How Nokia is (and isn't) back in the phone business today

Analysis We have a new phone company today, and it’s European. And the badge says Nokia.

So is Nokia back in the phone biz? Yes and no. It won’t spend a penny on either making or marketing phones - even at arm’s length. All that is going to be the job of a new entity, HMD Global Oy, run by present and past Nokians. From HMD we can expect a range of Android phones and tablets.

HMD tells us that HMD’s owner is a private equity fund, SmartConnect LP, but neither Nokia, Foxconn or Microsoft have equity in the new company. The fund is “managed by Jean-Francois Baril, a former Nokia executive, as well as by HMD management. The Board of HMD will consist of five members, including one representative from Nokia,” according to HMD.

A 20-year Nokia veteran, Arto Nummela, VP of Mobile Devices Business for Microsoft in AMEA, will become the CEO. Florian Seiche, a former HTC president and its Europe chief, becomes HMD’s global sales chief.

Nokia’s strategy was outlined 18 months ago, when Nokia Technologies President Ramzi Haidamus vowed that “We will go beyond tablets for sure. We will be looking at going into the cell phone licensing business post-Microsoft rights." The occasion was the launch of the first post-split Nokia device, the N1 tablet, manufactured by Foxconn.

But it has taken a long time for the pieces to fall into place. Some of those pieces are financial: HMD starts life with $500m in the kitty, and the assurance of use of the Nokia brand for ten years. Other pieces are operational. Microsoft acquired a global device sales network when it bought Nokia’s phone division. That’s something Microsoft never wanted in the first place, even when Steve Ballmer was negotiating the deal. Satya Nadella wanted it even less. So Microsoft has finally got shot of it, for $350m, to Foxconn entity FIH.

HMD reminds us it has “exclusive access to the pre-eminent global sales and distribution network to be acquired by FIH from Microsoft, as well as access to FIH’s world-leading device manufacturing and engineering capabilities, and its growing suite of proprietary mobile technologies and components”.

Nokia’s strategy was in place three years ago, we gather. That’s why Microsoft received only a limited use of Nokia’s brand for smart devices. With CEO Satya Nadella cooling on the idea of making phones at all, it’s continued to run down the remaining business.

Microsoft’s statement doesn’t make any commitment to continuing the Lumia brand. Again, this shouldn’t surprise anyone. Only four new Lumia devices have limped out of the door in the past year, all running Windows 10 mobile. The Surface team elbowed aside the Lumia team at last year’s big launch; the original plan was for the Lumia phones were going to have their own launch event. At the Microsoft Store, barely two thirds of owners would recommend them to a friend.

It’s hard to imagine how HDA, the “new Nokia” phone company, can differentiate its Android phones and slabs from anyone else’s Android phones and slabs. Maybe it doesn’t have to any more, as in the the post-Shenzhen world, startups can be nimbler and operate on much lower overheads. There’s money in brand licensing when the technology brand retains trust and an emotional appeal. ®