Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

I'm pretty sure Cher Wang won't listen to my advice.

But if anyone happens upon the founder and chairwoman of HTC Corp., perhaps you can suggest she give Florian Seiche a call.

Seiche once worked for Wang as head of HTC's European business before heading to Nokia Oyj. Now he's president of HMD Global Oyj, a Finnish startup that has an exclusive 10-year licensing deal to make handsets under the Nokia name.

HMD's dream is to "create a new generation of Nokia-branded mobile phones." Importantly, that includes both feature phones -- those old-style handsets with keypads -- and smartphones running Google Inc.'s Android operating system.

Pushing the Finnish brand is a mission HMD has taken over from Microsoft Corp., which wasted $7.5 billion proving what the rest of us already knew: that buying Nokia as a way to push its own operating system was doomed from the start. It's not that Windows Mobile wasn't good, it's just that Microsoft was more like the guest who turned up late with a six-pack of beer when the party had already moved on to tequila shots. Bringing pint glasses doesn't make people more likely to drink your beer, even if it is a micro-brew.

HMD is betting that now the Nokia brand is finally freed up to run whatever operating system the market wants, the company will have a good chance of tapping into nostalgia for what was once the world's most iconic name in mobile phones. Nokia-branded Android handsets will have to wait until early next year, yet right out of the blocks HMD gets the feature phone business, which includes global name recognition, reach and distribution. While many in developed markets may have forgotten Nokia, the name is still known and respected in Africa, Latin America and parts of developing Asia.

That's precisely what HTC needs. 

There's no denying the feature phone business is shrinking, dropping around 18 percent annually for the past four years, yet global consumers still bought more than 540 million of them in 2015. That's half a billion people who have a mobile phone and are on the cusp of purchasing their first smartphone. That's a very enticing opportunity for HMD, and it should be for HTC, too.

Not Dead Yet
Although the market is shrinking, half a billion people still bought feature phones last year
Source: Bloomberg Intelligence, IDC

HTC's challenge is that it's not a low-end smartphone maker. The company does best at the high end, and that's where it should stay. But today's entry-level smartphone buyer is tomorrow's premium customer, a market where there's still strength, as I've pointed out in past columns. By combining with HMD, HTC could have a dual-brand strategy with Nokia at the bottom and HTC at the top. New buyers could be introduced to Nokia during the shopping experience and be educated about what the future holds when they're ready, and able, to go upscale.

Nothing to Lose
With half-year sales down 85% in five years, there's not a lot of downside in HTC teaming up with HMD
Source: Bloomberg

What Cher Wang needs to understand is that although the market is slowing, people are still buying smartphones. They're just not buying her smartphones. Right now, though, she seems obsessed with virtual reality, a war in which HTC is likely to be slaughtered even if it wins a few Pyrrhic victories along the way.

At least by teaming up with HMD, both companies would have a fighting chance. Neither brand has anything left to lose.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net