Nokia to Return as Smartphone Brand in Bet on Staying Power

(Bloomberg) -- The Nokia brand is set to return to smartphones, two years after the Finnish company sold its flagship handset business and walked away defeated by Apple Inc. and Samsung Electronics Co.

Nokia Oyj said Wednesday it will license its brand to a Helsinki-based company run by former Nokia managers, HMD Global Oy, which plans investments topping $500 million to bring mobile phones and tablets to the market. Nokia won’t have a financial stake in the venture, though it’s set to collect fees from brand licensing and intellectual property.

The comeback effort is a bet that shoppers will remember and embrace a brand that almost disappeared with the sale of Nokia’s handset unit to Microsoft Corp. in 2014. Nokia, which once dominated global smartphone sales, gets a risk-free second chance at a business that was crushed by Apple’s iPhone and Google’s Android software introduced in 2007.

“It’s going to take more than a well-known brand name in this competitive market," said Annette Zimmermann, an smartphone analyst at research firm Gartner in Germany. “To shake up the market and offer something that excites the fickle market will be difficult.”

Shares of Nokia advanced 1.9 percent to 4.63 euros as of 4:17 p.m. in Helsinki.

PRIVATE EQUITY

HMD is funded by a group of international private-equity backers through a fund called Smart Connect LP, as well as by HMD’s management team. The venture will be run by Arto Nummela, a former Nokia manager and current head of Microsoft’s Mobile Devices business for Asia, Middle East and Africa and its business making inexpensive, so-called feature-phones. Florian Seiche, also a former Nokia executive and current Microsoft manager, will be president at HMD. The HMD executives declined requests to be interviewed.

The venture will make smartphones running Android, and also plans tablets and feature phones. FIH Mobile Ltd., part of Foxconn Technology Group, will help to build the devices.

HMD will be in charge of designing, making and selling the devices, said Ramzi Haidamus, president of Nokia’s IP-licensing business. While Nokia doesn’t have a financial stake, it will make sure the firm follows broad product guidelines, he said. He declined to comment on what types of phones would be made or in which markets they would be sold. Nokia didn’t give details of the licensing pact.

“If things don’t live up to expectations, the company isn’t saddled with enormous inventory and expense still on the books,” said Ramon Llamas, an analyst at IDC.

TOUGH MARKET

Nokia and HMD will be trying to crack a tough market with Samsung, Apple and Huawei Technologies Co. dominating smartphone sales with about half of the total 334 million high-end phones shipped in the first quarter, according to data from researcher IDC. Sales of 10 million Nokia-branded smartphones in the first year could be considered a success, Gartner’s Zimmermann said.

The new venture also marks an exit from cheaper phones by Microsoft. As part of the arrangements announced Wednesday, Microsoft is selling its feature-phone assets to FIH and HMD.

The ex-Nokia managers aren’t alone in trying to revive a wounded brand. China’s TCL Communication Technology Holdings Ltd. bought control of the mobile-phone unit of France’s Alcatel SA in 2004 and still supplies phones under the Alcatel OneTouch brand. Royal Philips Electronics NV sold its television business to TPV Technology, which kept the Dutch company’s name on its sets.

FINNISH PRIDE

For Finns, the deal may restore some national  pride in the country’s best-known company. The sale of the business, less than three years after then-Chief Executive Officer Stephen Elop joined Nokia from Microsoft, prompted Ilta-Sanomat, Finland’s biggest tabloid, to called him a “Trojan Horse” who assisted Microsoft all along. Elop returned to Microsoft as part of the sale, though he is now with Telstra Corp.

Nokia emerged as Finland’s first major global corporation and symbolized the country’s transformation into a technology-driven economy. At its peak in 2000, it generated about 4 percent of Finland’s gross domestic product.

When Nokia exited phones in 2014, Microsoft acquired rights to use the Nokia brand in smartphones for two years. HMD is now acquiring the rights for the next decade.

Nokia more recently has been getting most of its revenue from wireless network equipment and related software and services.