Nokia plans to return to the handset market in 2016 by licensing its brand

Nokia (NYSE:NOK) CEO Rajeev Suri confirmed the rumors that have been swirling around the company for a few months, and said that next year the company will re-enter the mobile phone market by licensing its brands and designs.

"We will look for suitable partners," Suri said in an interview with German publication Manager Magazin. "Microsoft makes mobile phones. We would simply design them and then make the brand name available to license."

The decision by Nokia, first rumored in April, could put it in direct competition with Microsoft (NASDAQ: MSFT), which acquired Nokia's devices and services business in April 2014.

Nokia sold its handset business to Microsoft in April 2014 but still holds onto more than 10,000 patents, many related to mobile phone technologies. Indeed, Nokia has already made forays into handsets since the Microsoft deal. It currently offers the Z Launcher app on the Google Play app store that lets users scribble a letter or two to find their content more quickly. Over time, Nokia has said, the Z Launcher learns what applications are in use, and predicts and highlights the applications consumers are expected to want based on time of day and location.

When Microsoft officially acquired Nokia's devices business last spring, Microsoft was only licensed to use the Nokia name on Lumia Windows Phone smartphones for 18 months after the deal's closing. Microsoft can use the Nokia brand name on feature phones for 10 years. Microsoft has dropped the Nokia name from its Lumia smartphones.

As part of the transaction, Nokia agreed not to license its brand for mobile phones until the fourth quarter of 2016. It's unclear if Nokia will solely license its brand and designs for Android phones or for Windows phones as well.

Ramzi Haidamus, president of Nokia Technologies, recently told Re/code that the company wants a true partner that will use its brand in a way that reflects the image the company wants to send out to the world. Haidamus stressed Nokia would not make a deal or push back its plan to get back into phones if it cannot find the right partner.

"Market-share logic suggests Nokia will develop Android-based devices skinned with Finnish design finesse and bearing the famous blue logo. They could also include some innovations currently hidden away in Nokia lab vaults across the globe," analysts from research firm CCS Insight wrote in a blog post. "This supplier approach is a twist on being an original design manufacturer. The phones aren't white-labeled goods but rather blue-labeled devices. A company interested in springboarding into the smartphone industry with an established brand could suddenly become a Nokia."

They also wrote that there is a "temporary feel to this strategy and the company can adjust its value-chain roles and product portfolio depending on market success."

Microsoft, meanwhile, has been pushing entry-level and mid-range Windows phones in an effort to boost Windows Phone's market share, which stands at around 3 percent in the U.S., according to comScore, and 2.7 percent globally, according to IDC. Verizon Wireless (NYSE: VZ) said it will launch the Lumia 735 for around $200 with a contract while AT&T Mobility (NYSE: T) will soon launch the Lumia 640 XL. Microsoft has also pledged to release a flagship Windows phone later this year, which could help spark interest in the platform.

Microsoft shook up its leadership team and devices chief Stephen Elop is leaving the company in the reshuffling. Elop, a Microsoft executive who had been CEO of Nokia, returned to Microsoft when the software giant completed the Nokia deal.

Even though Microsoft has already announced plans to cut around 12,500 former Nokia workers, Microsoft CEO Satya Nadella said in April that "we need to take further action to reduce our costs across devices as we execute on our Windows 10 first-party hardware plans."

For more:
- see this Manager Magazin article (translated via Google Translate)
- see this Reuters article
- see this The Verge article
- see this Re/code article
- see this separate Re/code article

Related articles:
Microsoft devices chief Elop to leave company in executive shakeup
Nokia revises long-term strategy in patent-licensing unit, will cut jobs as a result
Report: Nokia could re-enter handset market via brand licensing next year
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