Nokia returns to devices through a bold technology licensing strategy

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Nokia returns to devices through a bold technology licensing strategy

Nokia has returned to device market through a bold technology licensing strategy, according to a new analysis from Ian Fogg, Director of Mobile Analysis at IHS Technology.

Nokia has returned to device market through a bold technology licensing strategy
Nokia has returned to device market through a bold technology licensing strategy. Image courtesy-Nokia

Key points:

  • This is an audacious move by Nokia, and Nokia has a long history of bold strategic moves.
  • For Nokia, the advantages of licensing are considerable, but the company’s success depends on the partnership strategy.
  • Microsoft should rest easy for now.

Analysis:

This is an audacious move by Nokia. 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.

This strategy goes far beyond a brand license play. Nokia intends for the resulting Nokia-brand devices to be indistinguishable from a Nokia-made device which means Nokia must ensure ongoing quality management of its partner(s) devices. To deliver on this goal Nokia will license a package of assets, not only the Nokia brand name, to help with product differentiation. This includes extensive imaging intellectual property.

Nokia claims to own 1,200 standards essential patents, to have filed 914 patent families in 2013, and for 75 percent of the total patents it holds to have been created by teams still at Nokia.

Considerable advantages of licensing

For Nokia, the advantages of licensing are considerable. Nokia can enter the mobile device market without needing to worry about manufacturing, supply chain management, stock control or hardware distribution. And, by selling its former devices unit to Microsoft, Nokia has freed itself from historic baggage, restructuring costs, and can start afresh.

Success depends on partnership strategy

But Nokia’s success depends on the partnership strategy. How should Nokia license its assets? There are different potential approaches:

  • License to a single exclusive global partner, likely for an extended period: The model here could be akin to the way TCL is using the Alcatel OneTouch brand in a joint venture. Or, Nokia could license without a joint venture, but this will make it harder to ensure product quality.
  • License to different companies for different classes of devices: For example, different companies for tablets, smartphones, portable navigation devices, etc.
  • Have multiple licensee partners, split by region: For example, one manufacturer in India, a different company in South America. This would enable Nokia to rise alongside the growth of regional OEMs.

The choice of customers for Nokia’s licensing is the biggest risk with Nokia’s strategy. It will need to strike a balance between how best to maximize the commercial return for Nokia and ensuring the products meet the quality standards Nokia wishes to set.

Past efforts not successful

This is far from the first time Nokia has sought partners for a mobile devices strategy. Past efforts have not been successful. The Symbian venture over a smartphone OS ran into the ground amid bureaucracy and differing partner visions. Nokia failed to establish successful licensing of its Series 60 software. And, the Intel partnership with Meego was aborted after just one year in as Nokia switched to Microsoft. And, Nokia has only just extricated itself from the choice of Windows Phone.

Nokia must execute much better with licensing and mobile devices this time if it is to succeed. This is a different Nokia now, dominated by executives from Nokia Networks, but how different is the quality of new Nokia’s execution of mobile device strategy? We will see.

Microsoft should rest easy for now. Nokia has often had great strategy in the past and fallen down on execution. And, because of the terms of the Microsoft’s deal to acquire Nokia’s devices unit, Nokia is unable to license its brand for use on smartphones for two years post deal close. This period gives Microsoft sufficient runway to make its Lumia smartphones a success, if they are ever going to be.

(About the Author: Ian Fogg is the Director of Mobile Analysis at IHS Technology)

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