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Nokia Plots 2016 Return to Phone Market

By Ina Fried@InaFried
April 20, 2015, 3:00 AM PDT

Four years ago, Stephen Elop, Nokia CEO at the time, described Nokia as a man at the edge of a burning platform. While its rivals had set the phone market on fire, Nokia had poured gasoline on its own platform by failing to acknowledge newcomers Apple and Google had changed the game.

In hindsight, the “burning platform” memo can be seen as the prelude to the 2013 disposal of its once dominant mobile handset business to Microsoft in what many Finns considered a fire sale. The operation that made the candy bar phone as ubiquitous as the smooth black slate of the iPhone design is today was no more.

So it is surprising that Nokia is quietly plotting a return to the consumer mobile market.

As early as next year, the company aims to rejoin the phone market, two sources briefed on Nokia’s plans told Re/code. In addition, the company has a number of other ambitious technology projects, including some in the virtual reality arena, these sources said.

The move is driven by Nokia Technologies–the smallest of the three businesses that remained after the Microsoft deal, alongside its mapping and network equipment businesses. Nokia Technologies is best known for being the arm that licenses the company’s massive portfolio of more than 10,000 patents.

Unlike other patent houses that do little more than license intellectual property, Nokia Technologies has designed new products and licensed them to other companies. So far, these ambitions have been small in scale. The division has released just two products–an Android program called Zlauncher and the N1, an Android tablet design it licensed to another manufacturer that is selling it under the Nokia name in China. Its return to the market is likely to employ a similar tactic.

But insiders said those two products are just the beginning.

“They have a lot of great stuff in development,” said Richard Kerris, a former Nokia executive who also consulted for the company until last year as part of his last startup. “It gave me complete confidence that Nokia is a company that is not going away.”

While Kerris said he couldn’t go into specifics, he said people will be blown away if some of the stuff he saw comes to market.

Resurrection

In conversations with those close to Nokia and insiders, a very different different image emerges than the prevailing view of Nokia as technology roadkill.

Nokia has remained silent about its work as it waits out its contract with Microsoft that prevents it from selling any phones under the Nokia brand through the end of this year or licensing the brand for use in phones until at least the third quarter of next year. That has not stopped it from staging a comeback scheduled after its contract ends. And indeed the company has been staffing up and hard at work on products for next year and beyond.

Nokia Technologies operates out of four hotspots: Sunnyvale, Calif., Cambridge England along with the Finnish cities of Espoo and Tampere. Nokia Technologies grew out of the office of the chief technology officer under the old Nokia, the unit that helped incubate a number of technologies years before they were ready to be used in products. Even as Nokia’s core smartphone business devoted all its near-term focus on Windows Phone in recent years, the CTO’s office worked on other projects, including phones and tablets.

The unit last year brought on former Dolby Labs executive Ramzi Haidamus as its president and last week hired longtime Cisco executive Guido Jouret to be its chief technology officer.

Even if the Nokia name comes back to the phone business, don’t expect Nokia to launch huge new manufacturing operations. It just sold those to Microsoft and isn’t eager to replicate those.

Instead, the N1 serves as a model of what the company hopes to do: Design cool products and then license the designs and Nokia brand to a company that will not only do the manufacturing, but also be responsible for sales and distribution. It’s similar to the approach taken by Kodak and Polaroid after those companies emerged from bankruptcy.

While licensing the brand to someone else reduces cost, it also leaves the success of those products at least partly out of Nokia’s control.
Plus, the smartphone business is a brutally tough one and even companies pouring tens of millions of dollars per year into research and marketing have trouble standing out from the pack as Nokia has already learned the hard way. Developing cool product concepts is one thing, while committing the resources to make them successes in the market is quite another.

And it remains to be seen just how committed Nokia’s top leadership is to these projects. The unit has a history of creating products that haven’t seen light of day amid the considerable turmoil the company has had in recent years.

With its plans to buy Alcatel-Lucent and potentially sell its mapping unit, Nokia is essentially remaking itself as a provider of network equipment. While there is some logic in building a network and designing devices to ride on that network, it could decide that these other efforts are too far afield at any point and scale them back. Ericsson, for example, was once a big cell phone maker before entering into a joint venture with Sony and ultimately getting out of the business entirely.

For its part, Nokia corporate says it is business as usual for the technology unit in the wake of the Alcatel-Lucent deal, which it says has “a clear focus on incubating new technologies and sharing those technologies through an active licensing program.”

As for its future plans, Nokia promised it is “expanding into exciting new areas … with a focus on enabling the human possibilities of the connected world” but said it won’t have more to say on that until a later date.

http://recode.net/2015/04/20/nokia-plots-2016-return-to-phone-market/