Summary Bullets:
- Focused on digital health, digital media and technology licensing, Nokia Technologies includes some of the vendor’s most exciting, speculative businesses.
- With new scale and a solid financial footing, making bets on new businesses makes sense for Nokia. But how long can it sustain those bets?
Two weeks ago, Nokia held its first analyst conference following the acquisition of Alcatel-Lucent. It was an opportunity for the vendor and its executive ranks to deliver an update on its strategy and messaging across the breadth of its product and solution set. That update resulted in new assessments of Nokia’s Service Enablement, IP Services Infrastructure and Fixed Access strategies. It also provided new insight into the vendor’s Nokia Technologies business – all while highlighting a potential conflict between Nokia Technologies and broader corporate demands.
Where its Networks business contains the fixed access, mobile access and IP networking gear that Nokia (and ALU) is most commonly associated with, Nokia Technologies represents the vendor’s technology licensing and advanced technologies business. It’s where the company looks to exploit existing assets (like the Nokia handset brand) and build new businesses. Take two of the business’ core components.
- OZO, the virtual reality (VR) camera built for professional use cases, and the core of Nokia Technologies’ Digital Media practice.
- Withings, the connected health and wearables/IoT vendor that will comprise the core of Nokia Technologies’ Digital Health practice once the acquisition is completed.
Wearables and VR might seem like strange, unfamiliar spaces for Nokia. To be sure, they represent “bets” on spaces that could help to grow the vendor’s addressable market. And whether or not those bets pay off, the logic behind the business is easy to grasp. Along with the investments being made by Nokia Venture Partners, it helps to paint Nokia as an innovator and technology leader, an image the company can afford to invest in now that its finances are (somewhat) solid. It could help to generate significant new revenues if these businesses are successful. Even if those revenues never materialize, the businesses Nokia Technologies engages in could give Nokia insight into the types of traffic these emerging applications will generate – insight it will need if it intends to remain relevant as a networking vendor.
By its nature, Nokia Technologies is a somewhat forward-looking business. But how did Nokia get to a place where it could invest in this type activity? It got there thanks to focus: Focus on a core set of business and product activities, and as important, focus on profitability. In his opening keynote, CEO Rajeev Suri spoke to this focus when he discussed the continuing need to evaluate the profitability of every Nokia business, and the fact that Nokia would only remain in businesses where it could be a top three player.
What does that say about new businesses outside of Nokia’s traditional purview? Is the value of these businesses in the insights they bring or their financial performance? How long can the insights be important if the business isn’t top three? At what point should customers worry about the longevity of a business? How can a vendor demonstrate the value of insights? Perhaps just as importantly, how can any vendor (Nokia or otherwise) ensure that new ventures don’t become distractions to their core business (think Cisco’s ill-fated acquisition of Flip)?
With new vigor, it’s understandable for Nokia to show a little confidence and invest to grow its business. Growth areas, however, can be quick business casualties if they don’t show results – especially if C-suite messaging doesn’t help and telegraph a firm, long-term commitment.