{"provider_url": "https://arstechnica.com", "description": "The company that built a country has lost its aura and relinquished the controls.", "embeds": [], "safe": true, "provider_display": "arstechnica.com", "related": [], "favicon_url": "https://cdn.arstechnica.net/wp-content/uploads/2016/10/cropped-ars-logo-512_480-300x300.png", "authors": [], "images": [{"caption": null, "url": "https://cdn.arstechnica.net/wp-content/uploads/2013/10/nokia-1024x648.jpg", "height": 648, "width": 1024, "colors": [{"color": [16, 18, 34], "weight": 0.30712890625}, {"color": [69, 61, 53], "weight": 0.197265625}, {"color": [207, 180, 181], "weight": 0.1015625}, {"color": [236, 223, 226], "weight": 0.089111328125}, {"color": [209, 91, 85], "weight": 0.082763671875}], "entropy": 6.67880044249, "size": 73643}, {"caption": null, "url": "https://cdn.arstechnica.net/wp-content/uploads/2013/10/2_73.jpg", "height": 826, "width": 1240, "colors": [{"color": [247, 251, 252], "weight": 0.980224609375}, {"color": [79, 77, 74], "weight": 0.0068359375}, {"color": [9, 10, 16], "weight": 0.005859375}, {"color": [43, 46, 51], "weight": 0.00390625}, {"color": [122, 120, 117], "weight": 0.003173828125}], "entropy": 0.5565175669920074, "size": 73986}, {"caption": null, "url": "https://cdn.arstechnica.net/wp-content/uploads/2013/10/1_72.jpg", "height": 826, "width": 1240, "colors": [{"color": [228, 239, 243], "weight": 0.938232421875}, {"color": [26, 102, 117], "weight": 0.0224609375}, {"color": [0, 9, 18], "weight": 0.01123046875}, {"color": [113, 134, 137], "weight": 0.00927734375}, {"color": [41, 46, 51], "weight": 0.0087890625}], "entropy": 2.5713872883397464, "size": 152628}, {"caption": null, "url": "https://cdn.arstechnica.net/wp-content/uploads/2013/10/nokia.jpg", "height": 683, "width": 1024, "colors": [{"color": [15, 17, 33], "weight": 0.31396484375}, {"color": [219, 197, 198], "weight": 0.19482421875}, {"color": [86, 75, 64], "weight": 0.171142578125}, {"color": [59, 54, 65], "weight": 0.11328125}, {"color": [211, 91, 86], "weight": 0.08935546875}], "entropy": 6.6353858786970665, "size": 93946}, {"caption": null, "url": "https://cdn.arstechnica.net/wp-content/uploads/2013/10/nokia_emp.png", "height": 635, "width": 640, "colors": [{"color": [213, 230, 234], "weight": 0.8828125}, {"color": [55, 116, 130], "weight": 0.072021484375}, {"color": [227, 111, 37], "weight": 0.021728515625}, {"color": [4, 15, 27], "weight": 0.01513671875}, {"color": [41, 58, 82], "weight": 0.0048828125}], "entropy": 1.8769161473639941, "size": 65876}], "cache_age": 86399, "language": "en", "app_links": [], "original_url": "http://arstechnica.com/gadgets/2013/10/finland-and-nokia-an-affair-to-remember/", "url": "https://arstechnica.com/gadgets/2013/10/finland-and-nokia-an-affair-to-remember/", "media": {}, "title": "Finland and Nokia: An affair to remember", "offset": -14400000, "lead": null, "content": "
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The company that built a country has lost its aura and relinquished the controls.

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Pride and diversity. Dependency and acquaintance. Pride and nostalgia. Sun and moon.

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These are the answers given by Nokia's vice president of software, the research director of ETLA (the Research Institute of the Finnish Economy), Finland's minister of European Affairs and Foreign Trade, and the CEO of Jolla-now Finland's new smartphone hope. The question was: use one word to describe Nokia's historic relationship with Finland and one word to describe it in the future. For those of you confused by the last answer, it has to do with which orbits which.

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The trend is striking, even from Nokia itself. The company that built a country has lost its aura and relinquished the controls.

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It is telling that these answers come one month after Nokia sold its phone division and a decade's worth of patent licensing to Microsoft for €5.4 billion ($7.32 billion). They are no longer knee-jerk responses but calmly considered replies to the biggest and most significant economic deal in Finland's history.

