Nokia’s Licensing Its Name To Microsoft, But It’s Free To Keep Building Hardware, And Could Even Dial Up To Mobile Devices Again By January 2016

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Amidst the “sadness” of today’s news that Nokia would be splitting up, selling its Devices & Services division to Microsoft for $7.2 billion, there is a little silver lining for the Nokia fanboys in the house. As part of the €1.65 billion ($2.2 billion) licensing deal (which also includes “reciprocal rights related to HERE services”), Nokia gives details of how Microsoft will license Nokia’s brand. The description indirectly indicates that Nokia may still end up making hardware sooner rather than later, and it may even go so far as to start producing mobile devices again in 30 months, by January 2016.

The note (emphasis mine):

“Microsoft has agreed to a 10 year license arrangement with Nokia to use the Nokia brand on current Mobile Phones products,” the note reads. ‘Mobile Phones’ is Nokia’s term for its non-smartphone devices, which it calls ‘Smart Devices.’ Nokia continues: “Nokia will continue to own and maintain the Nokia brand. Under the terms of the transaction, Microsoft has agreed to a 10-year license arrangement with Nokia to use the Nokia brand on current and subsequently developed products based on the Series 30 and Series 40 operating systems. Upon the closing of the transaction, Nokia would be restricted from licensing the Nokia brand for use in connection with mobile device sales for 30 months and from using the Nokia brand on Nokia’s own mobile devices until December 31, 2015.

What we have here is some license to use the Nokia brand for the next 10 years, but also a gradual phasing out of it: Microsoft, it has been noted, is buying outright the Lumia and Asha brands. But when it comes to the Nokia name, it has signed a license to use it only on lower end devices built on Series 30 and Series 40 operating systems. (Asha is based on Series 40, so it’s not clear whether those will fall into this category.) That effectively makes it sound like the Nokia brand will not be attached to new smartphones and higher-end feature phones produced by Microsoft. As for how “Nokia” may get used in those S30 and S40 mobile phones, that’s not specified: it could be on the devices, but it could just be in how the phones are marketed.

On the other side of the bargaining table, we have an interesting loophole for Nokia here. First of all, Nokia has, elsewhere in the company, a business left in which it will be licensing patents. You can see where it might use that channel to license its brand as well — right away if the device is not a mobile device, and in 30 months if it is for a mobile device. (Eau de Nokia aftershave, anyone?)

More interestingly, there is no restriction on Nokia itself using the name on non-mobile devices of its own from the day after the deal comes into effect. And after December 31, 2015, Nokia will be free to make its own mobile devices once again, under its name, if it so chooses.

There is a lot still left at Nokia that can make its way into a mobile device or a gadget of another sort. Through all of Nokia’s thousands of layoffs, closure of Symbian and adoption of Windows Phone, the company has kept plugging away at new technologies and thoughts about how it might apply them, and in an optimistic frame of mind, this could point to some exciting things:

“There will be all kinds of devices over time, and it might not be what you think of as handsets today,” noted David Wood, the co-founder of Symbian who is no longer with the company. “Who knows what will be interesting in the longer timescale? With innovations around wearable computing like Glass from Google, Nokia may want to get into some of this eventually.”

“Our current CTO organization has research on-going in a number of areas, not all of which are public, but which could give opportunities for new Nokia or partner products which would not conflict with this. We’re now beginning the detailed strategic planning for the new Advanced Technologies business, built on many of the activities from our current CTO and IPR organizations and expect to share more of our detailed strategy by the closing of the transaction,” a spokesperson tells me.

Of that CTO office, recent Nokia alum Wood describes the team as “very bright people who have now learned their lessons about how a company that was once cutting edge can fall into being risk averse.”

He points to innovations with touchscreens, augmented reality and more that languished in the labs for fear of cannibalizing a then-successful business. Natasha notes that some of the areas that Nokia has been exploring in its Advanced Technologies division include research into the carbon-based graphene, nano technology and flexible displays — and that’s only the stuff that’s been made public. In other words we may well see devices, and mobile devices, come from Nokia, but not as we know them today.

That’s right, old Nokia may go back to its innovative, disruptive roots. Considering its current smartphone share is only 3%, it’s a brand really with nothing to lose.

The disparity between a 10-year license and the 30-month mobile device restriction raises questions, too. Assuming that Microsoft doesn’t necessarily want to create confusion in the market, it’s curious that they would sign a long-term deal for the rights to a name, but then basically let Nokia use the name however it wants after 30 months. Perhaps it doesn’t have the intention of holding on to that license (as in, it may sell it on) for 30 months, either because it will discontinue that business, or because it will be looking for a buyer for those assets — one way that it might make $600 million in cost synergies through the deal.

And what happens to all of the above if the deal falls through, failing to pass regulatory or shareholder approval? Business as before, it seems, with an additional break fee for Nokia: “The transaction is subject to potential purchase price adjustments, protecting both Nokia and Microsoft, and a $750 million termination fee payable by Microsoft to Nokia in the event that the transaction fails to receive necessary regulatory clearances.”

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