Rumors swirled last December about Nokia selling off its Vertu unit. Now, news reports suggest the wireless handset maker is in late-stage talks with European private equity group Permira to sell the asset for some $265 million.
Nokia launched Vertu in 1998. The luxury phone unit sells devices that cost upward of $5,000 and as much as $315,000, rivaling exotic car brands and fine watches. The phones are made by hand, and often include diamonds and hand-stitched leather.
Nokia doesn't offer specific earnings for Vertu in its quarterly reports. But the Financial Times reports the unit drives between $268 million and $402 million annually. Vertu has flagship boutiques in London, Paris, Milan, Singapore, Hong Kong, Tokyo, New York and Las Vegas. The phones are sold in more than 50 countries.
Exclusive Mobile Phones
We asked Avi Greengart, an analyst at Current Analysis, his take on Nokia's rumored move to exit the luxury mobile -phone business. He told us the decision would represent Nokia getting out of a non-critical business as it focuses on its mainstream customers.
"Nokia would be going to get some money out it, which is great, assuming this goes through," Greengart said.
"For the private equity group, this is about luxury goods. The luxury market remains strong, particularly in Asia," he continued. "That market seems far more interested in status symbols than in platforms and apps. You don't buy a Rolex because it's your only watch and there's no other way to tell time."
Vertu has relied on exclusivity -- along with celebrity endorsements from the likes of songwriter Seal, actress Michelle Yeoh and chef Alain Ducasse -- to demonstrate its appeal to the uber-rich. One of the key features of Vertu phones is the Concierge, a personal dedicated lifestyle assistance service that's available 24/7 in any language. When users press a dedicated button on the phone, the Concierge answers and provides anything from gift ideas to restaurant reservations.
Nokia Looking for Answers
The news comes against the backdrop of another quarter of poor results from Nokia. The company lost $1.7 billion in the first quarter of 2012. Revenue is down about 30 percent from the year-ago period and the company has spent more than $2.6 billion in the last six months alone.
Nokia's net sales for the first quarter totaled $9.3 billion. Nokia hopes to build on that with its new smartphone strategy, which includes expanding the Lumia portfolio to cover higher- and lower-priced units. Nokia also plans to expand geographic coverage to 45 countries. Nokia also renewed its feature phone portfolio with seven new Asha products.
Doubling the number of Lumia devices sold quarter-on-quarter is a respectable pace, Nokia said, however, that sales results have been mixed. Nokia exceeded expectations in markets like the United States, but the company said establishing momentum in certain markets, including the United Kingdom, has been more challenging.