Even though Nokia Corp. does not plan to manufacture its own smartphones in the future, the company confirmed this week that it would consider design and brand licensing opportunities. Essentially, it means that in late 2016 smart handsets with Nokia name on them may return to the market.
After selling its devices and services division to Microsoft Corp. in early 2014, Nokia got rid of its production facilities as well as numerous engineers and design teams. However, the company retained its Nokia Technologies research and development arm, which owns thousands of patents and employs hundreds of developers worldwide. With intellectual property and engineering talent Nokia still has, the company is more than capable of designing a variety of products.
Nokia N1: Designed by Nokia, made and sold by Foxconn
Days after selling its devices and services unit to the world’s largest software developer, Nokia began to design a media tablet. The company unveiled the Nokia N1 slate in mid-November, 2014, and immediately got a lot of attention from both the media and the end-user. Under Nokia’s current business model, the company does not produce or sell any hardware, but licenses design, bill-of-materials, Z-Launcher software and other things to contract makers, who then handle manufacturing, distribution and sales. For example, Nokia N1 is produced and sold by Foxconn Technology Group in China.
“We have tested the brand licensing business model on the market with N1 tablet and this is really a learning exercise for us,” said Timo Ihamuotila, chief financial officer of Nokia. “I want to remind that we invested over $20 billion into brand marketing during the time when we were in the devices business. This is really a brand, which is recognized by [4 billion on the planet] and [which] pretty soon going to be without the product. We think it is a vacuum, which we need to try to fill with a very smart business model.”
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At present Nokia’s brand and design licensing remains a small business for the company. In a bid to grow it, Nokia needs to expand the portfolio of products it can license. This week Nokia confirmed that it could extend its licensing business with smartphones once it regains rights to use its brand on such devices in late 2016.
“I think it is a very interesting business opportunity long-term for the technologies business unit,” said Mr. Ihamuotila. “Particularly in the latter part of 2016, [when] the brand does not have any of limitations anymore and we can also consider licensing it for smartphones.”
Since Nokia has loads of patents covering mobile and communications technologies as well as talented engineers, brand licensing business makes a great sense for the company, in the short-term future. The market of smartphones and mobile gadgets will continue to grow rapidly for many years to come, there will be a lot of firms, who would like to sell their own smartphones and this is where Nokia may come into play.
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What remains to be seen is whether there will be a lot of such companies, considering the fact that only Apple makes a lot of money selling handsets. Moreover, if those companies manage to earn profits on Nokia-designed hardware, perhaps, it will make sense for the company to return to the market itself.
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