Despite the Microsoft takeover, what's left of Nokia can still make mobile phones - and soon

Despite the Microsoft takeover, what's left of Nokia can still make mobile phones - and soon

Summary: The Nokia brand looks to have been relegated to feature phones under Microsoft, but Nokia can still re-enter the device market in the not too distant future.

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With Nokia's manufacturing, supply chain and 32,000 staff — once dedicated to making and selling Nokia phones — now being sold to Microsoft, you'd be forgiven for thinking that Nokia's dreams of returning to mobile glory are all but over.

As part of the acquisition, which saw Microsoft agree to buy Nokia's devices and services buiness for €5.4bn, Microsoft gets rights to use Nokia's name in connection with feature phones for 10 years. However, the period which Nokia has to wait before licensing the name to someone else, or making phones using the brand itself, is far shorter.

Under the terms of the deal, Nokia can't license the Nokia brand to anyone that might use it to sell mobile phones for a period of 30 months. And should Nokia wish to re-enter the devices market itself, it can use the Nokia name for its own kit from the start of calendar 2016. 

So in theory, in just over two years, Nokia could launch its own line of mobile devices again alongside Microsoft's own Nokia-branded feature phones. Six months after that, it could begin licensing its name to another manufacturer, meaning there could theoretically be three companies selling phones under the Nokia brand. 

But even without its own devices or brand on the market, Nokia still stands to gain significant revenues from the smartphone business through patents it has licensed, rather than sold, to Microsoft: €1.65bn of the €5.44bn purchase price gives Microsoft a 10-year non-exclusive licence to Nokia's smartphone patents — some of which it has been using in litigation against various Android smartphone makers — and reciprocal rights related to Here mapping services. Microsoft has an option to extend the licence too. 

Of course, with the Nokia handset stable under its belt, Microsoft will have the freedom to get rid of the brand entirely and rename the ranges in its own image if it so chooses.

However, Micrsoft's outgoing CEO Steve Ballmer claims naming will get simpler under its leadership: while the company could boost its own branding by slapping 'Windows Phone' in the middle of Nokia handset names, Ballmer said on Tuesday it has no such plans.

"I will say that I think we can probably do better for consumer name than the Nokia Lumia Windows Phone 1020. And yet, because of where both companies are and the independent nature of the businesses, we haven't been able to shorten that," he said.

"Just take that as a proxy for a range of improvements that we feel we can make. We can simplify the way in which we work with operators and the overall consumer branding and messaging gets much simpler. That is an efficiency of being one company."

Global coverage: Nokia Interim CEO: Microsoft deal makes us stronger | Even with Nokia devices, Microsoft wants to license Windows Phone to other makers | Does its Nokia buy thwart or fuel a possible Microsoft break-up? | Microsoft shows how to flush decades of Nokia goodwill away | Microsoft gets less than $10 per Windows Phone unit | Microsoft-Nokia deal: Reaction from the Twitter trenches | Elop drops Nokia CEO role to lead devices team under Microsoft deal | Microsoft-Nokia deal: 11 quick facts | Microsoft to buy Nokia's devices, services unit for $7.2B

Topics: The Microsoft-Nokia Deal, Microsoft, Mobile OS, Mobility, Nokia, Smartphones, Windows Phone

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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10 comments
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  • Nokia Phones

    Well they can release an Android device and finally go under....if they wish. Or just remain a Services and Infrastructure company and remain profitable.

    But time will tell.
    Dreyer Smit
  • what did Microsoft buy, exactly?

    The more I read about the terms of this deal, the more I wonder: what did Microsoft buy, exactly, when they "bought" Nokia? They didn't buy the patents, apparently, just a 10 year non-exclusive license to them. Nor did they buy the Nokia name, just a 30 month exclusive use of it. So who actually owns those things? And what does Microsoft own for its $7+ billion?
    dsf3g
    • All it bought in the end patents!

      For chump change. Nokia patents on mobile are extensive. It will lead to more litigation. On the plus, most are FRAND; this will limit how far MS can litigate.

      When Elop joined Nokia, I predicted it would kill Nokia. This prediction has been fulfilled. When MS released Win7 and Win 8 devices, correctly predicted they would not have an impact on the smartphone market.

      Predicting the outcome of this purchase is harder, too many unknowns. MS and litigation is just implicit.

      Will Nokia or MS gain market share? Maybe. Will they become a dominant player over time? Maybe, small chance, if they offer innovation, a better price or at least competitive.

      MS's current path is not even close to achieve these goals. Win8 laptops are not worth more than 250 dollars with a max around 700. Win8 was a step back from Win7. Laptop prices starting a bit under 400 to 1000+ are simply no go, they don't offer the wow factor.

      MS is at a cross roads and it's future will depend on how fast it can rectify it's past monopoly based tactics to innovative strategies.
      Uralbas
      • Regarding current win mobile devices

        They were implicitly ignored, because they are a very small player and have to complete with two gorillas. The one losing market share to MS is IOs.

        Are they currently relevant?, not really, because even at half the price of its competitors or less, Win8 devices haven't been able to make a dent on the current gorillas.
        Uralbas
        • You miss a lot. Nokia is not dead it is very

          healthy. Even without the smart phone divisions it sold to Microsoft it remains a company with very large revenues. And Windows Phone devices have had an impact on the smart phone market. In many countries it's above 20% and ahead of ios. In many more it's above 10%. In all of them it's the fastest growing. In some countries only ios is losing share to WP. In others both ios and android are losing share to WP. And as for W8 devices they are over 110M in use today. Many of the most popular like the lenovos are priced competitively with apples, not less, and due to androids drive to zero margins and both google and amazon selling at a loss, the tablets portion of W8 is priced above most of the competition.
          Johnny Vegas
    • It bought Nokias devices and services divisions

      Design, engineering, production, marketing, sales, all of it. It also bought license to use all their mobile patents and the right to license them to others for royalties. And it bought the rights to use Nokias mapping patents and data which is much bigger and more comprehensive and more current than Googles and covers many many more cities around the world. And they have the right to use all that on all their devices and their services, not just for their smart phones. Oh and unlike with Googles Moto fiasco, no most of these are not frand. They are not low level mobile comms protocol essential things, they are higher level smart phone functionality things. And android device makers are already paying Nokia license fees for them today.
      Johnny Vegas
  • with what ?

    yes, they can in theory stat selling phone but with what ? they sold their entire devices division and patents associated. They would have to start from scratch , hire new people, develop new products from the ground up, etc...
    brrunopt
    • Chinese manufacturer

      Nokia can sub contract manufacturing to a Chinese firm like a lot of other companies.
      frank0-3f91e
  • It will not go that far.

    Probably once the 30+ months agreement on Nokia Brand, and 10 years on patents expire, Nokia will be merged into Microsoft including the NSN part of it.
    Ram U
  • So it basically stops Nokia going to another OS provider for a few months?

    I agree with the other user the more and more I read this I wonder why and what has Microsoft done. I'm guessing it was to simply stop Nokia from dropping windows or maybe also adding Android, Firefox etc to its handsets line-up. However I did recently attend one of their app events in my country which was interesting to the point were I am actually thinking of developing apps for windows platforms now. Guess the lagging behind in terms of app numbers is really starting to bug them a bit were they are finally trying to do something about it.

    Funny enough at that first event they did also mention big changes were happening at Microsoft with which the various employees of many years found very exciting and liked a lot and that was about a week before Steve announced he was to retire lol. So exciting changes, I'm not quite sure about that myself but even with this story were they finally bought the company we all thought they would buy. The only real shocker seems to be what they bought for their money.
    guru_mike