Nokia on Thursday announced it started an official review of its Digital Health division which produces wearables and devices such as smart scales. No official reason for the “strategic review” of the unit has been provided by the company and the probe doesn’t encompass its related businesses such as Nokia Technology, Technology Licensing, and Brand Partnerships. The review may not necessarily result in any changes to the division or divestments, Nokia said, without providing a specific timeframe for the completion of the probe.
The unit that’s now finding itself under scrutiny largely consists of the assets of former French manufacturer of health-focused devices Withings which Nokia purchased in 2016 for €170 million ($212.3 million). As detailed in its recent financial report for the calendar year 2017, the company recorded a write-down of €141 million ($175.9 million) on its goodwill investment in the third quarter of its recently concluded fiscal year. The timing of its acquisition coincides with the peak popularity of fitness trackers and other wearables which lost momentum in subsequent years, prompting Withings — rebranded into Nokia Health last year — to stagnate. While the company’s overall sales have also been stagnating in 2017, the majority of that trend is attributed to the current situation in the wireless industry which is now “between Gs,” having already committed countless resources to 5G research and development without making any returns. With network infrastructure being Nokia’s core business and 5G deployment being predicted to start in the immediate future, the firm isn’t concerned about the stagnating performance of its flagship divisions, yet that of the Digital Health unit cannot be attributed to such trends.
The newly launched review is understood to be part of Nokia’s international cost-cutting efforts which started following its Alcatel-Lucent acquisition in late 2016. As part of the same plan, the company will cut approximately 6.7-percent of its domestic workforce, having previously announced 425 layoffs in Finland meant to be completed over the course of this year. The tech giant is presently becoming more reliant on its licensing business which includes its deal with HMD Global, a phone company started by some of its former employees that’s presently selling Nokia-branded Android smartphones and managed to capture around one percentage point of the global market in less than a year since relaunching the brand on a global level, according to some industry trackers.