How does Nokia still make money?
A few days ago, the media reported an interesting news - The State Administration for Market Regulation is currently investigating antitrust issues in licensing fees from 5G patent holders such as Nokia.
The first reaction of many people is, wasn't Nokia acquired by Microsoft in 2013? How come it has a monopoly again?
At that time, Nokia sold most of its mobile phone business and some of its patented technologies to Microsoft. It experienced a "free fall like and ." Investors classified Nokia's stock as a "junk stock." Many people felt that Nokia was completely Bankruptcy is only a matter of time.
But 10 years later, Nokia is not only alive, but also doing well.
In early February this year, Nokia announced its Q4 and full-year financial reports for 2021. The financial report shows that in 2021, Nokia's net sales were 22.202 billion euros (156.524 billion yuan), a year-on-year increase of 2%, net profit was 1.623 billion euros, calculated based on the exchange rate as of the deadline, it was almost 11.4 billion yuan.
Screenshot of Nokia official website
What is the level of net profit?
Zhiyan Consulting once published a ranking list in the "Net Profit attributable to Parent Companies of National Shanghai and Shenzhen A-share Listed Companies". If Nokia was included in it, it would rank 67th.
Xiaomi had a net profit of 19.3 billion yuan last year, Meituan had worked hard for a year and still lost 23.5 billion yuan, and Jingdong also had a net loss of 4.467 billion yuan. In this comparison, Nokia is really making money without knowing it.
Nokia's performance in the first quarter of this year was not bad either. Its net sales were 5.3 billion euros, or 37.3 billion yuan, and its operating profit margin was as high as 10.9%.
So the question is, what does Nokia make money after losing its "mobile phone"?
It is not difficult to find the main business composition of Nokia on Oriental Fortune Network . Taking the first quarter of 2022 as an example, there are three main items: telecommunications equipment supply accounts for 81.77%, corporate operations account for 6.41%, and patent licensing accounts for 5.72% %.
Oriental Fortune Network screenshot
The answer is clear at a glance. Nokia no longer makes mobile phones, and its focus is on telecommunications manufacturing equipment. This business contributed 17.98 billion euros in sales to it last year, accounting for 80% of the total performance.
Out of sight, Nokia has become the world's third largest telecommunications equipment manufacturer , According to a survey by research firm Dell'Oro Group, in the global telecommunications equipment market, Huawei sales accounted for 28.7%. First, Ericsson ranked second with 15%, and Nokia ranked third with 14.9%. In fact, a few years ago, Nokia even dominated Ericsson.
Dell'Oro Group drawing
You must know that Nokia only established a complete telecommunications field in 2016. At that time, Huawei and Ericsson were the two big players in the telecommunications equipment supply market. The former deployed 2/3 of the world's 5G commercial Network, sales revenue has exceeded the sum of Ali and Tencent , and is the world's largest telecommunications equipment manufacturer. The latter is a nearly 150-year-old company that has been focusing on the telecommunications industry since its birth.
Before this, no company could break through the blockade of these two behemoths. Even Samsung and were far behind. After Nokia quickly integrated its telecommunications business, it once stepped on Ericsson in 2017, second only to Huawei. .
In addition to being one of the top three telecommunications equipment suppliers in the world, Nokia also has a well-known title - "Patent Troll".
Last year, the patent licensing business alone brought Nokia 1.502 billion euros in revenue, totaling 10.6 billion yuan.
The key is that patent licensing costs almost nothing, and 1.502 billion euros is a real profit. is really the envy of all the big manufacturers who have worked hard to make mobile phones.
can’t help but make us sigh, is this still the Nokia that once faced the end of its hero?
I remember that on September 3, 2013, Nokia finally announced that it would sell its mobile phone business to Microsoft at a low price of US$7.3 billion. The then CEO Ollila’s reluctance became a classic:
“We didn’t do anything wrong, but I don’t know why we lost.”
also remembers that Nokia has been the world’s No. 1 mobile phone for 15 consecutive years, with annual sales of 430 million units. It was unparalleled for a while; Nokia 1100’s world record of 250 million sales has never been broken, and it will never be broken again. By.
In my impression, Nokia’s last picture was fixed on the Lumia 1020, which was the last flagship phone of an independent brand. After being merged by Microsoft, there was little news.
But now, Nokia is showing signs of rebirth.
The telecommunications business that I almost gave up
Nokia fell from the altar of mobile phones and transformed into a telecommunications equipment supplier step by step. The process can be described as twists and turns. Let us turn the time back to 2006.
