Nokia is setting sights on wearables market

Posted on April 28, 2016

ABOUT A DECADE after Apple, Inc.’s iPhone first hit the market, Nokia Oyj is seeking to relaunch its consumer business with health bands and connected scales by acquiring French start-up Withings SAS. It’s out to revive a brand that was once one of Europe’s most valuable, but has slipped further as Nokia sold its phone business to Microsoft Corp. two years ago to focus on telecommunications networks.

The Withings Activite Pop smart watch is displayed during the CES Unveiled press event ahead of the 2015 Consumer Electronics Show in Las Vegas, Nevada, US on Sunday, Jan. 4, 2015. -- Bloomberg
“The longer you’re out of a market, the more your brand value declines,” Ramzi Haidamus, who heads the Nokia Technologies unit from San Francisco, said in an interview in Paris. “Today, we’re coming back to consumers’ hands -- we’re inverting that decline.”

Nokia said Tuesday it’s buying Withings in a deal that values the start-up, based near the French capital, at 170 million ($192 million). Withings, which has about 200 employees, doesn’t disclose financials. The Nokia brand was worth 3.2 billion at the end of last year, and the company re-evaluates that estimate each year in its accounts, Mr. Haidamus said.

“Studies show us Nokia is a trusted brand,” Mr. Haidamus said. “So it’s very compatible with health.” Nokia said it’ll decide on re-branding Withings’ products when the transaction closes in the third quarter.

Sales of wearable consumer devices such as health bands will make up $32 billion in sales by 2019, about three times the 2013 level, according to a report by researcher IHS.

Nokia’s brand value topped out at ninth globally in 2008 at $33 billion, plummeted to $2 billion in 2014 and has since rebounded a bit to $3 billion this year, but still falls outside the top 500, according to data from Brand Finance.

Since selling its mobile-phones unit to Microsoft, Nokia Technologies has focused mostly on licensing patents. It dipped a toe back into the consumer segment with an Android-based tablet built by Foxconn Technology Group and unveiled in 2014, and started advertising a virtual-reality camera for professionals last year.

Mixed trends on the network side of its business may have given Nokia extra motivation to make a consumer-focused comeback and seek new revenue. Phone carriers have spent billions in recent years on faster wireless networks, but with much of the networks already built, investments are expected to slump by 7% this year and another 5% in 2017, according to predictions by Deutsche Bank AG.

Meanwhile, Nokia’s phones have fallen off the map. Microsoft in July unveiled plans to cut jobs and write down about $7.6 billion on its mobile unit, wiping out nearly the entire value of a business that failed to gain market share since it was acquired. Microsoft’s Windows Phone software still commands less than 5% of the market for mobile operating systems, according to researcher IDC.

“In its golden years, Nokia built a great brand in the mobile telephone market,” IHS Analyst Antonios Maroulis wrote in a note. “Nokia still believes its brand holds value and has maintained trust, despite all of the calamities that ensued since Windows Phone.” -- Bloomberg