With Nokia in its backyard, cell phone use pervades Finnish culture

In this story: From boots to bytes Technology meets self-expression A clear vision RELATED STORIES, SITES

From James Hattori
CNNdotCOM Correspondent

NOKIA, Finland (CNN) -- It's a country of extremes, with little daylight in the winter, yet bright sun well past midnight in the summer. It's one of the largest and most remote countries in Europe, yet only 5 million people live there. And in this small population, it seems that nearly everyone has a mobile phone.

Who knew Finland was so high-tech? Those who know Nokia did. The company is perhaps better recognized than its home country, Finland, a land that borders Norway, Sweden and Russia. Over the last two years, Nokia has come to dominate the mobile phone industry, with a 28 percent worldwide market share -- nearly double that of its nearest rival, Motorola, and triple that of Swedish neighbor Ericsson.

Among the notable aspects of Nokia -- often mistaken for a Japanese name, even by savvy mobile phone users -- is the company's progression from 19th-century paper mill to 21st-century wireless powerhouse.

MESSAGE BOARD Who will win the popularity contest between PCs and Web-connected cellular phones?

It all started in 1865 with engineer Fredrik Idestam, who founded the pulp mill along the Nokia River that would eventually become the Nokia company. The town of Nokia (current population 27,000) grew up around it and by the end of World War II, the company had evolved into a large conglomerate, selling everything from toilet paper to tires, diapers and electricity. Finland's biggest trading partner was Russia, and for years Nokia sold rubber boots to the Soviet army.

But the collapse of the Soviet Union a decade ago sent Finland's economy into a tailspin, including Nokia. To survive, the company had little choice but to start selling off its assets and some of its rich history. The man at the crossroads was new CEO Jorma Ollila.

"We felt very strongly that this digital technology would really take the industry," Ollila said.

A London-educated banker who joined Nokia in the mid-80s, just as it entered the mobile phone business, Ollila decided on a radical strategy. He bet the corporate farm on a new digital mobile phone and dumped everything else.

"It was pretty emotional to prepare to take the decision (to sell assets) to the board. Everybody would say, 'You know, you're taking our heart away and selling that. Why didn't you start with something else?'" Ollila said.

The company's 2100 series phone was an incredible success. In 1994, the goal was to sell 500,000 units. Nokia sold 20 million.

"I think coming from a modest background in terms of how the country fares among major trading nations makes you try just a little bit harder," Ollila said.

Nokia House, with its see-through offices, reflects the free-thinking philosophy of the company

One part of trying harder is what Matti Ala Huhta, president of the mobile phone division, calls "understanding end-user needs." He points to the fashion statement the phones make for their end users -- in blue, green, red, yellow and black.

"It appeals to people who want to, let's say, express their personality in the form of the mobile phone they're carrying," Huhta said. "They want to have a cool phone."

It's hard to argue with Nokia's success. Its stock has risen 2300 percent over the last six years. A $10,000 investment in 1994 has grown to as much as $500,000 this year.

"Nokia realized in the 1990s that focusing on digital technology would enable them to gain market share from their competitors," industry analyst Walter Piecyk said.

Nokia's stock tumbled 25 percent in the last quarter because its new Internet phones were late to market, according to Piecyk. Near-term profits on Nokia's product line also have gone down as the company rids the product line of some of its older models.

Now Nokia aims to turn the mobile phone into a combination mini-computer that will let you surf the Web, watch TV and get e-mail -- all while talking on the phone.

"Cellular phones will always be on," Yrjo Neuvo, Nokia's technology guru, said. "So you don't really need to make a call to receive an e-mail. E-mail just comes like it comes to your network PC today."

A former university scientist who has an asteroid named after him, Neuvo modernized mobile phones -- adding bigger screens, menus and scrolls. And you can credit or blame him for those chirpy melodies. He now oversees the company's role in so-called "3G," or third-generation, high-speed digital services.

This kind of free thinking is reflected in Nokia House, the company's main headquarters near Helsinki. The structure's 26,000 glass plates and see-through offices symbolize the company's philosophy of openness.

Even with the growing threat of competition from Japan and Korea, Ollila is confident its wireless strategy will pay off.

"In a three- to five-year time span, we will see a tremendous impact, with the mobility and Internet coming together," Ollila said.

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