Can Nokia Rise Like A Phoenix In Phone Segment?

by Sohini Bagchi    Aug 10, 2015

nokia

Nokia boss Rajeev Suri is reportedly planning a comeback - in the mobile phone or more precisely the smartphone segment. A one-time leader in the mobile phone market, the Finnish firm saw its decline with the rise of smartphones and was eventually eclipsed by Apple and Samsung. Nokia witnessed a sharp decline and then sold its handset business to Microsoft in late 2013 while focusing on making telecom network equipment.  But like a phoenix, the company is set to re-emerge from its ashes.

Nokia is hiring software experts, testing new products and seeking sales partners as it plots its return to the mobile phone and consumer tech arena it abandoned with the sale of its handset business, according to a Reuters report, a clear indication that Suri is planning a smartphone comeback.

Read more: End Of Nokia; Get Set For The New Microsoft Mobile

Setting the stage

According to Reuters, Nokia is recruting heavily with an aim to once again make a dent in consumer areas. Dozens of job postings from the company in California are searching for Android engineers, as the company prepares to embrace Google’s operating system fully. Remember that Nokia has already recently dabbled in the Android waters with the N1 tablet and Z launcher.

Experts however believes Suri must wait until late 2016 before he can consider re-entering the handset business - after a non-compete deal with Microsoft expires. Currently however preparations are underway and 2016 may not be a long wait.

The company has already made a dent into the consumer market by launching an Android tablet, N1, and last week, it unveiled a “virtual-reality camera” with analysts calling it as the “rebirth of Nokia”. It has also launched an Android app called Z Launcher, which organizes content on smartphones.

However, the key problem is Nokia has no unique smartphone operating system. According to a TechRadar report, Nokia’s comeback smartphone, which CEO Rajeev Suri hinted, will run Google’s Android operating platform. However, this would make it yet another Android handset among hundred others in the world. It would be rather better to build a team who can work on a unique design and OS and then get into the segment.

Earlier in May, Nokia had also planned to lay off about 70 people in its engineering division. But a company source told Reuters that the plan is to bring this to half now. At present Nokia’s-600-strong technologies division are working on designs for new consumer products, including phones, as well as in digital video and health. Beyond this, the phonemaker declined to comment.

Fresh competitors 

As Nokia steps into the market, it is likely to face stiff competition from newcomers like China’s Xiaomi and India’s Micromax. Even well positioned brands like Samsung are under threat to these smaller, yet nimble players.

“We only see this competitive pressure intensifying in coming years,” said CCS Insight mobile analyst Ben Wood. “Barriers to entry in the handset market are lower than ever and almost anyone can enter the smartphone market.

The strength of the Nokia brand - crucial to the success of such licensing deals - is also open to debate. Nokia says it will not repeat the mistakes of the past of missing technology trends, being saddled with high costs, and reacting too slowly to changing consumer tastes.

To lower such risks, it is seeking partners for “brand-licensing” deals whereby Nokia will design new phones, bearing its brand, but - in exchange for royalties - will then allow other firms to mass-manufacture, market and sell the devices.

This is stark contrast to its previous handset business which in its heyday manufactured more phones than any other company in the world and employed tens of thousands.

Suri said last month that Nokia aimed to re-enter the mobile phone business, but only through such licensing agreements. It will not fall back on the “traditional” methods, said the CEO, who took the helm last May and has turned it into a slimmed down, more profitable company. He sold off its mapping business a week ago.

Such brand-licensing deals - as Nokia has struck for the N1 tablet - are less profitable than manufacturing and selling its own products, but also less risky. They can add a tidy sum of revenue for little investment for the company, which generates the bulk of income from selling telecoms network equipment to operators like Vodafone and T-Mobile.

“They want to be innovative and seen as a company with long-term vision in the (tech) industry and having a foot in devices plays into this impression, even if it’s not bringing massive revenue at the outset,” said Gartner analyst Sylvain Fabre.

 Reuters says, the company asserts its brand is recognized by four billion people. But, after being consistently ranked as one of the world’s top-five brands in the decade up to 2009 according to market researcher Interbrand, it has since nose-dived and now looks set to disappear from top 100 lists.

“A brand is quickly forgotten if it is absent from the consumer business,” Anssi Vanjoki, a professor at Finland’s Lappeenranta University of Technology told the agency.

Experts believe Nokia as a brand may not appeal to users the way it used to be unless it does something something different. If only there is something new and interesting to the brand, the old heritage may be helpful.