Just this week, Yahoo laid off 400 employees at its software development centre in Bangalore ?to cut costs and seek new areas of growth?. Yahoo had earlier set a deadline of November 2014 to slash 2,200 employees from its global workforce. A day later, telecom gear maker Nokia announced that it was closing its Chennai plant from November 1 after Microsoft terminated its mobile purchase agreement from the the factory and left it with no business. Nokia had sold its Devices and Services business, including assets in India, to Microsoft in September 2013. That?s another 1,000 jobs apart from the 2,000 Nokia had laid off earlier from its Chennai operations.
Both Yahoo and Nokia were technology pioneers and dominated their respective fields. Yahoo was the most successful Internet business of its era while Nokia dominated the mobile handset market for many years. Yahoo is still big?600 million people a month visit the site, but like AOL, it is seen as a dinosaur. It was left flat-footed as Google and Facebook emerged as the next generation of online leaders.
Sales have fallen at Yahoo since 2008 and Google and Facebook are taking an increasing share of its display ad business. The firm has cut costs and found ways to boost its profit margins and keep earnings up. But the pressure for change is on?and it shows.
In today?s environment, companies that are not seen as relevant are dead and Yahoo is in danger of that fate. It is big in news, sport, finance, email, owns Flickr, the photo-sharing site, and has a 40% stake in China?s red hot Alibaba, but a series of chief executives have come and gone in acrimonious circumstances and its founder/CEO Jerry Yang, quit Yahoo in 2012, hurting the company and its stock badly. The current round of layoffs suggests more trouble ahead and could be the start of a long slide downhill for one of the original pioneers of online giants. It still has the size and the Alibaba stocks give it financial heft but Google and Facebook are forging ahead and the gap may become too large to bridge.
It?s a similar story with Nokia. Everyone?s first cellphone was a Nokia. Next to Motorola, which invented the mobile handset, there was no bigger name in the business. The company has been on such a steady downward slide over the past seven years that it?s easy to forget how dominant and long-lasting its reign was over the cellphone business. Samsung Electronics is heralded as a titan with just over 25% of the global handset market today; Nokia at its peak in 2007 controlled 49.4% of the market. When Nokia was on top, nobody could touch it. That kind of success eventually bred an obstinate attitude, a reluctance to change and a vulnerability that was exposed first by the Motorola Razr, and then more fully by Apple?s iPhone.
As dominant as Samsung and Apple are, Nokia was even bigger in its prime. Then, in January 2007, Steve Jobs walked on to a stage and pulled an iPhone out of his pocket and changed the world forever. Nokia?s fall was swift. According to figures from analyst firm Gartner, Nokia?s smartphone market share in 2007 was a dominant 49.4%. In subsequent years, it was 43.7%, then 41.1%, then 34.2%. By the first half of 2013, it had plummeted to just 3%. Many blame this decline, at least in the initial stages, on Symbian, the firm?s mobile operating system. It was, in the eyes of many experts, simply not up to the job.
Unable to compete in a world that was moving forward without it, Nokia brought in outsider and Microsoft veteran Stephen Elop in 2010 to shake things up. He did just that by dropping the company?s proprietary software and adopting Microsoft?s Windows Phone mobile operating system.
Prior to his appointment, Nokia was in shambles, having made several poor investments in new businesses?all in an attempt to transform itself from a paper supplier. Those investments went sour after a massive recession hit Finland. What followed was a three-year battle to gain acceptance for Windows Phone software and its Lumia phones.
Now, Nokia?s devices and services business is part of the Microsoft family. Like Yahoo, Nokia?s collapse was pretty dramatic but, also like Yahoo, it still has some solid assets.
Beyond mobile devices, the Finnish company?s telecom infrastructure business, mapping services, and advanced technology division will continue operating under the Nokia brand. There is also Nokia Solutions and Networks, a mobile broadband company.
It is the mapping software of choice in 80% of cars that feature built-in dashboard navigation. Thanks to Nokia?s early dominance, it owns many crucial patents on which the mobile industry relies. The Microsoft sale, however, signalled the beginning of the end for Nokia as a global brand in the hands of millions.
The closure of the Chennai factory suggests that software rather than hardware will be a priority for the new owners. It is a sobering reminder that even the strongest companies can fall, more especially in a digital world that is changing so rapidly that even consumers have a hard time keeping up.
The writer is Group Editor, Special Projects & Features, The Indian Express
