Nokia Name to Return to Smartphones in Bet on Brand's Power

Nokia said Wednesday it will license its brand to a Helsinki-based company run by former Nokia managers who aim to bring new mobile phones and tablets to the market. HMD Global plans investments topping $500 million (roughly Rs. 3,360 crores). Nokia won't have a financial stake in the venture, though it's set to collect fees from brand licensing and intellectual property.

The comeback effort is a bet that shoppers will remember and embrace a brand that almost disappeared with the sale of Nokia's handset unit to Microsoft Corp. in 2014. Nokia, which once dominated global smartphone sales, gets a risk-free second chance at a business that was crushed by Apple's iPhone and Google's Android devices introduced in 2007.

"It's going to take more than a well-known brand name in this competitive market," said Annette Zimmermann, an smartphone analyst at research firm Gartner in Germany. "To shake up the market and offer something that excites the fickle market will be difficult."

Shares of Nokia advanced 2.4 percent to EUR 4.65 as of 2:19 pm in Helsinki.

HMD is funded by a group of international private-equity backers through a fund called Smart Connect LP, as well as by HMD's management team. The venture will be run by Arto Nummela, a former Nokia manager and current head of Microsoft's Mobile Devices business for Asia, Middle East and Africa and its feature-phone business. Florian Seiche, also a former Nokia executive and current Microsoft manager, will be president at HMD.

The venture will make smartphones running Android, and also plans tablets and cheaper, so-called feature phones. FIH Mobile Ltd., part of Foxconn Technology Group, will help to build the devices.

Nokia and HMD will be trying to crack a tough market with Samsung, Apple and Huawei Technologies Co. dominating smartphone sales with about half of the total 334 million high-end phones shipped in the first quarter, according to data from researcher IDC.

The new venture also marks an exit from cheaper phones by Microsoft. As part of the arrangements announced Wednesday, Microsoft is selling its feature-phone assets to FIH and HMD.

When Nokia exited phones in 2014, Microsoft acquired rights to use the Nokia brand in smartphones for two years, though it has already stopped using it.

Since the deal completed in 2014, Nokia has been getting most of its revenue from wireless network equipment and related software and services.

© 2016 Bloomberg L.P.