Ericsson and Nokia Celebrate Their Anniversaries; What Makes for Vendor Longevity?

David Snow - Principal Analyst, IP Services Infrastructure

David Snow – Principal Analyst, IP Services Infrastructure

Summary Bullets:                 

  • Nokia and Ericsson both celebrated company anniversaries; company longevity in telecoms is rare
  • The last decade has been particularly tumultuous and maybe Huawei is demonstrating a “third way”

A humorous tweet from CMO Barry French of Nokia a few weeks back referred to Ericsson as being “the new kid on the block” as Ericsson celebrated “140 years of innovation”. Nearly a year ago, Nokia also had an anniversary; “Nokia at 150: from pulp mill to the programmable world”.  This drew attention to a game that is periodically played between competing companies – the game of longevity

Doubtless, there’s something comforting about any company’s long and distinguished history; whether from the perspective of an individual employee or from that of its customers. To be trading under one name for longer than a human lifetime is certainly a great achievement, especially in such a high tech industry as telecoms, marked by rapid progress and dramatic boom-and-bust cycles. However, while some comfort may be drawn from the Nokia and Ericsson milestones, that considerable period of time belies the fact that contained within those two company timelines are multiple instances of short-lived, and often terminal, company histories.  Nokia, in its latest incarnation, is a prime example of the confluence of many other major companies whose well-known names have been erased from the telecommunications landscape over the course of just the last decade. In fact the identity that Nokia still represents for most people is as the once-preeminent handset vendor, but that unit was sold to Microsoft in 2013 and the Nokia handset brand disappeared with it. Ericsson too has had its fair share of dramatic strategic refocusing, and both companies have had times in their histories when their very own survival has been at stake. At those times, the ability to mix the impact of previously good or bad strategic decisions with a creative ability for company re-invention has often been the deciding factor in the longevity stakes.

However there’s another factor, or rather, company, which cannot be ignored in the longevity stakes simply because it seems to be defying that imperative; and that is the phenomenon which is Huawei.  Huawei’s early history was marked by a single-minded market break-in determinism and extreme cost-competitiveness.  However, over the last five years or so it has evolved towards what may be called a “more mature” like its older peers. But, far from being an “old timer” with upwards of a century of experience, Huawei has demonstrated meteoric growth, overtaking both Nokia and Ericsson in terms of revenue over a period of less than 30 years; Huawei learns, and learns very fast.

So what happens next with these three giants? One of the major strategic decisions any company faces in transforming market is whether to acquire or partner, and it’s here that Nokia and Ericsson have shown their differences. Nokia decided to acquire the former Alcatel-Lucent combination while Ericsson decided that a strategic partnership with Cisco was its best way forward.  However, Huawei has ruled out both major acquisitions and strategic partnerships in favor of continued organic growth and increasing multi-vendor openness; something of a “third way” strategy. Now, to be sure, “openness” means many different things and we’ve yet to see how Huawei’s behavior actually changes, and, as for Nokia and Ericsson, we’ve yet to see how their strategic choices play out too. But while Nokia playfully refers to Ericsson as “the new kid on the block” there’s no doubt that “the newest kid on the block” will continue to disrupt the market. In another decade or so, which of these three companies will still be there celebrating their anniversaries and which will end up as history?

About David Snow
As Principal Analyst for Service Provider Infrastructure, David is responsible for tracking the evolution and key developments within the IP Services Infrastructure market. His coverage areas include Hosted Multimedia Application Servers, IP Multimedia Subsystems (IMS), Mobile Softswitching, Policy Control, Service Delivery Platforms (SDPs), Session Border Controls (SBCs) and Softswitches.

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