Nokia Corp (ADR) (NOK): Digital Health Is THE Next Frontier

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Nokia Corp (ADR) (NOK) exited the consumer electronics business in 2014 when it sold its Devices & Services unit to Microsoft Corporation (MSFT). Now the company has announced it is returning to the consumer market, but this time it’s — wisely — avoiding the smartphone quagmire.

Nokia Corp (ADR) (NOK): Digital Health is THE Next Frontier

Source: Withings

Instead, Nokia is going after the increasingly popular health and fitness wearables segment, and rather than start from scratch, it’s buying France’s Withings to hit the ground running.

Nokia put out a press release, announcing its plan to acquire Withings in a deal worth $170 million Euros, or roughly $195 million. The company had this to say about the purchase:

“Withings shares our vision for the future of digital health and their products are smart, well designed and already helping people live healthier lives … Combining their award-winning products and talented people with the world-class expertise and innovation of Nokia Technologies uniquely positions us to lead the next wave of innovation in digital health.”

What Withings Brings to Nokia

You may not have heard of Withings, but the French company has a strong presence in the health and activity tracker market, where it is considered one of the early pioneers; it has been focused on the connected health market since releasing its first product in 2009.

Withings has also released several smartwatches, and while it has never been dominant, in 2014 it was estimated to have 4% of the smartwatch market.

Its products — including the Go, Pulse O2, Activité smartwatch and Smart Body Analyzer connected scale — are carried by popular retailers like Best Buy Co Inc (BBY) and generally fare well in reviews. The company also sells “smart” blood pressure monitors, thermometers, sleep monitors and other health-related connected devices.

Smartphones vs. Health & Fitness

When you hear the name Nokia, chances are you still think of phones — after all, the company was the world’s biggest seller of mobile phones until Samsung (SSNLF) dethroned it in 2012. While the terms of Nokia’s sale of its Devices & Services unit (including Lumia smartphones) to Microsoft allow the company to return to selling smartphones in 2016, why would it?

The smartphone market is mature and ruthlessly competitive. Chinese manufacturers are aggressively developing high-quality, low-price smartphones and the only company making big money from smartphones — Apple Inc. (AAPL) — saw its quarterly revenue decline for the first time since 2003 as iPhone sales decline.

Why jump into a market where competition is horrific, prices are under pressure and sales are plateauing? Especially when you’ve already been killed there once before …

The Wearables market is just starting to explode. IDC stats have the sales of wearables increasing by nearly 172% in 2015, and the expectation is that this is just the start of the curve. Leading those sales are health and fitness trackers.

While tech giants like Apple and Samsung are making waves, they do not yet dominate the way they do with smartphones.

Smaller companies like Fitbit Inc (FIT) are still market leaders, while dozens of independents like Pebble — and Withings — are still in the game. And outside of the wearables themselves, the rush to develop smart health devices like blood pressure monitors and scales, along with connectivity to medical services is in the early stages, but also shows great potential.

In other words, if Nokia is looking for a return to the consumer market, digital health is a smart choice.

Buying Withings doesn’t grant Noki immediate frontrunner status as it would if it bought a company like Fitbit, but it also cost just $195 million as opposed to the $4 billion or so Fitbit would command.

For $195 million, Nokia hits the ground running with an established product line and an established retail presence that covers virtually every aspect of connected health, from basic fitness trackers to home health accessories and a premium smartwatch.

Combined with its networking know-how, design chops and considerable patent portfolio, the company might just be able to pull off a semblance of its former glory, but this time the Nokia-branded gadget will be on your wrist instead of in your pocket.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2016/05/nokia-withings-nok/.

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