Nokia Returns with Android Phones, But Is It Doomed to Fail?

If at first you don't succeed, try, try again. At least, that's what Nokia is thinking. The company today surprised the industry by announcing that it will "be returning to the worldwide mobile phone and tablet market" with new devices based on Android. But in another twist, the revived Nokia-branded phones will actually be made by a new, relatively unknown company, HMD.

According to Nokia's release, the Finnish company HMD global Oy will gain the exclusive rights to "create Nokia-branded mobile phones and tablets for the next ten years." Nokia would receive royalty payments from HMD for the sales of those devices.

HMD was created to "provide a focused, independent home for a full range of Nokia-branded feature phones, smartphones and tablets," and has agreed to buy from Microsoft the rights to use the Nokia brand on feature phones. That transaction is expected to close in the second half of 2016.

But don't get too excited by the promise of new Nokia phones just yet.

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Will Nokia Succeed?

The strategy to move towards Android has one big flaw. "The low-end Android market is now flooded with low-cost Chinese manufacturers," said Lynnette Luna, principal analyst at Current Analysis' consumer group. "It's a tough place to compete," she said.

Nokia has long had Android on its mind, according to a report by IHS Technology, but has not been able to return to smartphones "until this year due to a non-compete agreement it struck with Microsoft." The new arrangement with HMD as the sole licensee of the Nokia brand means the brand "is less likely to be abused," according to IHS.

While the Nokia name continues to be strong in the feature phone market, it has been waning for a long time in the smartphone world. Microsoft dumped Nokia in favor of Lumia for its 950 and 950 XL Windows 10 Mobile devices.

To pull this revival off, HMD and Nokia will have to work on branding. "I'm not sure that Nokia still has the brand cache it once had," said Luna. "HMD may have the low-cost manufacturing piece in place, but it will have to spend a significant amount on the brand to stand out in the crowd," she added.

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