At that time, Germany Siemens and Finland Nokia both wanted to develop 3G and 4G radio communication technology, which required a lot of investment, but the funds required were too large and neither company could afford it, so in 2006 The two companies hit it off immediately. Siemens' network business segment and Nokia Networks (a subsidiary of Nokia) each invested 50% to establish Nokia Siemens Networks Communications ("Nokia Siemens Networks" for short). Nokia owns golden shares, which is one share more than Siemens. Everyone knows the story after
. The first-generation iPhone was launched in 2007. In the following years, and Apple pushed Nokia to the ground. Until 2013, Nokia could no longer hold on and sold its mobile phone business to Microsoft.
What you may not know is that almost at the same time as Microsoft's negotiations to acquire the mobile phone business, there was another major event - Nokia's acquisition of Nokia Siemens Networks. Interestingly, at the time, Nokia planned to sell after the acquisition.
In fact, Nokia has always planned to sell Nokia Siemens Networks. Because it is too expensive, has high costs, has redundant personnel, and has been completely defeated by the cheap equipment launched by Huawei in the market. It has suffered a cumulative loss of billions of dollars in the past six years.
Nokia has long tried to sell Nokia Siemens Networks, but because the offers from all parties were too low, neither Siemens nor Nokia were willing. In September 2011, the two companies had no choice but to invest another 500 million euros, hoping that Nokia Siemens Networks would make a last-ditch effort.
At that time, the patience of the two companies was really running out. As early as 2009, they had already invested an additional 250 million euros.
However, this "abandoned son" that both parties disliked became the seed of Nokia's revival six years later.
On April 1, 2013, Siemens publicly announced that it planned to sell all its shares in Nokia Siemens Networks.
Nokia also set up a special committee of the board of directors to discuss related matters, and finally gave three plans:
A plan: merges with Alcatel-Lucent, leapfrogging Huawei. After merging with the listed company Alcatel - Lucent , Nokia Siemens Communications will naturally become a listed company. After that, he sold his shares and retired with a clean slate.
B plan: will sell a majority stake in Nokia Siemens Communications to private equity investors, and Nokia has since become a small and medium-sized investment participant.
C plan: convened some investors from familiar Nordic countries to buy out Siemens’ shares in Nokia Siemens Communications.
It can be seen from these plans that Nokia at this time had not yet realized the value of Nokia Siemens Networks. The solution came up with was either to raise the stock price and retreat, or to retreat to the minority shareholders and fish in troubled waters.
At exactly this time, the market environment changed quietly, which saved Nokia Siemens Networks' life and even Nokia's life.
At that time, the booming Internet services had increasingly higher bandwidth requirements, which in turn stimulated the market's demand for a new generation of mobile broadband infrastructure. Thanks to this, Nokia Siemens Networks began to turn a profit.
The then CFO Ihamotilla put forward a hypothesis that completely changed the direction of things:
"What would happen if we bought out the shares held by Siemens and retained Nokia Siemens Networks?"
It was this proposal that was presented to the board of directors Another possibility beyond thinking was one that seemed impossible at the time - to build a brand new Nokia based on Nokia Siemens Networks.
In the end, Nokia won Nokia Siemens Networks at an ultra-low price: the total valuation was 3.4 billion euros, and the buyout price was 1.7 billion euros, of which 1.2 billion was cash and 500 million was bridge financing provided by Siemens.
At the end of October 2013, Nokia finally decided that would not sell Nokia Siemens Networks, because there was not much left in Nokia after selling its mobile phone business. Nokia Networks’ employees accounted for 80% of Nokia’s total, operating expenses also accounted for 80%, and sales It also accounts for 80% of total revenue, and Nokia Siemens Networks has become Nokia's largest business.
A business that was once almost abandoned has now become the mainstay of Nokia.
Nokia has grown to this day and is the only telecommunications equipment manufacturer in the world that provides 5G network technology to the four major operators in the United States, the three major operators in Japan, and the three major operators in South Korea. is also the only one that covers all elements of the 5G network, including radio, Equipment provider with end-to-end product portfolio including core network, cloud, management, and automation.
Data released by Nokia’s official website shows that so far, Nokia’s 5G commercial orders have reached 214. Ericsson only has 142 copies.
Even in 2017, Nokia returned to the Fortune Global 500 with revenue of US$26.11 billion, ranking 415th. It has been on the list since then, ranking 485th in the 2021 rankings.
"Fortune" China official website screenshot
Nokia has developed so fast in recent years, why do we rarely hear about it? According to
data, Nokia's markets are mainly in Europe and North America, with net sales accounting for 34.4% and 28.3% respectively, followed by 12.6% in the Asia-Pacific region. The Asia-Pacific market is only one-third of the European market and less than half of the North American market.
