Nokia’s Acquisition of Withings is a Mistake


Nokia plans to acquire health and connected fitness device maker Withings for $191 million. For Nokia, this looks like a great acquisition, expanding its Internet of Things (IoT) strategy and making a move into the digital health market, which represents a large growth opportunity. By 2021, Tractica forecasts that 98 million healthcare wearable devices will be shipped annually, accounting for $17.8 billion in worldwide revenue. Withings provides a range of connected products including blood pressure monitors, home security cameras, baby monitors, baby scales, sleep solutions, activity trackers, and smart watches. Withings is also part of the Walgreens Balance Rewards program, which allows Walgreens customers to earn points by checking their vital signs using wearable devices.

However, when examined from the perspective of Withings, and in terms of what this move means for the wearables market, the acquisition looks like a strategic mistake for four key reasons.

  1. Withings brings much more to the table than Nokia. Withings is a growing and successful brand in the connected health market and has strong technology and design expertise. Nokia is a brand that is still trying to find its footing after selling the HERE maps unit and its mobile phone business. Nokia’s network equipment business is just coming to grips with the acquisition of Alcatel-Lucent, and overall it is unclear to me what the Nokia brand stands for today. Recently, Nokia has been experimenting with 360 degree VR cameras for movie makers and Android tablets. Withings, on the other hand, has a clear value proposition and a compelling, focused product portfolio.
  2. Nokia is part of the old telecom guard, with the majority of its revenue and growth coming from its networks business, which could not be further away from digital health. It is hard to argue that Nokia’s top leadership and thinking will not influence the strategy of Withings, which operates like an agile Silicon Valley startup. I see this as a clash of company cultures, and Withings is likely to be a misfit within Nokia. From an execution perspective, I don’t really see Nokia being able to accelerate the growth of Withings’ business.
  3. Withings clearly has large ambitions and believes that Nokia would provide it with the platform to grow and scale its business. However, other than providing some capital and the R&D capabilities of Bell Labs, what Withings needs most are strong partnerships in the healthcare sector or in the consumer electronics market. On both counts, Nokia falls short and is unlikely to provide much value.
  4. Withings, a European company in its branding and ethos, has been trying to expand its reach in North America, working to rebrand itself appropriately for the market. The North American market is the largest market for wearables, and especially for digital health and healthcare wearable products. Nokia has little leverage or presence in the device space in North America these days, and although its network infrastructure business in the region is sizable, I don’t see how that can help Withings. Mobile network operators are unlikely to be the ideal channel for selling connected health wearables in North America, at least at this point.

Overall, I believe Nokia will hold Withings back rather than propel it forward. The wearables market is changing rapidly, and companies need to leap forward. Nokia’s desire to expand its presence in the digital health space is not enough to make a success of Withings. Nokia will very likely need other acquisitions to bolster its digital health strategy, and that might create more confusion and management headaches from an organizational perspective. On the other hand, Nokia CEO Rajeev Suri is a smart visionary and has a great track record in turning around Nokia’s network business, making it into a global leader today. Only time will tell whether or not Nokia will succeed here and if Suri has other cards up his sleeve, but as of now it looks like an uphill climb.

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