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Samsung Electronics (OTCMKTS:SSNLF) Has a New (Old) Rival in Wearables

Samsung Electronics Wearables
Samsung Electronics Co Ltd (OTCMKTS:SSNLF) released its Q1 2016 earnings report on the 28th of April. However, just a couple of days prior to the same, a rather surprising name came up as a new rival in the wearables segment: old enemy Nokia, which was the world’s biggest seller of mobile phones till 2012. This time, Nokia is armed with a small ace up its sleeve.
Samsung Electronics Wearables

Samsung Electronics Set to Face Nokia but Not in Phones

Nokia has realized that digital health is going to be the next domain where it needs to make a splash. Now it has announced it is returning to the consumer market, but this time it’s – wisely – avoiding the smartphone quagmire.

Instead, it is going after the increasingly popular health and fitness wearables segment, and rather than start from scratch, it’s buying France’s Withings to hit the ground running. Nokia put out a press release, announcing its plan to acquire Withings in a deal worth 170 mn Euros, or roughly $195 mn.

Withings has a strong presence in the health and activity tracker market, where it is considered one of the early pioneers; it has been focused on the connected health market since releasing its first product in 2009. It has also made many smartwatches. While it has never been the leader, in 2014 it was estimated to have 4% of the smartwatch market.

The terms of Nokia’s sale of its Devices & Services unit (including Lumia smartphones) to Microsoft allow the former to return to selling smartphones in 2016. But is it in its best interests to do so? The smartphone market is mature and very fierce. Chinese vendors are quickly making high-quality, low-price phones. The only firm making big money in this segment – Apple Inc. – saw its quarterly revenue fall for the first time since 2003 as iPhone sales dropped.

Why jump into a market where there are too many players, prices are under threat and sales are not growing much? That too, when Nokia has already seen its fall there once before.

No Tech Giant Leads Here

The Wearables market is just starting to explode. IDC stats have the sales of wearables increasing by nearly 172% in 2015, and the expectation is that this is just the start of the curve. Leading those sales are health and fitness trackers.

While tech giants like Apple and Samsung are making waves, they do not yet dominate the way they do with smartphones. Smaller firms like Fitbit Inc are still market leaders, while dozens of independents like Pebble – and Withings – are still in the game. The race is not limited to wearables alone. There is also the rush to make smart health devices like blood pressure monitors and scales, along with connectivity to medical services. All these are still in the early stages, but they show a lot of potential.

In other words, if Nokia is looking for a return to the consumer market, digital health is a smart choice. Buying Withings doesn’t grant Nokia immediate frontrunner status as it would if it bought a firm like Fitbit, but it also cost just $195 mn as opposed to the $4 bn or so Fitbit would command.

For $195 mn, Nokia hits the ground running with an established product line and an established retail presence that covers virtually every aspect of connected health, from basic fitness trackers to home health accessories and a premium smartwatch.

Combined with its networking know-how, design chops and considerable patent portfolio, the firm might just be able to pull off a semblance of its former glory, but this time the Nokia-branded gadget will be on your wrist instead of in your pocket.

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