Nokia Smartphone Comeback

Nokia on Wednesday announced its return to the mobile phone and tablet business in connection with a larger agreement by Microsoft to sell its entry-level phone business to HMD Global and FIH Mobile for US$350 million.  Under the deal, Microsoft will sell its Hanoi, Vietnam, manufacturing facility to FIH Mobile, a unit of Hon Hai/Foxconn Technology Group. Workers will be given the opportunity to work for FIH Mobile or HMD Global, according to Microsoft.

Nokia will grant HMD, a newly formed company, the exclusive global license to create Nokia-branded phones and tablets for the next 10 years and will receive royalty payments from HMD for sales of those devices, covering both brand and intellectual property rights. HMD plans to invest more than $500 million over the next three years to support the global marketing of the Nokia devices, which will be paid for by investors and profits from the new business. HMD will be led by CEO Arto Nummela, a former senior executive at Nokia and the head of Microsoft’s mobile device business in Asia, the Middle East and Africa. Florian Seiche, senior vice president for Europe, sales and marketing at Microsoft Mobile, and also a former Nokia executive, will become president.

Nokia’s Long Game

Nokia found a strategy to get its name back into the mobile device business when faced with competition from brands such as Apple, Samsung and Google, which have dominated the mobile landscape in recent years, analyst Jeff Kagansaid. “After selling their failing handset business to Microsoft several years ago, Nokia has been trying to re-enter the marketplace,” he told the E-Commerce Times. “Unfortunately, to date, they haven’t really created any growth waves yet.” Nokia has been stuck in a noncompete situation since the sale of its phone business to Microsoft in 2013, according to a report by IHS Technology. The company’s goal was to re-enter the business in a way that required much less capital investment and reduced risk. Feature phones represent a declining market, with only 400 million units shipped worldwide in 2015, the report said. However, Nokia still has a great deal of brand recognition, and HMD likely will target emerging markets under the new relationship. The company likely will pursue smartphones and wearables, he told the E-Commerce Times.