Nokia disposes of Withings and yet another Technologies President

Nokia has indicated that Gregory Lee’s main job was to get rid of Withings, so now that process is complete he’s moving on.

When Lee was poached from Samsung Electronics North America less than a year ago the messaging was that his consumer electronics expertise would take Nokia’s re-entry into the consumer space to the next level.

“Gregory’s passion for innovation and operational excellence, along with his proven ability to build and lead global consumer technology businesses, make him well suited to advance Nokia’s efforts in virtual reality, digital health and beyond,” said Nokia CEO Rajeev Suri at the time.

Withings, which had only been acquired the previous year, was clearly meant to be a cornerstone of this consumer tech effort, so imagine Lee’s dismay when, at the start of this year, Nokia announced it was ‘reviewing strategic alternatives’ for its digital health division. By the start of this month that process concluded flogging it back to the bloke they bought it from was the best strategic alternative, which kind of called Lee’s position into question.

“Gregory came to Nokia, made a clear-eyed assessment of our consumer business and incubation activities, and took the bold decision to refocus Nokia Technologies on licensing,” said Suri. “As part of that effort, he assessed strategic options for Digital Health, which led to the sale of that business. Given that, we have agreed that his work at Nokia is done. He leaves the company with my great appreciation and thanks.”

So the official line is that the guy they brought in to head up its consumer tech business quickly concluded Nokia shouldn’t be in the consumer tech business. OK, fair enough, but that’s a pretty strange narrative. A simpler explanation would be that, by the end of 2017, Nokia realised (once more) that it couldn’t hack it as a standalone devices player and that Lee just had the misfortune to be in the wrong place at the wrong time.

Nokia’s confusion about what to do with the devices IP it kept hold of when it flogged the handset division to Microsoft seems to have manifested itself in turmoil at the top of the Nokia Technology division. Ramzi Haidamus was brought in from Dolby in 2014, oversaw the brand licensing idea, but cleared off after two years, just after the acquisition of Withings, indicating he maybe disagreed with the move.

They then brought in Brad Rodrigues, but only ever named him as ‘Interim President’ of Nokia Technologies and he lasted a year or so before moving on not long after Lee came on board. Now, were told, current Nokia Chief Legal Officer Maria Varsellona has been handed this poisoned chalice, a move that makes sense if the division is reverting back to patent trolling, which seemed its most likely strategy from the start.

We all make mistakes. Nokia thought it could re-enter the devices market in a narrower, more targeted way through Withings and at the same time position itself to capitalise on consumer IoT when it starts to take off. It then had to be reminded the hard way that devices are no longer a core competence and Lee has been unfortunate to be at the helm during that process.

Nokia set to sell Withings back to its founder

Having indicated it wanted to get out of the digital health game earlier this year, Nokia is selling Withings back to the bloke it bought it from.

Éric Carreel is one of the founders of Withings and he seems to have held on to much of the cash he trousered when Nokia bought his company two years ago for €170 million. Nokia isn’t revealing how much he’s buying it back for but, since it’s been on the market for 2-3 months it seems safe to assume he bought it back at a significant discount.

Nokia isn’t saying much about this clear strategic failure, which is understandable, merely reiterating the established party line. “The planned sale is part of Nokia’s honed focus on becoming a business-to-business and licensing company,” said the announcement. In other words, we got a bit carried away with diversification but now we’ve learnt our lesson. At the time the move seemed intriguing, given Nokia’s rich devices heritage, but that ship has clearly sailed.

There seems to be a fair bit of this kind of contrition about these days. Yesterday Cisco bailed on its video services business and Ericsson has been attempting a similar move with its TV efforts for a while. The current corporate fashion seems to be to double down on your core competence, which seems sensible.

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Nokia seems to have given up on digital health

Finnish networking vendor Nokia has announced a strategic review of its Digital Health business, which is usually a sign that it wants to get rid of it.

“Digital Health’s business portfolio includes consumer and enterprise products, and it manufactures and sells an ecosystem of hybrid smart watches, scales and digital health devices to consumers and enterprise partners,” said the short announcement. “The strategic review of the Digital Health business may or may not result in any transaction or other changes.”

Essentially Nokia is admitting that its 2016 acquisition of digital health company Withings for €170 million has failed. At the time it seemed intriguing, since Nokia had recently bailed out of the devices game by flogging its phone business to Microsoft.

The charitable assumption was that the failure of Nokia smartphones was a one-off due to the sudden arrival of iOS and Android, and the people who dominated the mobile phone market for so long could replicate that performance with wearables and other digital health devices. On top of all this latent device expertise would be all manner of synergies with the networking and IP licensing side.

In hindsight this was either a fairly ill-considered attempt to diversify or a classic example of failed integration or most likely a combination of the two. There is usually very little overlap between the people who conduct M&A and those in charge of integrating the acquired company and, more importantly, realising all the lovely synergies that looked like such no-brainers during the acquisition due diligence.

The whole point of moving out of devices and doubling down on networks with the acquisition of Alcatel-Lucent was supposed to be to transform Nokia into a 100% B2B business. Even the Nokia consumer brand existed only in the form of licensing agreements with the likes of HMD, and even the mapping business in the form of HERE was deemed to peripheral to Nokia’s core competences.

So, again in hindsight (which as we know is always 20-20), a move back into devices, with a B2C element, ran contrary to pretty much every strategic move Nokia had made in the preceding years. No wonder, then, that the integration failed. Who were the Withings sponsors at the Nokia top table? Where was the budget to follow through on the acquisition and make Nokia a digital health market leader? How much device expertise was left after the Microsoft sale?

Today’s announcement is the culmination of a process that, in hindsight, was very much underway four months ago, when Nokia recorded a €141 million charge due to ‘the impairment of goodwill related to its digital health business.’ Essentially Nokia wrote-off the vast majority of the Withings acquisition and is now making a public show of trying to recover whatever residual value it can on behalf of its shareholders.

Microsoft will be crying crocodile tears at this M&A failure, having written down the entire $7.6 billion it paid Nokia for its handset division a few years ago (Nokia’s current market cap is only 4-5 times that amount). Compared to that the Withings misadventure is a minor one, but probably signals an end to Nokia attempts to diversify away from networking for the foreseeable future.