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AH Primetime: Can Nokia Make a Smartphone Comeback?

August 10, 2015 - Written By Cory McNutt

After once being the biggest manufacturer of mobile phones and then falling out of sight and mind, Nokia wants to get back into the mobile phone business.  The question remains – can a smartphone manufacturer that was consistently in the top five worldwide brands for a decade up until 2009, find its way back now that it is not even in the top 100?  Nokia’s circumstances goes to show you no matter how big a company you are – look at BlackBerry – if mishandled and ill informed, even the mighty can fall.  There is also a lesson to be learned from the Nokia-Microsoft fiasco – even if you may be mighty in other areas, it does not guarantee you success in the smartphone business.  Now, out of the mobile phone picture for years, will Nokia be able to mount a comeback in 2016 – the year they must wait in their non-compete agreement with Microsoft.

Nokia boss Rajeev Suri is planning such a comeback and has preparations under way.  In January they launched the N1, an Android tablet in China and just days ago unveiled a “virtual-reality camera,” which is being called the “rebirth of Nokia.”  Nokia has also introduced an Android app called ‘Z Launcher’ to help organize smartphone content.  The 70 employees they were going to layoff has now been cut in half and Nokia is now hiring software experts, testing new products and looking for sales partners – all clear signs of  mounting a comeback.  Its technologies division is advertising on LinkedIn for dozens of jobs in California in product development and Android engineers specializing in the operating software.  While there is no firm word from Nokia on its preparations, except to say that some of their 600 employees are working on new consumer products – including phones.

Nokia claims it will not repeat its past mistakes and it is nice to hear them say that, but it will be even nicer to see if they actually follow through.  They made the same mistakes that BlackBerry is guilty of – missing technology trends and reacting too slowly to changing consumers’ tastes – and even to this day, BlackBerry is clinging to its past glories and still refuses to fully embrace Android.  To avoid this risk, Nokia is not going to manufacture their own devices, only design them and will seek partners for “brand-licensing” agreements where other companies will produce, market and sell their Nokia smartphones.  It will cut into Nokia’s profits, but it is also less risky, as Suri tries to slim down Nokia’s operations to make a profit.  Gartner analyst Sylvain Fabre claims, “They want to be innovative and seen as a company with long-term vision in the (tech) industry and having a foot in devices plays into this impression, even if it’s not bringing massive revenue at the outset.”

The licensing root has been successful for other companies like Philips and Alcatel, but with the new crop of Chinese companies on the rise, such as Xiaomi and Huawei and the India company Micromax, it may be harder to get a foothold in those countries – just ask Samsung.  But with the Android OS and the plenitude of displays, processors and parts to choose from, it is easier than ever to become a ‘smartphone manufacturer’ – however, being successful is another question.  CCS Insight mobile analyst Ben Wood said, “Barriers to entry in the handset market are lower than ever and almost anyone can enter the smartphone market.”

This is where Nokia is relying on their past reputation to give them a ‘foot-in-the-door’ so to speak.  Many analysts believe that a brand name will quickly fade from memory and wonder just how much the Nokia name will mean – does it still have that ‘goodwill’ on a business balance sheet?  Others say that if Nokia can come up with some innovation that the other smartphones do not offer, it may jumpstart the interest and regenerate the brand name.  We will have to wait until 2016 to see exactly what Nokia can offer that will make us take interest.  Nokia may not have as difficult a time as some may think – there are ‘oldtimers’ like myself that remembers the time when the Nokia name was on just about every mobile phone and there are many young people that loved the look of the Nokia Windows Phone and is marvelous camera, they just wanted an Android OS.  If Nokia can even reproduce a device like that, customers may quickly embrace the smartphone and the name.