Nokia’s $200m R&D ransom spawned a decade of paranoia

Jul 5, 2011
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A mass exodus of Nokia R&D engineers in 1997 led to the company paying $200m in what amounted to retainer bribes, newly released documents in Finland confirm today, with the company held to ransom by a surprise staff walkout. The paperwork reveals that product developer Jyrki Hallikainen persuaded 44 of his R&D peers to ditch Nokia and set up a new company with the help of Philips, Helsingen Sanomat reports, forcing then mobile phone chief Pekka Ala-Pietilä to open the company checkbook and sign off roughly $4.5m apiece in order to convince them not to leave.

Hallikainen insisted on striking out, setting up cellphone ODM Microcell. Eventually, though, the lure of Nokia's cash drew ex-employees back to the firm, Philips withdrew its support, and Microcell was sold to Flextronics in 2003 for $80m (as well as taking on the company's $120m in debt).

The incident, it's claimed, left Nokia execs deeply concerned about corporate espionage and secrecy, including accusing staff who had remained with the company of leaking insider info to the Microcell team. Given that Finnish laws prevented Nokia from monitoring staff communication, the company became a strong advocate for a change in electronic surveillance legislation, allowing for staff members suspected of leaking information to be investigated and their emails and other data tracked. That law, known as "Lex Nokia," was eventually passed in 2009.

Whether Nokia's decision to spend big and concede to the engineers' demands has paid off, viewed from today's perspective, is arguable. Back in 1997 the mobile market was a very different place, and you could well suggest that it wasn't until the arrival of the first-gen iPhone in 2007 and the evolution of touchscreen smartphones that Nokia's troubles became more significant. S60 5th Edition brought with it Nokia's first mainstream attempt at touch implementation, in 2008, but proved underwhelming in comparison to rivals of the time.

Still, until that point Nokia had been building momentum in developing markets, and it's conceivably that same momentum which is tiding the company over as Symbian is phased out and Windows Phone arrives later this year.

[via GigaOm; image via Carl D. Patterson]


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