Screenshot of Oriental Fortune Network
From 2019 to 2021, Huawei has gradually upgraded from being included in the trade control blacklist by the United States to "Huawei's device suppliers are not allowed to supply Huawei 5G equipment as long as they involve products with American technology." Sanctions imposed four times in three years have kept the North American market closed to Huawei, and the attitude of the European market is also ambiguous.
Under pressure from the United States, the British government is pushing to completely remove equipment from "high-risk suppliers" such as Huawei from the 5G network. It will ban the purchase of new Huawei 5G equipment after the end of 2020 and remove all Huawei 5G equipment kits before 2027. . Fortunately, Spain, Portugal, Luxembourg , Austria and the Netherlands and other countries have a neutral attitude and have not explicitly banned Huawei in legal form.
Huawei, ZTE and are struggling in the European and North American markets, giving Nokia and Ericsson an excellent opportunity to catch up.
On September 29, 2020, Nokia signed a 5G agreement with British Telecom (BT) and became BT's largest infrastructure partner; the next day it was announced that it had been selected by Finnish operator Elisa as a national supplier of 5G RAN.
From 2019 to 2020, Nokia's net sales in the European market and North American market increased by 1.88% and 2.76% respectively.
In sharp contrast to growth, Nokia's net sales in the Asia-Pacific region fell by 8% from 2019 to 2021. Considering the US sanctions against Huawei, this is not difficult to understand.
In the Chinese market, China Mobile’s Procurement and Bidding Network shows that in March 2020, in China Mobile’s 2020 Phase II 5G Wireless Network Equipment Centralized Procurement Announcement, Huawei, ZTE, Ericsson, and China Information Technology ( Datang ) won the bid with shares of 57.25%, 28.68%, 11.45%, and 2.62% respectively, and Nokia received no pellets. It is actually a very outrageous thing that
has no harvest.Against the background of and Swedish 's comprehensive boycott of Huawei last year and the country's countermeasures, Ericsson also won a contract for 2% of China Mobile's 700Mhz 5G available base station tender.
This may also have stung Nokia's nerves and changed its past arrogance. The main reason for 's failure in 2020 is that the wireless frequency band does not meet China's requirements, so it gave in the next year. announced that "Nokia has completed all bidding tests and released a full-band series of products, especially in China." The required 5G product frequency bands. "
After all, the Chinese 5G market is an extremely huge market, and Nokia cannot be uninterested.
The following year, Nokia's efforts achieved certain results. On July 18, 2021, China Mobile announced the 5G 700M base station collection results. It was no surprise that Huawei won the bid with a 60% share, but Nokia obtained a 4% share and officially returned to the Chinese market.
It can also be seen from the first quarter financial report of this year that Nokia's net sales in the Asia-Pacific region were 676 million euros, a year-on-year increase of 1.19%.
But why is Nokia subject to antitrust again? Let’s talk about its most profitable pure profit business: patent licensing.
A wealthy “patent troll”
In addition to its status as a telecommunications equipment supplier, Nokia is also known as a “patent troll” in the industry.
To become a "patent troll", you must first have a rich family background. Nokia established its electronics department as early as 1960, began to get involved in the telecommunications industry, and experienced a complete telecommunications industry development history. During the
2G period, Nokia was one of the main owners of patents; during the
3G period, Nokia owned a large number of WCDMA patents; during the
4G period, Nokia, which actively participated in LTE research and development, owned a considerable number of LTE patents; during the
5G period, Nokia was trying its best to catch up, with 4,000 5G core patent family.
These accumulations are like compound interest, generating amazing potential energy at the moment.
"Mobile phones are all of the same origin, and 4G mobile phones are also using 2G technology." Wang Yanhui, secretary-general of the China Mobile Phone Alliance, once said that it is difficult for global mobile phone manufacturers to completely bypass Nokia's patent "wall."
Past patents have profoundly affected the emergence of new technologies. As long as the patent protection period is in effect, those patents that seem to have been eliminated by the times are still a hurdle that cannot be overcome.
's historical accumulation and continuous research and development have created Nokia's patent monopoly.
Ordinarily, I have a patent. If you use my technology, it is natural to pay patent fees, especially standard patents in the field of communications. This kind of patent is core and cannot be circumvented. How much is the patent fee for
? generally follows the "FRND" principle, which is fair, reasonable and non-discriminatory.
But Nokia’s patent fees are surprisingly high. Take 5G patent fees as an example. The 5G patent fee standards announced by Nokia in 2018 require that each 5G mobile phone using its patents should pay Nokia a patent fee of 3 euros. In comparison, Huawei is much more conscientious, charging only 2.5 US dollars, or 2.36 euros, per unit.
