Nokia is getting back into the device business.
Piggybacking on Microsoft’s sale of its feature phone business to Foxconn’s FIH Mobile and new company HMD Global, Nokia announced a licensing agreement with HMD to create Nokia-branded mobile phones and tablets.
Under the terms of the ten year deal, HMD will pay royalties to Nokia Technologies for the sales of Nokia-branded mobile products. The agreement covers both brand and intellectual property rights, Nokia said.
The deal will also see Nokia Technologies take a seat on HMD’s Board of Directors and set mandatory brand requirements and performance related specifications to ensure the quality of the Nokia brand.
Nokia Technologies president Ramzi Haidamus said the agreement marks the start of an “exciting new chapter for the Nokia brand.”
“Instead of Nokia returning to manufacturing mobile phones itself, HMD plans to produce mobile phones and tablets that can leverage and grow the value of the Nokia brand in global markets,” Haidamus said. “Working with HMD and FIH will let us participate in one of the largest consumer electronics markets in the world while staying true to our licensing business model.”
The announcement came alongside news from Microsoft on Wednesday that it is selling “substantially all” of its feature phone assets to FIH Mobile and HMD Global.
Nokia said HMD has conditionally agreed to acquire from Microsoft the rights to use the Nokia brand on feature phones and certain related design rights. FIH said it will acquire the remainder of Microsoft’s feature phone business assets, including manufacturing, sales and distribution.
Current head of Microsoft’s global Feature Phones business and former Nokia executive Arto Nummela will take over as CEO of HMD once the deal closes.
The transaction is expected to close in the second half of this year.
Nokia said an additional agreement with FIH will give HMD full operational control of sales, marketing and distribution of Nokia-branded mobile phones and tablets, with exclusive access to the pre-eminent global sales and distribution network FIH is acquiring from Microsoft.
According to Nokia, HMD’s new smartphone and tablet portfolio will be based on the Android operating system. Over the next three years, Nokia said HMD plans to invest more than $500 million to support the global marketing of Nokia-branded mobile phones and tablets.
“We will be completely focused on creating a unified range of Nokia-branded mobile phones and tablets, which we know will resonate with consumers,” Nummela said. “Branding has become a critical differentiator in mobile phones, which is why our business model is centered on the unique asset of the Nokia brand and our extensive experience in sales and marketing. We will work with world class providers in manufacturing and distribution to move quickly and deliver what customers want.”
Nokia’s move back into the device space follows confirmation from Nokia CEO Rajeev Suri last summer that the company was looking to do just that once provisions in its partner agreement with Microsoft allowed it to do so this year.
At the time, Suri told Germany’s Manager Magazin “Microsoft makes mobile phones. We would simply design them and then make the brand name available to license.”