Business Transformation

Did Nokia Really Just Launch a Tablet?

Less than a year after selling its mobile phones division to Microsoft, Nokia has announced a new consumer device, the N1, that shows how the Finnish giant is planning to put its technology portfolio to work. (See Eurobites: Nokia Re-enters Consumer Fray.)

There appears to be a lot of confusion over what is happening, so here's the big picture.

First, this tablet is nothing to do with the former devices business that is now part of Microsoft Corp. (Nasdaq: MSFT), which still uses the Nokia Corp. (NYSE: NOK) brand on the device lines it acquired but which looks set to phase out the use of the Nokia name over time.

Second, Nokia's brand is being used and its technology and design are being deployed in the tablet, but this is a licensing deal for Nokia, and not a full-fledged return to the consumer devices market.

Nokia may no longer have smartphones or features phones to sell, but it does have a catalogue of patents, a brand and a growing portfolio of specialist technologies that is managed by its small but important Technologies division, and it's looking to exploit (or "monetize" if you like) those assets through licensing deals. (See Microsoft Officially Closes Nokia Buy and Nokia Ushers In New Era, Retires NSN Name.)

And that's exactly what it is doing here: It has designed the tablet, but is licensing that design, plus the Nokia brand and the Z Launcher technology that gives the device its unique selling point (USP) to an original equipment manufacturer (OEM), which Nokia has confirmed is Foxconn Electronics Inc. (See Nokia Unveils a New Android Tablet for the full details about the tablet.)

The Brand Ambassador
The N1 tablet is a licensed product that gets Nokia's brand and licensed technology out into the consumer marketplace. But will it deliver any profits?
The N1 tablet is a licensed product that gets Nokia's brand and licensed technology out into the consumer marketplace. But will it deliver any profits?

Its OEM partner is, Nokia notes, "responsible for full business execution, from engineering and sales to customer care, including liabilities and warranty costs, inbound IP and software licensing and contractual agreements with 3rd parties." So Nokia has essentially done its bit and will now wait to see if the tablet, which is due to launch in China at a price of about US$249 plus taxes in early 2015, sells in large enough volumes to make it some money. Nokia says it is not revealing any details about the licensing deal but notes that a revenue-sharing arrangement is part of the agreement.

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It seems clear, following Nokia's Capital Markets Day in London on November 14, that this device will be the first of many. (See Nokia Ups Guidance But Investors Take Fright.)

At that event, CEO Rajiv Suri, when asked about any return to the consumer market, stated: "I think it's important for us to return to the consumer market because we want to strengthen the brand and because there is a tangible financial business opportunity as well. But whatever we do, we want to license to products that are consistent with Nokia's brand and what it stands for. Brand licensing is a key opportunity. Other than that we have nothing to say on whether we would come back to consumer products. I think we're focused on brand licensing as the first opportunity."

And the CEO did not rule out some sort of role in the smartphone market. "We're not looking at direct consumer entry in handsets per se -- brand licensing is the operative word," he said.

He added: "The Nokia brand is powerful… we see interest in licensing [and are] pursuing opportunities but ensuring licensed products are consistent with brand promise -- [we] want there to be no clear difference between products and services we sell in-house versus those of brand licensing partners."

And it looks like licensing will become an increasingly significant part of Nokia's business in the coming years. "We have many patents that we have yet to monetize -- we have opportunities that go beyond device makers" in sectors such as security systems, set-top boxes and so on, stated Suri. "The addressable market in these areas is expected to grow in coming years. It will take time for opportunities to come to fruition -- 18-month negotiations, with litigation can take longer. I would suggest caution when it comes to timing."

One key consideration, though, is how much value the Nokia brand has retained, and the CEO recognizes that. "We have a remarkable brand -- yes, maybe tarnished somewhat, but we are still in a position that is the envy of others."

Let's see if that brand can have a positive impact on Nokia's balance sheet in the future: Keep an eye on the quarterly numbers reported for the Technologies division.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, and Iain Morris, contributing editor, Light Reading

pzernik 1/5/2015 | 9:58:49 PM
Re: Tarnished brand If you think Nokia is tarnished the Foxconn "labor camp" is all rusted out.




iainmorris 11/20/2014 | 5:29:08 AM
Tarnished brand "Tarnished" seems a pretty accurate description of Nokia's brand. According to Interbrand, which ranks the world's most valuable brands each year, Nokia has dropped from number five in 2009 - with a brand value of $35 billion - to 57 last year (data for 2013 came out last month), when it was reckoned to be worth just $7.5 billion. 
[email protected] 11/18/2014 | 3:09:14 PM
Re: Worth noting because.... Well MSFT did get a shrinking but still substantial business that had potential to turn itself around under the right leadership (ahem)...
bosco_pcs 11/18/2014 | 2:46:14 PM
Re: Worth noting because.... So that begs the question, what exactly did Microsoft get for a lousy $7B?
Liz Greenberg 11/18/2014 | 12:56:14 PM
Re: Worth noting because.... Exactly Ray...great brand name known for great engineering and innovative products.  It seems though that they may end up missing one useful feature...a microSD slot which to date has been on the Nokia branded Windows smart phones and tablets.  This could affect sales.  I wonder if they are taking this from Google's play book and assuming that everybody wants to store everything in the cloud rather than having it handy on their device for when the users bodies are actually above the clouds (i.e. in airplanes)?
[email protected] 11/18/2014 | 11:30:57 AM
Worth noting because.... Of course, LOTS of companies do licensing deals, but not many have a brand like Nokia to license.

Also this is a departure for Nokia in business strategy, of course -- it's not making the device or getting involved in sales, marketing, support.

And while plenty of companies have talked about exploiting IPR, here's a real tangible example of a company that is actually delivering the goods.

And it's using Android, which 'old' Nokia did not want to do.
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