3 Euro/set What is the concept?
China Academy of Information and Communications Technology "Global 5G Patent Activity Report (2022)" shows that Nokia's patent family (a patent family includes multiple patents applied for in different countries and enjoy common priority) accounts for 7.6%, so whole The total 5G patent cost of one piece of equipment is as high as 40 euros, equivalent to RMB 283. A low-end machine with 5G only costs about 2,000 yuan. Such a high price is obviously difficult for major mobile phone manufacturers to accept.
China Academy of Information and Communications Technology drawing
The patent fee was too high, and many manufacturers refused to comply, so Nokia began to initiate lawsuits all over the world.
In 2019, it launched a legal lawsuit against Lenovo , claiming that it infringed on 20 video compression technology patents;
In 2011, Nokia sued Apple. In the end, Apple paid Nokia a one-time compensation of about 420 million euros. It sued again in 2014, claiming that Apple The company's is suspected of infringing on more than 30 of its patented technologies;
In 2012, veteran mobile phone manufacturer Blackberry also lost to Nokia in the patent war, agreed to settle and pay patent fees to Nokia;
In 2012, Nokia sued HTC, claiming that HTC Nokia has infringed on 45 of its patents globally;
other manufacturers such as Huawei, vivo, Samsung, etc., Nokia has sued them all, and even car manufacturers Daimler , Toyota , Honda , Nissan , etc. have also been accused of infringement. Nokia has been sued over patent fees for Internet of Vehicles components.
What is worth exploring here is, What patents does Nokia have that allows it to be so rampant?
Take Nokia’s lawsuit against Apple as an example.
Nokia believes that all iPhone models since Apple first launched the iPhone in 2007 have infringed on the 10 patents it controls. There are several interesting patents, such as mobile phone network data transmission (US6359904) and wireless phone network data transmission (US5802465).
Since then, Nokia’s patent infringement case against Apple has escalated. Almost all Apple products, including Apple’s iPod series portable music players, iPhone series mobile phones, Mac series computers and other products, are involved in seven patent infringements. The representative ones are: Touch screen communication equipment (US6518957) and user interface equipment (US6924789).
Nokia sued Apple again in May 2010, claiming that Apple infringed on five of its patents, including wireless radio frequency antenna (US6348894) and location determination method and device (US7558696).
In March 2011, Nokia once again sued Apple for patent infringement in the United States, claiming seven patent infringements, including a date range database synchronization device (US6141664).
In addition to these, there is another one that is even more ridiculous.
In December 2010, Nokia sued Huaqin Company for eight patent infringement cases involving "mobile communication devices with cameras", "communication terminals", "selected data transmission methods", "user equipment, cellular radio networks and location update methods therein" Mobile phone basic technology patents such as "selecting data transmission methods".
Even mobile phones and cameras are patented by Nokia! is enough for major manufacturers to drink a pot.
In the era of Nokia's mobile phone business, the value generated by patents was often partially offset by Nokia's need to pay to use the patented technologies of other mobile phone manufacturers.
But now that Nokia has lost its mobile phone business, this value offset has been crossed out from one side of the equation, and the value of the patent can be directly realized.
How did Nokia come back from the dead?
went from being the world’s third telecommunications equipment supplier to a “patent troll” suing all over the world. There are still a lot of controversies surrounding Nokia today, but it is no longer the old age we remember it to be.
After experiencing a "free fall", it can still continue to recover and stir up troubles. Nokia's comeback is one of the most exciting transformations in modern business history.
In fact, has been transformed for more than 100 years, and transformation has been a common occurrence for Nokia. has gone from papermaking to chemicals and rubber, from cables and pharmaceuticals to natural gas , petroleum, and the military... Contact with consumer electronics happened after 1960. .
Since entering the telecommunications field in 1960, Nokia has experienced three huge crises and countless smaller crises.
In 1973, the global oil crisis broke out, oil prices skyrocketed, the purchasing power of Finnish companies dropped significantly, and Nokia fell into crisis. Kali Kelamo, then CEO of Nokia , weakened the traditional heavy industry and focused on the electronics and telecommunications fields, successfully surviving the first crisis.
html In the late 1980s, competition in the consumer electronics market was fierce. Motorola entered cellular mobile communications. Nokia's profits dropped sharply. Chairman Kali Kelamo chose to commit suicide. After the new chairman, Simo S. Voletto, took office, he divested himself of the flooring and other departments and focused only on telecommunications, consumer electronics and other fields to survive the crisis again.
In 2013, after Nokia sold its mobile phone business to Microsoft, there were only three companies left: HERE Maps, Nokia Siemens Networks and Nokia Technologies.
