Can Nokia make a success of hardware second time around?

Having sold off its hardware business to Microsoft, Nokia's returning to the market with a licensing model.
Written by Eeva Haaramo, Contributor
The N1 tablet. Image: Nokia

"They say Nokia is dead, Nokia is no more... I say they couldn't be more wrong."

Nokia's head of products Sebastian Nyström set the tone for the company's return to hardware in his Tuesday keynote at the Slush startup conference in Helsinki, announcing the Finnish firm's return to consumer devices with the launch of its N1 Android tablet.

Since the company last released a tablet, the playing field has changed significantly. The launch of the N1 comes less than a week after Nokia CEO Rajeev Suri announced the company won't get back into smartphone manufacturing but stated that the company sees "considerable interest in licensing" its brand for use on other hardware. Now that interest has materialised in the N1, Nokia's first brand-licensed product. Chinese manufacturer Foxconn will license Nokia's software, design, and brand for the N1 with an expected rollout in China and "other select countries" in early 2015.

The decision to go back to the consumer device business wasn't an easy one for Nokia. After the sale of its devices and services division to Microsoft was finalised in April, Nyström said it wasn't a self-evident choice as there was a sense of 'after all we have been through, do we even want to get back to it?' feeling. But eventually the company decided it didn't want to let its history of technology and design go to waste.

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"Nokia is committed to remaining a consumer-facing brand and we aim to create technology that simplifies and enhances the lives of our customers," Nokia said in a statement. "Nokia N1 was created to provide consumers with a simplified and faster user experience on an Android tablet."

President of Nokia Technologies Ramzi Haidamus expanded on the strategy at Nokia's Capital Markets Day last Friday. Haidamus emphasised a new focus on licensing in its return to consumer markets, adding that allowing other companies to use its patents, technologies, and brand will be a priority. Haidamus' division is behind the N1 and Nokia's Android home screen Z Launcher.

Another key area of interest for Nokia is looking for ways to increase the earnings from its 10,000 patent families. At the moment Nokia Technologies accounts for 17 percent of Nokia's operating profit. Having traditionally kept key patents to itself to bolster its devices, the company is now looking to expand the number of companies looking to take those patents to market. It's also opening discussions with non-phone hardware businesses to encourage makers of digital cameras, wearables, and set-top boxes to license patents.

Licensing gold

Market research firm IHS believes the advantages of licensing are considerable for Nokia. Having rid itself of its historical baggage with the Microsoft deal, licensing gives Nokia an entry back to the mobile device market without the need to worry about manufacturing or supply chain management.

"This is an audacious move by Nokia," IHS industry analyst Ian Fogg said. "There will be those at Microsoft who will be startled by the speed and audacity of Nokia's strategy. They shouldn't be: Nokia has a long history of bold strategic moves."

But being bold doesn't guaranteed success. IHS points out that Nokia's past licensing efforts haven't always been winners, for instance, the licensing of its Symbian software or the Meego partnership with Intel which was aborted within a year. Furthermore, Nokia has only just extracted itself from its exclusive partnership with Windows Phone.

Consequently IHS argues that choosing the right customers is the biggest challenge and potential risk for the company. Meanwhile Nokia has yet to reveal whether it will opt for an exclusive global licensing deal, partner with different companies in different device categories, have several licensing deals segregated by region, or adopt another strategy for licensing.

Regardless, the announcement of Nokia's N1 Android tablet was received with cheers from the 14,000 strong crowd at Slush. The company may have been playing to a home crowd, but it shows passion is still there for the brand and for now it seems the momentum is there for Nokia's new beginning.

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