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Can Nokia’s New Smartphone Drive Revenue Growth?

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Nokia 8 launch

Nokia (NOK) recently announced the launch of Nokia 8, its first device in partnership with China’s (FXI) HMD Global. A few years back, Nokia exited the smartphone business, as it was losing market share to more technologically advanced manufacturers such as Apple (AAPL) and Samsung (SSNLF). Nokia has licensed its brand to HMD Global and manufactures smartphones in Vietnam. Similar to Nokia, BlackBerry (BBRY) also outsourced its handset business to manufacturers in India, Indonesia, and China.

In the current smartphone space, Nokia faces competition from China’s Huawei, OPPO, and Vivo, which account for over 20% of the global smartphone market. Nokia has however priced its smartphone at a higher ASP (average selling price) than these manufacturers.

The Nokia 8 has several features such as dual-sight video where customers can stream videos using the front and rear cameras with a simultaneous split screen.

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Licensing revenue rose YoY in 2Q17

In the above table, we can see that Nokia technology revenue rose 90% YoY (year-over-year) to 369 million euros in 2Q17. This business segment generates revenue through patent sales and licensing. Profits rose over 150% YoY for this segment in the last reported quarter.

In May this year, Nokia signed a licensing agreement with Apple, and according to this contract, Nokia will supply network infrastructure products to Apple. Apple, in turn, will restart the sales of Nokia’s digital health devices in its online and retail stores. Nokia also has a licensing deal with Xiaomi and expects to realize income from this deal in 4Q17.

While the Nokia 8 will be available in major markets by the end of October 2017, analysts expect marginal revenue growth for the firm over the next few years. Analysts seem to think that while Nokia Technologies might be able to offset revenue declines in other business segments, the firm’s licensing revenue will aid in overall revenue growth for the firm.

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