Nokia has had a long and twisted history in the mobile device space, with its recent reincarnate set to continue that story
The Nokia brand has lived a very colorful, but sometimes confusing, life as one of the most successful companies manufacturing and selling cellphones. It has gone through a number of twists and turns over the past 20 years since the late 1990s, where the company made not always successful changes in strategy, including death and (now) resurrection.
Nokia’s partial death came in April 2014, when it sold its handset business to Microsoft, which kept the Nokia brand for feature phones running on the Nokia S30/40 proprietary operating system and the Lumia brand for smartphones based on the Windows Mobile OS. But, after some time, Microsoft stopped using the Nokia brand, resulting in what was considered to be the final death blow to the Nokia brand.
But wait! In the vernacular of Mark Twain, the rumors to Nokia’s death were greatly exaggerated. Recently, Microsoft sold its S30/40-based feature-phone business to FIH Mobile, which is owned by Taiwan-based electronics giant Foxconn, and HMD Global Oy, a newly founded Finnish corporation in a $350 million arrangement.
Arto Nummela will become CEO of the new Nokia, which will be jointly owned by FIH and HMD. Nummela is a former Nokia executive and currently head of Microsoft’s mobile devices business for greater Asia, the Middle East and Africa, as well as Microsoft’s feature-phone business. Under Nummela, Microsoft was able to ship a respectable 15.7 million feature phones using the S30/40 OS in the first quarter of 2016. He will resign from Microsoft and head up the new joint venture under the reincarnated Nokia brand.
About 4,500 Microsoft employees will have the opportunity to transfer to the new Nokia, and the agreement includes Microsoft’s manufacturing plant in Vietnam, which will be run by Foxconn. The new line of smartphones and tablets will be based on Google’s Android OS.
But let’s back up for a moment. Nokia flew into notoriety when it made “candy bar” Series 30 feature phones, which were officially introduced in 1999 with the release of the Nokia 7110. The manufacturer had a number of models designed for a number of specific target markets, and developed both the low-end Series 30 and higher-functionality Series 40 for a number of target markets. Nokia oversaw its own smartphone OS, Symbian, that was used in their higher-end Series 60 line of smartphones.
Things changed dramatically in September 2010, however, when Nokia hired Stephen Elop from Microsoft as the company’s new CEO. He did a review of Symbian and felt the OS was not going to be able to keep up with the progress being made by both Apple’s iOS, Google’s Android or Microsoft’s Windows Mobile. He and the senior executives announced they were going to abandon Symbian and, instead, partner with Microsoft to build future Nokia smartphones using the Windows Mobile OS.
Unfortunately, while new smartphones were elegant and sophisticated technologically, the Windows Mobile OS and the associated user experience was not well received in the market and Nokia’s worldwide leading market share plummeted until its cellular phone division was sold in September 2013 to Microsoft for $7.5 billion, along with Stephen Elop rejoining Microsoft to manage the mobile device business.
Microsoft wasn’t able to do any better selling Windows Mobile-based devices and the mobile device division basically ran itself out of business. The company finally charged off $7.6 billion in 2015. In retrospect, Nokia likely should not have hired Elop from Microsoft instead of someone else with significant experience in the smartphone market. The company rightly decided to abandon Symbian, but should have adopted Android for its smartphone OS. That, combined with Nokia’s capability to build advanced handsets, would have given it a good shot at building smartphones on par with the rest of the market.
This brings us back to 2016, and the re-entry of Nokia into the cellular phone business. Certainly, there is a market for low-cost S30/40-based cellphones in lower economic echelons of large markets such as India, China, Indonesia, Brazil and Africa, but for Nokia to regain substantial respect and market share, I believe it will eventually have to develop a line of advanced, high-end Android-based smartphones.
Nummela and his new team will begin focusing on the low end of the market with the S30/40-based handsets. They have access to great manufacturing capabilities in Foxconn to build the low-end phones that will provide the best margins possible. Over time, Nokia will have the ability to compete with the high-end market using its past experience developing very high-end, high-technology Android-based mobile handsets and tablets.
The challenges facing the new Nokia and Nummela are numerous. The most important is being able to make a profit offering the S30/40-based low-end feature phones for emerging markets like India, Indonesia, China and Brazil. Nokia will also need to successfully develop Android-based smartphones and tablets for specific vertical markets and find ways to differentiate. There are certainly a number of vertical markets that could utilize custom Android phones, and they should be able to innovate in the areas such as camera, music, video, positioning, etc.
“We will be completely focused on creating a unified range of Nokia-branded mobile phones and tablets, which we know will resonate with consumers,” said Nummela in a press release. “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 our customers want.”
As a result, Nokia is soon to be reincarnated with new ownership and leadership. It will be fun to see if Nokia can return to glory in the cellular handset, smartphone and tablet market.
J. Gerry Purdy, Ph.D., is the principal analyst with Mobilocity LLC and a research affiliate with Frost & Sullivan. He is a nationally recognized industry authority who focuses on monitoring and analyzing emerging trends, technologies and market behavior in mobile computing and wireless data communications devices, software and services. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices. He provides critical insights regarding mobile and wireless devices, wireless data communications and connection to the infrastructure that powers the data in wireless handheld devices. Purdy continues to be affiliated with the venture capital industry as well. He spent five years as a venture adviser for Diamondhead Ventures in Menlo Park, California, where he identified, attracted and recommended investments in emerging companies in the mobile and wireless industry. Purdy has had a prior affiliation with East Peak Advisors and, subsequently, following their acquisition, with FBR Capital Markets. Purdy advises young companies that are preparing to raise venture capital, and has been a member of the program advisory board of the Consumer Electronics Association that produces CES, one of the largest trade shows in the world. He is a frequent moderator at CTIA conferences and GSM Mobile World Congress. Prior to funding Mobilocity, Purdy was chief mobility analyst with Compass Intelligence. Prior to that, he owned MobileTrax LLC and enjoyed successful stints at Frost & Sullivan and Dataquest (a division of Gartner) among other companies.
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