Nokia mobile phones, smartphones and tablets will be headed back to markets around the globe now that the company has reached a 10-year licensing deal to have its mobile phone designs developed, built, distributed and marketed by a newly formed Finnish company, HMD Global.
In a related deal, Microsoft’s remaining feature phone manufacturing, sales and distribution assets are being acquired by Foxconn Technology Group’s FIH Mobile Ltd. (FIH), which has signed a deal with HMD and Nokia Technologies to use the Nokia brand on feature phones while building a global business for Nokia-branded mobile phones and tablets, according to the companies. FIH is acquiring the feature phone assets from Microsoft for $350 million under the deal. None of Microsoft’s existing Windows 10 Mobile smartphone technologies and products are included in the transaction.
The separate deals were announced on May 18 by the parties, which include HMD, founded to spearhead the new branding, design, marketing and sales initiatives for Nokia mobile phones, smartphones and tablets. All of the new Nokia-branded devices will run on the Android operating system, rather than on Nokia’s own operating system, which was used on its earlier phones.
HMD said the Microsoft transaction will close in the second half of 2016 and that the company plans to invest more than $500 million over the next three years to market the new products around the world. No timeline was announced for when the new devices will become available.
“We will be completely focused on creating a unified range of Nokia-branded mobile phones and tablets, which we know will resonate with consumers,” Arto Nummela, CEO-designate of HMD, said in a statement. “Branding has become a critical differentiator in mobile phones, which is why our business model is centered on the unique asset of the Nokia brand and our extensive experience in sales and marketing. We will work with world-class providers in manufacturing and distribution to move quickly and deliver what customers want.”
Ramzi Haidamus, president of Nokia Technologies, said the deals will let his company stay true to its licensing business model while once again seeing its name on products that will be offered to consumers and business users.
“Today marks the beginning of an exciting new chapter for the Nokia brand in an industry where Nokia remains a truly iconic name,” Haidamus said in a statement. “Instead of Nokia returning to manufacturing mobile phones itself, HMD plans to produce mobile phones and tablets that can leverage and grow the value of the Nokia brand in global markets.”
IT analysts who spoke with eWEEK had a range of opinions about the moves by Nokia and its partners.
“Nokia’s brand is both aspirational and deeply utilitarian in parts of Africa and Asia,” Avi Greengart, an analyst with Current Analysis, told eWEEK. “It is harder to understand how the Nokia brand can be profitably applied to Android smartphones. Nokia’s brand has no relevance to those choosing among Apple, Samsung, Huawei or Xiaomi, and the competition is absolutely brutal at every price point today.”
On the other hand, “assuming that they can be built profitably and that the distribution network has not been lost, there should still be opportunity in rural emerging markets for Nokia feature phones,” he wrote.
Rob Enderle, principal analyst at Enderle Group, said Nokia still has a well-recognized brand name, but its more recent connections to the Windows Phone effort would have to be shed for it to be more successful. “So there is a path to success here; it just won’t be an easy one.”
Meanwhile, Nokia’s push for new feature phones could be good timing because “this is one of the segments that actually appears to be growing at the moment and the Nokia brand is still solidly connected to this class of phone,” he wrote. “Smartphones will be more problematic, however; so I expect those efforts to struggle more.”
At the same time, in markets around the world where smartphones dominate sales, users “likely won’t care very much unless [HMD] can come up with a blended combination of good marketing and well-differentiated phones,” he said.
Dan Olds, an analyst at Gabriel Consulting Group, said he’s not sure that Nokia’s moves now will be successful at this point in the mobile phone wars. “We have Apple on the high end and a huge number of Android variants filling all of the niches down to the feature phone level, so will a new phone from Nokia really make a difference? I don’t think so,” wrote Olds. “I also don’t think that Microsoft’s giving up its feature phone technology to FIH makes much of a ripple in the market.”
Nokia Branded Phones, Tablets Returning to Market in Licensing Deal
The Nokia announcements won’t likely move buyers much at this point today, said Olds. “I think consumers are overwhelmed with the choices in the phone/tablet/mobile market and won’t really notice either the exit of a player or [the arrival of] a new player. I think this is too little, too late for the Nokia name and their partners. The world has changed since the time they were phone powers, and there really isn’t a ready-made place for them in the market.”
Another analyst, Charles King, principal of Pund-IT, said he can imagine that some consumers in Europe could care about the latest Nokia developments, since the Nokia brand still carries weight in some quarters there. But whether the devices would be successful there depends on design, features and pricing, he added. “Suffice it to say that HMD Global has its work cut out for it.”
Overall, “it’s difficult to imagine any scenarios where this deal will be successful,” said King. “Given the ongoing challenges of Microsoft’s efforts around smartphones, in general, and Nokia, in particular, these deals smack of a ‘Hail Mary’ pass thrown with an extra ladle of genuflection. At the same time, such efforts have produced winners; so while positive results seem unlikely, the effort itself may be worthwhile.”
The Microsoft and Nokia brands have been tied together for years, first because Nokia was a Microsoft premier Windows Phone partner for a long time, and later after Nokia sold its smartphone division to Microsoft in April 2014 for $7.1 billion. With that sale, Nokia left a business in which it had been a major player for more than a decade. It looked like Nokia was done with smartphones.
That changed in July 2015, when Nokia confirmed its plans to find a licensing partner that would build, distribute and sell Nokia-branded phones once again, using the company’s vast design and engineering resources, according to an earlier eWEEK story. Once Nokia sold its manufacturing, marketing and channel distribution capabilities to Microsoft, it no longer had the infrastructure to again start building and selling phones on its own. Nokia had done something similar in November 2014, when the company announced that its first Android tablet computer, the N1, would be built under license by third-party device manufacturer Foxconn.
The sale of the Nokia phone business to Microsoft included a clause that prevents Nokia from re-entering the smartphone market until the fourth quarter of 2016, which is why the latest phone licensing plans are arriving now. Since the Nokia acquisition, Microsoft’s Lumia line of Windows-based phones, despite being generally well-received, has barely made a dent in unseating Android- and iOS-based smartphones from the top of the smartphone market.
In April, Nokia announced the acquisition of digital health tracking company Withings S.A. for $192.6 million as it moves to position itself right into the mix of the connected health marketplace. The move is aimed at also giving Nokia more clout in the Internet of things marketplace as it works to tie its products into a tighter relationship with consumers. The acquisition was also made because health care is expected to be one of the largest vertical markets in the IoT, with analysts forecasting that mobile health will be the fastest-growing health care segment from 2015 to 2020, according to Nokia.