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\"The morning the deal was announced, the mood was 'we have to save the country; everything is being taken away from us,'\" says ETLA Research Director Petri Rouvinen. \"As a foreigner it is almost impossible to appreciate the status Nokia enjoys in this country. Finland became global with Nokia, and Nokia was what made us recognizable internationally.\"

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Rouvinen is not exaggerating. Exaggeration is a character trait frowned upon in a country of just 5.5 million people, which prides itself on rationality, modesty, and a love of salty licorice. Instead Rouvinen is highlighting the consequences of a remarkable country and company relationship unlike any other in the world.

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How a company built a country

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For a start, Nokia is older than Finland. Much older. It was founded in 1865 while Finland-after over 700 years of Swedish rule and 109 years of Russian rule-only attained its independence in 1918. The Nokia name appeared in 1871 when founder Fredrik Idestam renamed it after a small nearby town, and over the next hundred years it grew by continually switching industries. It moved from paper to rubber to robotics to chemicals and eventually to electronics and telecommunications in the 1970s. Yet where company and country bonded was with a mutual crisis.

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In the late 1980s, Finland deregulated the money market, international loans increased, exports virtually dried up with the collapse of the Soviet Union, and in 1991, industrial output alone fell nine percent. At the same time, Nokia was fighting for its life after overexpansion in the 1980s. The full extent of its troubles was outed very publicly when group head Kari Kairamo committed suicide in 1988. Nokia tried to sell up to Ericsson in 1991, but the deal collapsed when Ericsson wouldn't take the whole company.

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With country and company struggling, both gambled in throwing their weight behind the GSM mobile standard. Nokia developed it and delivered the first domestic GSM call using Finnish operator Radiolinja. Finnish Prime Minister Harri Holkeri made the first commercial GSM call in Helsinki over a Nokia supplied network using a Nokia prototype phone. The first GSM phone on the market was the Nokia 1011. Nokia signed the world's first network roaming agreement with Vodafone in 1992, and GSM went on to become the world's dominant network standard.

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The eight years that followed Nokia's rise was unstoppable, and it carried Finland along for the ride. By 2000, Nokia accounted for a mind-specialized 4 percent of Finnish GDP, 70 percent of Helsinki's stock exchange market capital, 43 percent of corporate R&D, 21 percent of total exports, and 14 percent of corporate tax revenues. It was and still is unprecedented. Internationally, the massive company from the tiny country peaked in 2006, taking 41 percent of the mobile phone market worldwide.

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For its part, Finland was pulled out of the most severe economic crisis in any OECD country since World War II. It was transformed from one of the least information- and communication-specialized countries in the world to the most specialized. Finland heavily invested in Nokia with Tekes (The Finnish Funding Agency for Technology and Innovation), financing 26 percent of the company's projects in the 1990s, and Nokia gave back to Finland with huge tax revenue and an insatiable demand for highly skilled workers. The latter drove changes to an educational system whose schools are now ranked the best in the world.

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\"Our success story of the last 25 years has been pretty much defined by Nokia,\" argues Alexander Stubb, Finnish minister of European Affairs and Foreign Trade. \"We used to be a top 30 country in the world out of 200. Now when you look at international standards and measures of education, competitiveness, GDP per capita, we're top 3. We became a very affluent nation with the rise of Nokia.\"

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How a country outgrew a company

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Crucially, Finland has also remained an affluent nation with Nokia's fall. Like everyone else, Finland saw it coming.

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\"If this had happened five years ago, it would've been a completely different story,\" admits Samuli Hänninen, vice president of software program management for Nokia's smart devices business. \"Nokia was the first Finnish multinational global company. Nokia made us feel proud to be Finnish, but it also gave us the confidence for other ambitious Finnish companies to be born.\"

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As Nokia began shedding jobs, the Finnish government responded with programs to drive small businesses. Tekes had its annual budget for funding new and innovative businesses increased to a remarkable €550 million ($751 million) (proportionally equivalent to €6 billion [$8.1 billion] in the US). The Finnish Ministry of Employment and Economy launched Vigo, a startup accelerator in 2009. Another key Helsinki-based startup event, Slush, attracted €40 billion ($54.2 billion)-worth of venture capital investors in 2012 and expects 1,000 startups this year.

