The 150-Year-Old Mobile Phone Company

On this day in economic and business history ...

Fredrik Idestam began building a wood-pulp mill to make paper on the banks of a Finnish river on May 12, 1865. Three years later, demand was high enough to build a second mill, on a different river. That second river, the Nokianvirta, gave its name to the company he helped create, when it went public in 1871: Nokia (NYSE: NOK  ) . This was also the first year of a century-plus streak of uninterrupted dividend payments. At this point, Nokia had another manager, Leo Mechelin, who helped build the company into Finland's preeminent paper maker, and under the duo's leadership Nokia became a leader of the emerging Finnish paper-products cartel.

Idestam's retirement in 1896 was fortuitous for Mechelin, who'd pushed his partner to enter the electricity-generation business only to be rebuffed. The way was now clear to diversify, and over the following 15 years two other companies also arose on the banks of the Nokianvirta that would soon become part of Nokia's expanding enterprise. By 1922, Nokia was the corporate parent of three jointly owned lines of business: the original pulp mill (now with electricity), a rubber manufactory, and a cable manufacturer -- the latter of which formed the foundation of Nokia's eventual mobile empire.

The three subsidiaries merged into the modern Nokia Corporation in 1967, and 12 years later the groundwork was laid for a mobile phone industry leader when Nokia formed a joint radio-telephone venture with a fellow Finnish electronics manufacturer. The 1981 launch of Nordic Mobile Telephone (the first international cellular network) precipitated the launch of Nokia's first car phone in 1982. It wasn't quite "mobile," but Nokia was on its way.

The 1980s and early 1990s brought great changes to the venerable company, which emerged from a Finnish recession determined to concentrate on the electronics business. By this point, Nokia had to play catch-up with Motorola, which had for several years been leading the charge toward smaller, cheaper, and more accessible true mobile phones. The challenges of rapidly adapting and scaling up to meet the needs of millions -- and eventually billions -- around the world forced Nokia to undergo a dramatic transformation, but by the latter half of the 1990s it had cemented its claim to the mobile space. The list of best-selling mobile phones of all time soon began to look like a greatest-hits list for the Finnish company. Nokia's 3210, launched in 1999, became the first 100-million model, with 160 million sold. The 3310, launched a year later, enjoyed 135 million sales. The 1110, launched in 2005, was Nokia's greatest success story, becoming the best-selling mobile model of all time, with 250 million lifetime sales.

But Nokia stumbled badly. The era of smartphones, first hinted at by the business-focused BlackBerry (NASDAQ: BBRY  ) , was brought to full flower by Apple (NASDAQ: AAPL  ) when it launched the iPhone in 2007. It didn't have to be that way. A 2012 Wall Street Journal article reveals Nokia's advanced phone plans, in development since before the iPhone was a gleam in Steve Jobs' eye:

More than seven years before Apple Inc. rolled out the iPhone, the Nokia team showed a phone with a color touch screen set above a single button. The device was shown locating a restaurant, playing a racing game, and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen -- all features today of the hot-selling Apple iPad. ...

Consumers never saw either device. The gadgets were casualties of a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market.

Nokia has attempted to rebound from its bad development decisions by partnering with Microsoft (NASDAQ: MSFT  ) -- but Microsoft is also a company known for colossal research budgets that produce little in the way of new successes. The partnership is a big risk for Nokia, which abandoned its in-house Symbian operating system to adopt Microsoft's mobile OS. Thus far, Nokia has yet to see much return on this big gamble, as it was forced to skip a dividend for the first time in 143 years at the start of 2013. Can Nokia pivot to a bright new future, or is this the end of the line for the world's oldest mobile phone company?

The great mine strike of 1902
The United States was nearly brought to its knees by a coal miners' strike in 1902. The strike, called by the United Mine Workers of America on May 12, 1902, threatened to shut off the supply of valuable anthracite coal to homes and factories, which preferred using the hard, dense coal over a softer bituminous type that produced less energy and more smoke. It was the third major coal-miners' strike in five years, and like its 1897 and 1900 antecedents, the 1902 strike saw more than 100,000 strikers seeking (and gaining) significant concessions. Unlike the previous strikes, the 1902 strike set a precedent when it became the first major labor dispute that the federal government resolved as a neutral arbitrator.

The U.S. Department of Labor recounts the key differences of the 1902 strike:

On Friday, October 3, 1902, President Theodore Roosevelt called a precedent-shattering meeting at the temporary White House at 22 Lafayette Place, Washington, D.C. A great strike in the anthracite coal fields of Pennsylvania threatened a coal famine. The President feared "untold misery ... with the certainty of riots which might develop into social war." Although he had no legal right to intervene, he sent telegrams to both sides summoning them to Washington to discuss the problem.

Roosevelt, who had been injured a month earlier when his carriage was hit by a trolley car, sat in his wheelchair pleading with representatives of management and labor. "With all the earnestness there is in me," the President urged, "I ask that there be an immediate resumption of operations in the coal mines in some such way as will ... meet the crying needs of the people." He appealed to the patriotism of the contestants to make "individual sacrifices for the general good."

This meeting marked the turn of the U.S. Government from strikebreaker to peacemaker in industrial disputes. In the 19th century, presidents, if they acted at all, tended to side with employers. Andrew Jackson became a strikebreaker in 1834 when he sent troops to the construction sites of the Chesapeake and Ohio Canal. War Department employees operated the Philadelphia and Reading Railroad during the Civil War. In the violent rail strikes of 1877, Rutherford B. Hayes sent troops to prevent obstruction of the mails. Grover Cleveland used soldiers to break the Pullman strike of 1894.

As was often the case during this era, banker extraordinaire J.P. Morgan intervened, by drafting a proposal that would be amenable to both sides. The coal strike ended on Oct. 23, with both sides largely accepting Morgan's resolutions. A federal commission made the final determination, which granted miners many of their demands. Miners got higher pay and fewer hours, but the commission split the difference between their previous rates and the new requests.

The strike was a turning point in the American labor movement and helped feed the fires of Progressive reformers, like Roosevelt himself. However, investors and big business reacted with some alarm. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) , already mired in a weak bear market, lost its footing after the late-October resolution on its way to a 1903 panic -- the "Rich Man's Panic" -- which arose out of fear that Roosevelt's confirmed pro-labor and antitrust stance would destroy profitability and weaken corporate power.

Nokia's been struggling in a world of Apple and Android smartphone dominance. However, the company has banked its future on its next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide if the company is a buy or sell. To get started, simply click here now.


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