Author(s): Raghu Gopal
This week Nokia, the Finnish manufacturer of telecom equipment and former handset giant, announced it would acquire Withings for €170 million ($192 million). Withings is a French start-up that established itself as an innovator of Internet-connected wellness devices, such as bathroom scales and blood-pressure monitors. Withings isn't yet a widely recognised household name, but many early adopters know the brand well.
The acquisition could cleverly allow Nokia to exploit its own brand, which was synonymous with reliable, trustworthy devices and is still fondly remembered by an older demographic that might be more receptive to health-related products. At €170 million it is a relatively low-risk purchase compared with some of the eye-watering sums that have been paid for small tech businesses recently. A few of Nokia's rivals may regret missing out. A good example is Sony, which has also stated it wants to push into the Internet of things with healthcare-related products.
Nokia has made no secret of its desire to target such an opportunity. CEO Rajeev Suri commented that the Withings acquisition would strengthen Nokia's "position in the Internet of things in a way that leverages the power of [the company's] trusted brand".
Not long ago, Nokia was the world's dominant handset maker, before its market share faded and it sold its phone unit to Microsoft in 2014. Since then, Nokia has focused on its network infrastructure business, but occasionally the company comes along with the unexpected — like the time it unveiled a €55,000 virtual reality camera. But as a case study on how quickly things can change, Nokia went from being one of the world's top consumer-electronics brands to a company focused almost entirely on infrastructure for other consumer-facing firms. Nokia's acquisition of Withings comes at a time when connected healthcare could become a big opportunity, with mounting appreciation of and demand for personal wellness (or well-care as Nokia terms it).
Withings was founded in 2008 and was among the first companies to see potential in connecting personal healthcare products to the Internet. Over the years, Withings expanded its portfolio of connected devices to include smartwatches, fitness trackers, thermometers, blood-pressure monitors, sleep-quality sensors and baby monitors. The company's first activity-tracking wearable, the Pulse, was launched in 2014.
The deal adds momentum to Nokia's broader plans to resume designing and manufacturing a greater range of consumer electronics. It propels Nokia directly into the competitive market for connected healthcare and is another example of a fitness start-up being absorbed by an established tech company. Nokia claims Withings will benefit from its extensive technology expertise in sensors and it will undoubtedly find Nokia's portfolio of over 100,000 patents a valuable defence in the event of intellectual property disputes.
History shows that integrating a small, agile business into a large corporate entity is fraught with risk. In an effort to address this, Withings CEO Cédric Hutchings will lead the business within Nokia Technologies. He will also take control of about 100 Nokia engineers, providing much-needed resources to expand the portfolio of devices and services.
It will be interesting to see how successful Nokia is with Withings. The Finnish company must be aware of how the market has developed for companies like Jawbone and Fitbit. There was excitement, and then there were market realities. With Withing's range of gadgets, Nokia is positioning itself to enter the markets for wearables and the connected home. But consumer-centric devices can be short-lived opportunities, frequently burning out as margins quickly disappear. If Nokia can pivot the business toward personal medical devices it can use its resources to reinvent itself into something new.
There's also a touch of nostalgia here, reminding long-time Nokia fans of how that Nordic company can reinvent itself when called upon to do so. It certainly raised a smile in the CCS Insight offices to think that a Nokia product is now on sale in Apple stores.