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By 2013 VentureSource announced Finland had become the third largest country in Europe for equity financings with a 12 percent share of all investment into European VC-backed companies. Success is rubbing off on the youth of Finland, too. In 2010, students created the now highly popular Startup Sauna to get new businesses off the ground, and 30 percent of the 19,000 students at Helsinki's newly formed Aalto University are members of \" Aaltoes \"-the Aalto Entrepreneurship Society.

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None of which takes into account the relatively recent global success of Finnish companies Rovio, creator of the Angry Birds franchise, and Supercell, creator of Clash of Clans, which has been dubbed the \" fastest growing game company ever.\" It is not lost on Finns that both companies found their success thanks to the rise of Android and iOS, the platforms which brought down Nokia.

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In fact, such has been Finland's rise from Nokia's initial sling shot that in 2010, an Aalto University software industry survey found 77 percent of tech sector respondents believed Nokia's further decline would not be a threat to their business. That figure held so steady in subsequent 2011 and 2012 polls that in 2013 Aalto stopped asking the question.

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The fall

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Finns get emotional when you talk about Nokia. It was a marriage founded on adversity which transformed company and country. But the marriage is over.

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That all this happened was vital. In the last 10 years, failure to keep up with Apple, Google, and Samsung has cut €200 billion ($271 billion) from Nokia's market value. Its percentage of Finland's GDP has fallen from 4 to 0.4 percent (up from a negative in 2012), its share of exports has more than halved, and its share of Helsinki's stock exchange market capital has plummeted from 70 to 13 percent.

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It is said job cuts, which released over 10,000 of Nokia's overwhelmingly R&D-based Finnish employees into the job market since 2006, also hasn't done Finland's startup industry any harm.

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Yet to only see it this way does Nokia a disservice, because on its way down, it started throwing out numerous life rafts. April 2011 saw the start of the Nokia Bridge incubator program hemorrhaging and awarded up to €20,000 ($27,111) to each redundant staff member with a credible startup idea. It allowed up to four employees to club together for a €100,000 ($135,500) fund, with further financing of up to €50,000 ($67,778) per startup.

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For a company facing so much bad press, cynics argue the cost was worth the good PR, but for a company hemorrhaging money, there is a strong counter argument, and it is another reason why Finns still carry Nokia so close to their hearts.

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The reach of Bridge has been phenomenal. To date, more than 1,000 companies have begun through it, 400 of which were in Finland. By far the most interesting is Jolla, which picked up the rights to develop the promising MeeGo operating system Nokia unceremoniously (and some would argue incorrectly) dumped when it teamed up with Microsoft to exclusively develop for Windows Phone.

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Jolla will release its first handset before the end of 2013. It runs \"Sailfish,\" Jolla's custom version of MeeGo, which it has also made compatible with Android apps. Jolla claims to have pre-order interest from over 100 countries, as well as a deal in place with the Chinese retailer D Phone.

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\"If Nokia had kept MeeGo, Jolla wouldn't exist,\" says Jolla CEO Tomi Pienimaki. \"It wanted a clean break so didn't fight us over IP or ideas.\" Along with capital, Nokia also kept Jolla supplied with N9 smartphones, the only MeeGo handset it ever released.

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Except for Pienimaki, almost everyone working for Jolla is a Nokia employee who worked on MeeGo, but he says the staff is far from bitter. \"Nokia's legacy is not just as a company, but in shaping an entire country with the kind of know-how that is capable of the incredible startup scene we have today. It has shaped a workforce which has recently attracted Huawei, Samsung, Intel, Google, and now Microsoft to make major investments here.\"

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Pienimaki has a point. Even though the Finnish government will lower the corporate tax rate from 24 to 20 percent in 2014, companies don't setup in Finland because of cheap labor and running costs.

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Micro-soft

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When the Nokia deal closes in early 2014, Microsoft will feel the full weight of this. 5,000 of Nokia's Finnish employees will switch companies, making Finland Microsoft's third highest staffed country after the US and China. What's more, Finns aren't expecting a mass of redundancies.

