Nokia, Bowing to Smartwatch Dominance, Sells Digital-Health Unit

(Bloomberg) -- Nokia Oyj was the world’s dominant mobile-phone maker until it suffered a humiliating collapse after underestimating the appeal of smartphones made by Apple Inc. and others. Now, Nokia looks to have made a similar miscalculation on smartwatches.

Nokia announced plans Wednesday to sell off a digital-health business it acquired just two years ago to capitalize on the popularity of wearable fitness trackers such as those made by Fitbit Inc. Since then, however, makers of the gadgets have struggled as competitors such as Apple introduce similar features on their smartwatches.

Nokia got into the wearable-device market “as it was undergoing a transformation," said Ramon Llamas, research director for mobile devices at IDC in Framingham, Massachusetts. Consumers can use their smartwatches for a wide variety of functions that go far beyond the capabilities of Fitbit-style trackers. "People are saying, ‘The smartwatch looks pretty neat. I don’t need a fitness tracker,’” Llamas said.

Nokia said it’s selling the digital-health business to Eric Carreel, co-founder and chairman of Withings, a French startup that Nokia acquired in 2016 for 170 million euros ($204 million). Technologies from Withings formed the backbone of the Nokia unit, which has been marketing a heart-rate and activity watch and a “smart scale” that transmits data on body composition and heart rate.

Nokia in October took a 141 million-euro writedown on the acquisition, and Chief Executive Officer Rajeev Suri has said he wants to focus less on small-scale consumer products and more on the company’s main wireless network business and patent licensing.

The botched attempt at breaking into connected health points to tough competition in an industry where behemoths such as Alphabet Inc.’s Google are investing heavily. Google this week announced an agreement with Fitbit that will use Google artificial-intelligence software and cloud platform to develop its wearable devices.

Sale of the digital-health unit also could remove an area of possible friction between Nokia and several companies that license its patents to make their handsets and tablets. After Nokia reached a settlement in its legal patent battle with Apple a year ago, the U.S. tech giant resumed carrying the company’s digital-health products in stores and online. Apple had pulled those products during litigation.

Nokia said it expects a deal to close the sale of the unit toward the end of the second quarter of this year.

©2018 Bloomberg L.P.