Dropping the Nokia brand name will be 'risky'
The terms of the deal for Microsoft’s £4.6bn purchase of Nokia strongly suggest the former company plans to phase out the latter’s branding on future smartphone releases, a move that could be “risky” if the business wants to make Windows Phone a true contender to Apple and Google.
As part of its purchase, Microsoft will acquire the Asha and Lumia device name brand trademarks, while Nokia will continue to own and manage the Nokia brand. The “Nokia” mark may only be used by Microsoft on “current Nokia mobile phone products”, according to the terms of the license agreement.
Matthew Sammon, partner at patent and trademark attorneys Marks & Clerk LLP, explains if Microsoft was not planning to phase out the Nokia brand, it would have acquired the trademark because the licensing agreement will have a time limit on how long Microsoft can use the Nokia brand name after the deal completes.
Sammon adds: “The Nokia brand has been licensed for now so Microsoft can advertise the tie-up between the two companies: Microsoft with the reputation for software and Nokia with the strong hardware aspect. It gives them time to integrate.”
Microsoft’s challenge in numbers
If Microsoft is to go it alone in its bid to take on the likes of Apple and Samsung in the smartphone market, data suggests it faces an uphill struggle. For a start, its Windows Phone software represents just a 3.3 per cent share of the global smartphone market, while Apple’s iOS and Google’s Android software make up more than 90 per cent, according to Gartner data for the second quarter of 2013.
In spite of Nokia’s recent struggle to turnaround its losses and maintain its share of the smartphone device market, consumer perception of the brand - in the UK at least - is far more positive than that of Microsoft’s Windows Phone.
Nokia’s Index score on YouGov’s BrandIndex tracking data - an average of a brand’s quality, value, satisfaction, recommendation, reputation and impression in the eyes of the consumers YouGov polls - has consistently been higher than that of Windows Phone for some time and now ranks second only to that of Samsung.
Nokia’s Index score sits at 31.8 compared with Windows Phone at 3.4, according to the most recent data collated on 2 September, according to an average of the polls collected over four weeks.
Microsoft’s marketing “dilemma”
Ben Wood, chief of research at CCS Insight, says Microsoft will now face “a massive dilemma” in deciding which brand will lead its integrated mobile hardware and software push going forward: Windows Phone, the relative newcomer, or Nokia, which has been manufacturing phones for decades.
He adds: “There has been a lot of tension between Microsoft and Nokia about which brand leads first [in advertising Lumia Windows Phones] as before it was very clear that Lumia was ‘powered by Windows Phone’ as it didn’t want to just become a Windows Phone as another competitor could come in and sell cheaper devices and erode its market share.
“One of the biggest issues with Microsoft is awareness [of its mobile products] and one of the crucial factors now will be marketing. There needs to be a clear and defined message backed by an enormous amount of money to raise awareness of Windows Phone as an alternative to Apple and Samsung - not just as an operating system.”
To phase out the Nokia brand altogether would be a “risky”, according to Annette Zimmerman, principal research analyst at Gartner, who says such a move “would make no sense” in the near future.
She says: “I think it would be risky in any market outside the US where the Nokia brand has not been strong, even with the Microsoft partnership. In other markets I would be careful, especially in Nokia’s lower end phone business where the Asha brand is strong in emerging markets like India, Africa and countries in the Middle East. People buy a Nokia phone as they are careful with their money and want to buy a durable device - they can’t just afford to buy a junk phone.
“The Nokia brand still has a high value to people. That doesn’t mean the Microsoft brand is not known - but what does it mean to people?”