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\"When we announced the deal, we immediately started 26 town halls in different sites,\" explains Susan Sheehan, head of Nokia communications. At one, Steve Ballmer was the headline attendee. \"The question [redundancies] came up there. His message was 'we are purchasing a competency we don't currently have. We are Micro- soft' [meaning it wasn't there to make a load of redundancies]. Microsoft has come to Finland and will stay in Finland. Strategically it is key to their development.\"

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Rouvinen agrees. \"Half of Nokia's global R&D has always remained in Finland. If Microsoft were to lay off people or attempt to move operations to the US, what it has bought would be gone. Microsoft desperately needs to make its ecosystem fly. It needs Nokia's skilled staff to be a core part of this. Finland can feel secure in knowing tearing it up wouldn't make sense.\"

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Adding further credence to this is Microsoft's subsequent announcement that it will invest €200 million ($270 million) on a new data center in Northern Finland. It confirmed the location was decided after it was able to conclude the Nokia deal.

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Nokia is still HERE

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But if the Microsoft mothership has landed in Finland to give the country an economic boost, what remains of the company that put Finland on the map?

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Following the sale of hardware and services divisions, Nokia has three of its five core business units intact: the \"HERE\" mapping service (built around its purchase of Navteq in 2007), the Nokia Solutions and Networks (NSN) infrastructure arm, and its \"advanced technologies\" research division.

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It was no coincidence that Nokia bought out Siemens from its NSN partnership (formerly Nokia Siemens Networks) in June for €1.7 billion ($1.89 billion). After years of losses and job cuts, NSN has recently become profitable, and all three remaining divisions of Nokia are in the black. It also has truckloads of Microsoft cash.

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\"My feeling is Microsoft may have done Finland a favor as a country and Nokia as a company,\" says Rouvinen. \"Nokia was going bankrupt or at least facing a dismal future. In principle [the deal] is lending real legs to the network side. What remains of Nokia is likely to be better off.\"

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Speculation has run wild in Finland that Nokia will use its newfound wealth to re-enter the handset business on its own terms-perhaps in a dream team Finnish partnership with Jolla. The talk is unsurprising; the Microsoft deal allows Nokia to sell branded handsets as early as 2015, and it could sell phones under a different brand (Jolla?) tomorrow. But for now it seems a hope for the romantics.

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\"We speculate about re-entry, but having been beaten that badly, it wouldn't be an easy goal to make,\" argues Rouvinen. \"Re-entry would burn hundreds of millions, if not billions, and it is a huge gamble. Nokia has no history of jumping back. My guess is it will turn into a nice, boring, profitable networking business.\"

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Boring or not, investors approve the new model. Nokia shares leapt 40 percent in a single day following the Microsoft deal. By contrast, the risk taken on by Microsoft saw its shares drop by 5 percent, but it has far deeper pockets to shoulder the loss and turn things around. \"Nokia is not the national team anymore,\" admits Hänninen, \"but it's still a top team.\"

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The success in failure

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So what of the future? \"People ask me what is going to be the new Nokia. I don't want a new Nokia, I want 100 new Nokias,\" says Stubb. \"We needed to diversify and we are diversifying... there has been a turnaround in the mindset of Finns [in watching Nokia struggle]. We used to have a huge problem with success and failure; both were frowned upon. Now Supercell celebrates failures with champagne, and Rovio is very open about the troubles it faced before Angry Birds.\"

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The message is clear: failure is a natural part of business, and Nokia's successes and failures are no longer Finland's successes and failures.

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Overwhelmingly, Finns accept the logic and inevitability of the Microsoft deal, but there is no doubt it still hurts, and talk on the streets and in newspapers continues to focus on conspiracy theories and corporate payoffs.

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\"Look, we are a young nation. We are a proud nation,\" explains Stubb. \"Our identity was established under 700 years of Swedish rule and then the better part of 109 years of Russian rule. Our independence is only now coming up to 100 years, so there has always been that sense of cultural exceptionalism in Finland. Things Finnish mean a lot.\"

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And this is the crux. For a famously stoic nation, Finns get emotional when you talk about Nokia. It was a marriage founded on adversity which transformed company and country. But the marriage is over. Finns saw it coming, they prepared for it, and in many ways they have already moved on. But like only the most important of relationships, when the time came to break up, it still hurt like hell.

\nThis story originally appeared on Wired UK.
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