Nokia is dead, Newkia rises from its ashes

Singapore-based Newkia was formed the day the US$7.2 billion Microsoft-Nokia deal was announced, with the sole aim of acquiring Nokia employees and know-how but focusing on the Android platform.
Written by Eileen Yu, Senior Contributing Editor

SINGAPORE--Nokia's fate would have been a lot different today if it had taken the Android route, and this is what freshly minted company--aptly named Newkia--plans to do by acquiring as much of Nokia's know-how as possible.

Microsoft-Nokia deal reflects the complete failure of the Windows strategy, says Thomas Zilliacus.

Speaking to ZDNet in an interview Thursday, Thomas Zilliacus, executive chairman and founder of Mobile FutureWorks, did not mince his words when asked about his views on Microsoft's US$7.2 billion deal to buy out Nokia's devices and services unit. "The deal reflects the complete failure of the Windows strategy Stephen Elop chose when he was appointed Nokia CEO some two years ago.

"Nokia, which only three years ago was the world's runaway market leader in mobile phones, is today a small and insignificant brand," he said, noting that the purchase price announced yesterday represented just 2 percent of Nokia's market cap over 10 years ago.

Zilliacus spent over 15 years as a Nokia employee including seven where he was its Asia-Pacific CEO. He left in 1993 but spent another three years under Nokia's payroll as a regional consultant. He left to become an entrepreneur and currently runs investment company Mobile FutureWorks, which advisors include former Nokia's mobile phones CEO Jorma Nieminen and Ericsson's former CEO Sven-Christer Nilsson. 

Zilliacus, in fact, tried to buy out Nokia a year ago with the aim to steer the company toward a strategy focused on Android, but was unable to raise enough funds to do so despite approaching several global sovereign wealth and equity funds. 

He believes Nokia still makes the best phones in the world, pointing to the Lumia collection which he said had been well-received in the market.

"But consumers simply don't want the Windows OS because it lacks the ecosystem and there are not enough apps and services built for the platform that users find crucial today," he said. He added that the Windows market share is too small for developers to want to develop for the OS. "There's also a general image problem where Microsoft isn't perceived as a sexy company. Developers think it's cooler to develop for Android and Apple iOS."

He welcomes Microsoft's buyout because it opens up the floodgates for his company to now swoop in and gather up Nokia's technology know-how.

"We set up Newkia literally the day Nokia sold its phone business to Microsoft. It was the day Nokia died in Finland, and the new Nokia was born in Newkia. I know Nokia employees who are keen to develop for Android and maybe would like to join us," he said. "I strongly believe Nokia still has the best know-how in terms of mobile phones and we want to get the best people to join us."

He has already gathered a team of former Nokia employees and is hoping to acquire more with expertise across the entire value chain, from smartphone design to logistics to manufacturing.

While the company will be based out of Singapore, Newkia plans for its core research and development (R&D) team to be based out of Finland and may set up other R&D divisions in locations where there are strong know-how, such as Silicon Valley, he noted. 

"What Newkia wants to do is to use Nokia know-how, technology, and design to build the world's best smartphones, but running on Android," he said, noting Nokia for 14 years was the world's market leader and its reign ended only two years ago.

Zilliacus has yet to set any specific numeric targets for the new company, but is looking to release its first handset within a year. How quickly it can do so will depend on how quickly it is able to raise funds and have the core team start operating. 

"The world has changed a great deal in the last few years in the manufacturing and distribution of mobile phones. You no longer need your own factories like Nokia did, and you can quickly achieve quite significant market share with the right product and concept," he said. China's Xiaomi, for example, launched its first phone only a year ago and today outsells Apple in China. 

The Chinese smartphone marker today is worth US$10 billion, he noted. "So we have a company that didn't exist three years ago and is now worth more than what Microsoft paid for Nokia. It shows you can build something new with the right concept and products."

So what went wrong with Nokia? It did not renew itself, and became too arrogant because it was in such dominant position in the market.

"They thought they could win forever. They didn't realize the market had changed and consumers wanted different things as technology advanced."

- Zilliacus, on where Nokia went wrong

"They thought they could win forever. They didn't realize the market had changed and consumers wanted different things as technology advanced," Zilliacus said.

He highlighted a missed opportunity as early as 2003 when Nokia had developed a prototype (see photo below), among several others it was working on, that looked similar to iPhone but never launched it. This was four years before Apple released the first iteration of the smartphone, so Nokia could have beaten the iPhone. "But they rejected the prototype because they thought the market wasn't interested in a design like that," he said, adding he still had the prototype in a drawer.

It was downhill for the company since, and the decision to go with Windows was the final straw that broke the camel's back, Zilliacus said. When Elop joined Nokia, the company still had 30 percent market share but this eventually dropped to 10 percent today, he noted. 

No interest in BlackBerry buyout

Asked if he considered buying BlackBerry, Zilliacus dismissed the suggestion and said the Canadian handset maker has little to offer. "It was a concept that worked well but in today's market, what BlackBerry has is no longer unique. I don't really see a bright future for BlackBerry and its technology," he said.

While its strength had been in the enterprise segment, he noted that he gap the company and other market players had greatly narrowed in the past few years. 

Newkia plans to differentiate itself by offering superior user experience in features consumers want in their phones, he said, and it will be targeting the Asian region. 

"It is the biggest market when it comes to population and is the fastest-growing region. This is where the growth is today. And as we're here in Singapore, which is the heart of Asia, it makes sense for us to focus on this region," he said, but added that this does not mean the company will not launch its product in the United States.

Asked how it planned to compete against current Android market leader, Samsung, Zilliacus said: "We have to be mindful of the fact that Samsung is a gigantic company today and Newkia only just starting. We cannot really aspire to take on Samsung immediately, that would be overestimating our own capability.

"But I think we can offer consumers what can be new, exciting, and different. From that starting point, we can build a market and solutions that can grow quite rapidly," he said. "As we are going to have a core team of ex-Nokia people, we can rightfully say we're building phones with the technology that made Nokia the biggest player in the mobile arena until two years ago. And consumers globally have great faith in Nokia as a developer of phone and brand." 

The Nokia prototype built in 2003 which Zilliacus said was comparable to Apple iPhone but was never launched. (Photo credit: Aloysius Low/CNETAsia)
Editorial standards