The embarrassing thing is that the three businesses of are different, and the only thing has in common is that they are part of Nokia.
Nokia Siemens Networks is a network infrastructure supplier; Nokia Technology is a research, incubation and licensing platform, which is today's patent licensing business; HERE Map is a cloud computing-based business that answers the question "Where are you going?" is map navigation.
The three businesses have different business models, different customer groups, and different marketing models. How to coordinate them together has become a problem.
In the end, unified the three businesses in the context of the Internet of Everything: Nokia Siemens Networks is responsible for providing the foundation of the Internet of Things, and the HERE map business is the main application scenario; Nokia Technologies has a huge patent portfolio and is responsible for technology research and development.
As a result, the organizational structure with Nokia Siemens Networks as the center and Nokia Technologies and HERE Maps as two independent departments was formally formed.
Later, Nokia spun off its map business and sold it to German car manufacturers Audi , BMW and Daimler. In 2015, it acquired Alcatel-Lucent at a low price of US$16.6 billion to further integrate its communications industry chain.
Before Nordson Communications only had "one skill" and was the best mobile broadband provider in the world, it had almost no involvement in other businesses; while Alcatel- Lucent owned the entire industry chain of communications infrastructure, and its wireless network business was Disadvantages. The two complement each other exactly. After
acquired Alcatel-Lucent, Nokia realized an end-to-end business portfolio and built a complete communications business landscape. The market share of increased from 8% to 30%, making it the second largest communications service provider in the world.
Finally, the most important thing is that Nokia took this opportunity to win the largest industrial laboratory in the world at the time - Bell Labs . This laboratory has invented many basic technologies that support all digital equipment and systems in the entire information and communication network. It has won a total of 9 Nobel Prizes , 16 U.S. Highest Technology Awards, 4 Turing Awards, and invented . C language , one of the most popular programming languages in the world...
Including the acquisition of Motorola's wireless business unit in 2010, at this moment is equivalent to the superpower of Motorola, Alcatel-Lucent, Bell Labs, Nokia Siemens Networks and the original Nokia. Fit.
Although today, Nokia's development is still full of many unknowns, it faces fierce competition in the 5G field, and there are also many problems in its integration with Alcatel-Lucent. But what we can see is that such an "elephant" continues to adjust and "dance" from time to time. This is the power of corporate evolution.
Jim Collins in " Built to Last " believes:
"All companies certainly undergo some degree of evolution. Evolution "happens" whether we intentionally stimulate it or not. The real world is full of unexpected events that affect life. This happens to individuals as well as organizations, but the key point is that forward-looking companies can more actively apply the power of evolution.”
What drove Nokia’s transformation was Chairman Li Sito, who took office in 2012. Nokia, which was filled with a sense of failure at the time, promoted a kind of "paranoid optimism" to help Nokia actively evolve.
Paranoid optimism means that you must remain vigilant, have a sense of awe of reality, and at the same time think based on situations, thereby showing a positive attitude towards life.
“Paranoid means constantly questioning. In this way, you and your team can hone your acumen. However, continuing to be paranoid can be demoralizing and unhelpful unless you can stay optimistic. , actively explore and discover other alternative scenarios. "
Every positive evolution will also make Nokia more "anti-fragile". The so-called anti-fragility of is a characteristic that benefits from uncertainty and keeps pace with the times.
For example, resource redundancy. As mentioned above, Nokia has been working in the telecommunications field for more than 60 years. It has a large number of patents in the 2G to 4G fields and even formed a monopoly for a time. It is also trying its best to catch up in the 5G era and has already begun to lay out 6G.
It is precisely the redundancy of technical resources that has allowed Nokia Technology to retain its business. It can not only make money from patents, but also quickly transform and gain a firm foothold in the field of telecommunications equipment.
Another example is overcompensation. Nassim Nicholas Taleb 's "Antifragility" explains it this way, which means that in order to make up for shortcomings or cope with pressure, through reasonable and effective methods, not only normal compensation is finally achieved, but also additional huge advantages are formed.
As the saying goes, "Whatever doesn't kill me will make me stronger."
Statistics show that there will be approximately 15 crises in business operations every 100 years, with an average of one every 7 years. It is in such a precarious situation that the resilience of giants such as Nokia and IBM is actually very strong. They may not be able to come up with any brilliant tricks in every crisis, but they can definitely come up with them. A move that will completely destroy you, even if you face a free fall.
As long as you survive, you will have a chance to get back on your feet. This is especially important for every enterprise at a time when it is full of uncertainty and it is difficult to see the future trend clearly.
