Battle of the Nordic Giants.(mobile phone companies Ericsson, Nokia)

It remains one of the more intriguing "what ifs?" in the history of the cell phone. What if Ericsson had bought Nokia when it had the chance in 1991? One of the world's oldest telephone-equipment manufacturers, Ericsson was sitting pretty at the brink of a mobility revolution in telecommunications. Its Nordic neighbor, meanwhile, was foundering badly. Three years earlier, Nokia's charismatic chairman, Kari Kairamo, who had guided the upstart company into high tech, committed suicide, and the company had seemed aimless ever since. Now one of the banks that owned a chunk of Nokia wanted to unload it. But despite months of talks, the Ericsson-Nokia deal went nowhere.

It's a good thing it didn't--for Nokia, at least. The fortunes of the two companies have now been reversed. Under Jorma Ollila, who took over as CEO in 1992, Nokia not only turned itself around but smoked the competition. It first swept aside the United States' Motorola--the market leader at the beginning of the 1990s--then Ericsson of Sweden, then other competitors, ending up with more than 38 percent of the market this year. It has made no difference that Ericsson had been around since 1876 and was building phone systems in tropical jungles and along mountainsides when the Finnish company in the early 20th century was still making rubber boots and toilet paper along the Nokia River. Nokia's secret is in its consumer savviness. It has grown to be the world's No. 1 mobile-phone supplier and was, at one dizzy point during the '90s, the most highly valued company in Europe.

Ericsson, on the other hand, stumbled through the '90s. It continues to be the world's largest supplier of telecommunications infrastructure, but it sometimes seemed lost in the ever-shifting cell-phone market. In just three years, starting in 1998, its market share in cell phones shrank from 18 percent to 5 percent at a time when the business was experiencing phenomenal growth. Today its market share in cell phones-- now sold under the name Sony Ericsson--has fallen behind both the hard- charging Samsung of South Korea as well as Siemens of Germany. (Samsung's share was the fastest growing last quarter.) And the current global telecom slump isn't helping Ericsson. Its shares began in September at 10-year lows.

What happened? From afar, Nokia and Ericsson don't look so different: two companies separated by a slender strand of the Baltic Sea. But, in fact, they are hugely different. Though consumers know them by their branded phones, Nokia and Ericsson focus on different ends of the same business: Ericsson on systems (90 percent) and Nokia on the phones (78 percent). Ericsson grew up selling to governments and big, old-style phone companies; Nokia understood retail.

Moreover, while they may be global companies with tens of thousands of employees, Nokia is distinctively Finnish, and Ericsson Swedish. Each is the biggest company in its home country: Nokia had sales of $28 billion last year, and Ericsson $22 billion. Nokia, the product of a country toughened over the centuries by war on its borders, is aggressive, quick and flexible. Ericsson is more consensus-driven, more egalitarian and slower. "These are two companies people tend to lump together," says Dan Steinbock of the Institute for Mobile Market Research in Atlanta. "But it's like Swedish meatballs and Finnish potatoes: they taste very different."

Nokia would probably not be the force it is today if it had not gone through what company biographer Martti Haikio calls the annus horribilis of 1988. Kairamo had transformed a pulp- and rubber-products company into an electronics firm. He did so with such speed and conviction that he came to be known as the "turbo executive." His suicide--he was suffering from depression--stunned the company. Nokia didn't get fully back on its feet until Ollila, a former banker, took charge. He assembled an executive team of like-minded Finns, many of whom had attended the same schools, and drove everybody without apology.

The company ethos at Ericsson was, and is, different. Ericsson has been about technology and engineering since Lars Magnus Ericsson began repairing ...