Nokia’s luxury device brand Vertu — the epitome of conspicuous consumption with gold-and-diamond handsets priced in the six figures — has been conspicuously absent from the company’s many strategic announcements over the last year, which have seen the company drop Symbian for Microsoft’s Windows Phone, make a u-turn on MeeGo, re-assess its global device strategies, and lay off thousands and close factories in a bid to reverse its decline. Now it looks like it is Vertu’s turn on the chopping block.
According to an article in the FT, Nokia (NYSE: NOK) has appointed Goldman Sachs to sell the brand and the related device business, which it first started back in 1998 before Apple (NSDQ: AAPL) and Google (NSDQ: GOOG) proved to be major headaches for the company.
The biggest surprise of this story is that Vertu wasn’t offloaded sooner. Its handmade devices featuring precious metals and stones have more in common with the world of Rolex watches than they do with the mass-market phones that are the bread and butter of Nokia, and really look more like a folly from a declining brand than a truly remarkable achievement of mobile technology.
Indeed, although these devices were sold as “high-end”, the true high-end in mobile is about slick smartphones with high specs and loads of functionality — witness today’s news from ZTE (via WSJ) that it will be launching a “high end” device for the U.S. market next year. By that, it means something to compete with the iPhone, not a golden Vertu handset.
In keeping with Nokia’s strategy of offering services on top if its devices, Vertu also featured a concierge offering, where the press of a button could enlist the help of people to book hotels, restaurants, shopping excursions, airplanes and other services for their fussy, well-fed users.
But it also looks like the brand was not a complete drain on Nokia: the FT notes that revenue growth at the division was in the double digits in 2010, outpacing that of the rest of the device business, although it’s not clear if it was profitable at the same time. Source say annual revenues for Vertu are between €200 million and €300 million, tiny considering that Nokia made €5.4 billion in device net revenues in Q3 2011 alone.
There may be a home for the well-pampered Vertu yet. The devices are sold in 60 countries today, and apparently have loyal users among the super-rich of Russia, Asia and the Middle East. Now the division is apparently being shopped to private equity groups as well as other luxury brands to find a more suitable home.