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Nokia smartphones are poised for a comeback after former managers at the Finnish company licensed the handset brand from Microsoft and struck up partnerships with Google and phone manufacturer Foxconn.
Nokia was once the world's dominant cellphone maker but missed
the shift to smartphones and then chose Microsoft's unpopular Windows operating
system for its "Lumia" range.
Nokia quit smartphones in 2014 by selling its handset activities
to Microsoft to focus on mobile network equipment. Microsoft continued selling
Lumia smartphones under its own name but this year largely abandoned that
business, too.
HMD Global, led by Nokia veteran Arto Nummela, wants to launch
its first Nokia smartphone in the early part of next year using Google's (GOOGL.O) Android operating
system.
Success will require a dash for scale by stealing business from
Apple (AAPL.O), Samsung (005930.KS) and dozens of other
players in a cut-throat industry.
"Consumers may be carrying different smartphones now, but
are they really in love and loyal to those brands?" said Nummela in an
interview.
The Nokia consumer brand lives on as the badge on cheaper,
entry-level "feature phones" sold mainly in Asia, India and Eastern
Europe, though Microsoft invested little to market the name in recent years.
Smartphones typically cost anywhere from ten to 30 times as much as these basic
phones, which sell for as little as $20.
"For a new entrant, having an established brand provides it
with an instant on-ramp," said mobile phone analyst Ben Wood of CCS
Insight, who suggested that phone vendors with weaker brands should not take
the new challenge lightly.
"The barriers to entry for the Android phone space are
low," said Wood. "What HMD has is the Nokia brand and management
experience. The key to its success will be driving scale."
CEO Nummela, who was once responsible for Nokia's sales and
product development, does not lack ambition.
"We want to be one of the key competitive players in the
smartphone business," he told Reuters.
HMD President Florian Seiche previously worked at Siemens (SIEGn.DE), Orange, HTC and
Nokia. Chief Marketing Officer Pekka Rantala is a former CEO of Rovio, the
maker of the Angry Birds game, as well as a Nokia veteran.
"We are not going to skip any markets in the long
term," Seiche said, adding that HMD had already set up offices in 40
locations around the world.
NO FUNDING FROM NOKIA CORP
HMD is owned by Smart Connect LP, a private equity fund run by
Jean-Francois Baril, who was once in charge of Nokia's world-leading supply
chain management system. Other HMD managers have put in money of their own.
HMD on Thursday took over the feature phone business that Nokia
Corp (NOKIA.HE) sold to Microsoft.
It has a licensing deal with Nokia giving it sole use of the brand on mobile
phones and tablets for the next decade. It will pay Nokia royalties for the
brand and patents, but Nokia has no direct investment in HMD.
HMD is building its smartphone operating system in partnership
with Google and all its Nokia devices will be manufactured by Foxconn (2354.TW) of Taiwan, the
world's largest contract manufacturer.
Nummela says his team's enduring relationships with phone
service providers and retailers could help HMD quickly convince owners of Nokia
feature phones to upgrade in markets like India, Indonesia and Russia.
The Nokia name is still on a tenth of the feature phones sold
around the world, though in recent years it ceded ground to Samsung and TCL (000100.SZ), maker of
Alcatel-brand phones, as well as smaller players, according to market research
firm Strategy Analytics.
Shipments of Nokia feature phones plunged 40 percent in fiscal
year 2015 and HMD must reverse that decline while trying to break back into the
smartphone market, where hundreds of vendors compete by selling phones that can
be hard to distinguish.
"The feature phone is the essence of the business,"
Wood said. "Don't be under any illusions that this market is over."
source <<reuters.com>
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