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How Much Brand Licensing Could Drive Nokia’s Future

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Smartphone licensing agreement

A few months back, Nokia (NOK) announced that it would be reentering the smartphone market. Nokia is licensing its brand to HMD Global, which will be manufacturing the smartphones in Vietnam.

Nokia exited the smartphone manufacturing business after the firm sold its devices business to Microsoft (MSFT) in 2014. Notably, BlackBerry (BBRY) announced a similar brand licensing agreement with various manufacturers in December 2016.

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Nokia’s new smartphone is expected to launch in September 2017. According to a research report from Investorplace, Nokia generates between $11 and $23 for every smartphone sold via licensing and patent fees. This indicates revenue of $1.7 billion for Nokia if HMD Global can sell 100 million smartphones next year.

Licensing revenue drove Nokia’s Technologies segment sales in 1Q17.

Competition from Apple and Samsung in the smartphone segment

Nokia will likely find it difficult to penetrate the already competitive smartphone market, where it will face competition from heavyweights like Apple (AAPL) and Samsung (SSNLF). Chinese manufacturers such as Huawei, Oppo, and Vivo dominate the smartphone segment in emerging markets like India and China.

At the end of 1Q17, Samsung led the smartphone market with a share of 22.8%, followed by Apple, Huawei, Oppo, and Vivo, which have shares of 14.9%, 9.8%, 7.4%, and 5.2%, respectively.

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