Dubai: Nokia, which dominated the mobile phone market for 14 years, will find it tough to do well when it returns to a very competitive market in the fourth quarter of 2016.
The Finnish giant sold its handset business to Microsoft in late 2013 for $7.2 billion (Dh26 billion).
Daniel Gleeson, mobile analyst at IHS Electronics and Media, said that Nokia is wisely limiting its financial exposure by simply licensing its brand and technology.
In a best-case scenario, he said, Nokia’s handsets would act as “Trojan horses” for its technology. By pushing its technology into the market via Nokia-branded devices, Nokia will seek to guide the adoption of certain technologies towards using its patented ideas.
Microsoft has the right to use the Nokia brand on non-smartphone devices until 2020. This means “we will have Nokia-branded handsets available from two different companies for a few years. This will no doubt cause a lot of confusion, especially when it comes to after-sales support,” he said.
Samsung overtook Nokia as the top-selling manufacturer in 2012 as the Finnish giant failed to come out with winning models amid tough competition from Apple’s iPhone and Samsung’s Galaxy.
Saad Elkhadem, research analyst at International Data Corporation, said that Nokia is re-entering the market where profitability is extremely difficult and there is heavy competition.
They had an established brand name and it will “make a comeback, but it will take time to establish itself. They will be launching Android devices,” he said.
The primary drive behind Nokia’s move is to leverage the company’s brand strength in the consumer space. Without any presence in the market, Nokia would be wasting a valuable asset. “Smartphone adoption is picking up in the Middle East and Africa — a very strong region for Nokia in the past — so there is potentially much to gain there,” Gleeson said.
Nokia’s old handset business unit continues to haemorrhage money as part of Microsoft. Other handsets makers such as Sony, Blackberry and HTC have made significant losses in the past few years and even Samsung has seen its operating margin tighten considerably.
The flip side of that is Nokia will have “less control over the quality of devices” sold under its brand. Nokia handsets were always known as extremely well-built phones, if nothing else. Without proper controls, Gleeson said that the value of the Nokia brand could erode quickly.
“By pushing its technology into the market via Nokia-branded devices, Nokia is also looking to influence what technology becomes the de facto standard in many areas. This would then lead to more companies looking to licence Nokia technology. This is effectively the current strategy Qualcomm employs for its chipsets,” he said.
