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OULU, Finland (Reuters) - From early December, the Finnish city of Oulu is trapped in darkness for all but a few murky midday hours, a darkness some feared might be matched by its economic prospects after big local employer Nokia hit the skids.
Oulu, with a population of about a quarter million, was once a key Nokia R&D site, before the mobile maker was left for dead in the global smartphone race by Apple's iPhone and handsets running Google's Android software.
Nokia and its networks venture at one point employed about 5,000 people in Oulu, more than three times the next biggest private sector employer, but now it has work for less than half that.
The city's unemployment rate topped 16 percent in the summer, a level not seen since the Finnish financial crisis of the early 1990s.
But despite the gloom, and an average annual temperature of 2 degrees Celsius (36F), the buds of a recovery are visible in Finland's biggest northern city, 600 kilometers from Helsinki.
It is becoming a model for the rest of the country as it fights to fill the gap left by Nokia's tumbling sales and the tens of thousands of job cuts that preceded the former world beater's September decision to give up the mobile business and sell to Microsoft.
Oulu is now a leading candidate to host a new data center for Microsoft, which wants to invest $250 million on such facilities in Finland after it takes over the Nokia business next year.
Former "Nokians" are starting to land on their feet, too.
Pasi Leipala, a former senior manager at Nokia, is now chief executive at Haltian, which designs electronics and software products and is one of the city's most successful start-ups.
Last year you could count its employees on the fingers of one hand. Now it has a staff of 70.
"The best thing about Oulu is that there are so many skilled people; it's easy to hire some of the best talents," said Leipala.
U.S. wireless chipmaker Broadcom is expected to save hundreds of jobs by buying the Finnish wireless modem division of Japan's Renesas Electronics, which previously planned to dismiss all employees in Oulu, most of whom had transferred from Nokia back in 2010.
Telecom equipment maker Nokia Solutions and Networks, which will account for 90 percent of group turnover after the sale of the handset division, also plans to keep its 2,300 workers in Oulu, and there is talk of hiring more.
Oulu's resilience is in part a national story, the fruits of a determined focus on educational standards, which keeps the nation of 5.4 million people competitive. Finnish students score highly in international proficiency tests, and an OECD test in October showed its adults second only to the Japanese in both literacy and numeracy.
But even by Finnish standards, Oulu outperforms. A high concentration of technology and science researchers, including those at the University of Oulu and Oulu University of Applied Sciences, means that head for head it outperforms Helsinki by more than two to one in terms of the volume of registered intellectual property rights, according to city officials.
The city doesn't just depend on hi tech, however.
Many residents take a short drive to the nearby industrial neighborhoods to work in traditional businesses such as forestry and machinery.
These sectors have struggled through Europe's long period of economic stagnation. Finnish industrial output fell for the 12th straight month in October, and the Bank of Finland expects GDP to contract 1 percent in 2013.
Some local businesses, however, are finding ways round that weakness. Johanna Koskelainen, CEO of Kymppi-Eristys, a family-owned business specializing in industrial scaffolding and insulation for mining and industrial projects, managed to grow sales this year thanks to overseas contracts.
Its biggest customer has been Stora Enso's new pulp plant in Uruguay, and more than half the company's sales comes from outside Finland.
"We have to be more global. In Finland I don't see many big projects in the future," she said. "The growth is now coming 100 percent from abroad."
Honkamajat, which makes log houses, has also been growing in overseas markets such as Japan and Russia, while incorporating automation technologies to make the manufacturing and delivery process more efficient.
"We're now exporting log houses to more than 30 countries," said CEO Kari Tolvanen in the company's plant in the outskirts of Oulu. "For example, that one will be taken to Moscow by truck," he said, pointing to logs being machine-cut with millimeter precision.
He expects sales this year will be near levels before the global financial crisis of 2008, thanks to strong overseas sales. Without exports, he would be at the mercy of a local factory-made log house market that by total turnover is still around 25 percent lower than pre-crisis levels.
While Oulu's light summer nights and quirky events such as the Air Guitar World Championships attract visitors, some local entrepreneurs have even managed to capitalize on the long dark winters.
Valkee, a company that sells headsets designed to relieve seasonal affective disorder (SAD), a depressive condition that peaks in the cold sunless months, was founded by former Nokia engineer Antti Aunio and his scientist friend Juuso Nissila.
Like many Finns, Aunio struggled with SAD and asked Nissila for advice.
They went on to develop portable devices that treat the condition by channeling bright light directly to photosensitive regions of the brain through the ear canal. It raised 7.4 million euros from investors in June, adding to a previous round in which angel investor Esther Dyson took part.
Others are hoping to emulate their success, helped by funding from Nokia's Bridge program for former employees looking to start new businesses, as well as the state's Tekes fund, which grants money to technology start-ups.
A start-up center backed by the city and local universities is due to hold a unique event in February called Polar Bear Pitching, in which start-ups are invited to deliver pitches to potential investors in freezing cold water from inside holes cut in the ice. The cold, they say, will make them cut to the chase.
Kari Kivisto, another former Nokia employee, said Oulu would innovate its way out of the downturn, recovering as it once did after the tar industry collapsed in the 19th century. The city was a center of tar production in the days of wooden ships, but their iron and steel successors put paid to that.
"The tar business once flourished, and then all of a sudden it disappeared," said Kivisto, whose start-up Spektikor makes disposable heart-rate monitors that flash vital signs and help paramedics respond efficiently.
"Once again we're seeing tremendous change. We'll survive."
Editing by Will Waterman