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What’s Old is New Again; Nokia Hopes So

Remember when the hottest cellphones in the market were made by Nokia (NYSE: NOK). We watched it go by way of so many others in the wake of the iPhone made by Apple (NASDAQ:APPL) and devices powered by Android from Google (NASDAQ: GOOG).
(Google is now Alphabet and its ticker is GOOGL)

Well, you may be seeing Nokia devices back in the market, thanks to an agreement announced on Wednesday. Through a strategic brand and intellectual property licensing agreement, HMD global will be allowed to create a new generation of Nokia-branded mobile phones and tablets.

HMD global is a newly founded company based in Finland that is charged with providing the focus Nokia needs to start making devices again. Under the agreement, Microsoft (NASDAQ: MSFT) is selling the low end phone unit for $350 million. In 2014, Nokia was acquired by Microsoft for $7.2 billion. It took just a year for Microsoft to write Nokia off of its books, costing it to take a $7.6 billion charge.

The change is expected to be complete this year. HMD intends to invest more than $500 million over the next three years to support the global marketing of Nokia-branded mobile phones and tablets, funded via its investors and profits from the acquired feature phone business. Nokia will receive royalty payments from HMD for sales of Nokia-branded mobile products, covering both brand and intellectual property rights.

Nokia will need this help. While it dominated the smartphone market in the 1990s, it began to lose steam with the introduction of the iPhone and Android devices.

However, its troubles ran deeper than that, especially with rolling out products that consumers were not attracted to. Also, it failed recognize the importance of software, such as apps that run phones. It also didn’t accurately estimate how dominant smartphones would eventually become. While smartphones with apps were growing in demand, Nokia seemed to want to stick to developing phones with touchscreens, which were all the rage, was best. We see where that got the company.

Nokia was only cleared to enter the smartphone business at the beginning of the year. At that time, it answered rumors that it would deliver a smartphone this year through a brand-licensing model. It noted that the right path back to mobile phones was to allow that partner to manufacture and provide customer support for a product.

The question now becomes whether this deal will pay off for Nokia. Of course it boils down to whether HMD can actually pull off devices consumers will like? Consumers are so enamored with the mobile device leaders, it may be difficult.

For its latest quarter, Q1, Nokia reported an 8% year-on-year net sales decrease.
In reporting those earnings, it was that while the revenue decline was disappointing, the shortfall was largely driven by Mobile Networks, where the challenging environment is not a surprise. The company noted in its Q4 2015 earnings release that it expected some market headwinds in 2016 in the wireless sector.

After the announcement on yesterday, during intraday trading, Microsoft’s stock was up about .5%, while Nokia’s stock was up roughly 3.52%.

1 response to “What’s Old is New Again; Nokia Hopes So”

  1. But after crisis Nokia Company why your action on market is Not Close for more orses?

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