Leaked Nokia memo says no path forward for ‘struggling’ digital health business

Nokia’s Steel HR fitness tracker and watch — a rebranding of a former Withings product.
Photo by Nokia

Nokia’s health tech business is in trouble — more than the company will publicly admit.

Last week, the Finnish telecoms launched a “strategic review” into the health division, stressing that no firm decision about its future had been made. But, in a company memo seen by The Verge along with screenshots of the internal work chat, Nokia’s chief strategy officer Kathrin Buvac told employees that “our digital health business has struggled to scale and meet its growth expectations.”

“Rather than only falling in love with our technology, we must be honest with ourselves,” writes Buvac. “Currently, we don’t see a path for [the digital health business] to become a meaningful part of a company as large as Nokia.”

The memo does not say definitively that Nokia is shutting down its digital health business, but it is unquestionably preparing the ground. Buvac even signs off the memo with the adage: “Failing fast isn’t failure, it is accelerated learning.” Nokia declined to comment on the note and would neither confirm nor deny its authenticity, but a spokesperson told The Verge: “We now need to see how the strategic review progresses — there is no preordained outcome.”

But the signs are not good. Nokia first jumped into the digital health industry in 2016 with its $190 million purchase of French startup Withings. After the purchase, Nokia adopted and rebranded a selection of Withing’s products, including the Steel and Steel HR smartwatches. The devices were praised by customers and reviewers for their elegant and stylish design, although some found their tracking functions inconsistent.

But the division had trouble, too, including a redesign of the Withings smartphone app which users panned as buggy and prone to crashing. More significantly, Nokia said last October in its quarterly financial report that it was writing down €141 million ($164 million) on the purchase of Withings, meaning it had overvalued the startup significantly. At the same time, the company announced it was stopping development of its $45,000 virtual reality camera and cutting hundreds of jobs.

Nokia still maintains a thriving telecoms and patent business worth roughly €23 billion a year. But since the company’s exit from the mobile phone market, it’s had a hard time finding a new consumer electronics foothold. (Nokia’s mobile brand lives on and is doing quite well, but the phones we call Nokia’s are definitely not.)

As Buvac states in the memo, Nokia’s ambition is now to become “a business-to-business and licensing company.” It will continue to explore new sectors by incubating startups internally, she writes, and its foray into digital health has given the company a “new perspective on the sector” as well as “opened conversations with companies and influencers.” But this has not been enough to turn a profit.

You can read the full memo below:

Dear colleagues,

I wanted to take a moment to comment on today’s announcement that we have initiated a strategic review of our Digital Health business.

I know that for some of you this will come as a surprise, and you may also be wondering what this means for our strategy.

Why are we doing this?

We have a number of incubation businesses across Nokia which we run as internal start-ups. Solve a problem, place a bet, build a product, insert yourself into the market, gauge your progress, learn from your mistakes, decide next steps. Our Digital Health business is one of those bets we have made, and certainly we have had some early success since we integrated Withings into Nokia. The Steel HR watch is a fantastic piece of technology and the reception of Nokia Sleep at this year’s Consumer Electronics Show was very encouraging. However, rather than only falling in love with our technology, we must be honest with ourselves. In its entirety, our Digital Health business has struggled to scale and meet its growth expectations. Currently, we don’t see a path for it to become a meaningful part of a company as large as Nokia. Thus, we are conducting a strategic review to determine the best next steps for the business. Once we know more about possible future steps, we will inform impacted employees, as well as engage employee representatives in line with local legal requirements and practice, where needed.

What does this mean for Nokia?

Following the strategic choice we have made will allow us to focus and transform Nokia to be a business-to-business and licensing company in Telecoms and Industrial Automation. We will continue to have opportunities to address the IoT opportunity in Digital Health with private connectivity solutions, platforms and software, just no longer from a consumer product perspective.

That being said, we will continue to have a play in the consumer world with brand licensing, and our brand will continue to be present with the smartly crafted deal we have with HMD Global. We are pleased with their success in their first year of operation, where they have grown their revenue nicely and firmly established themselves as a serious player in feature phones and smartphones; Nokia branded mobile phones have leapt ahead of several other brands in only one year. This progress, along with the recent success of Networks and its end-to-end portfolio, has vaulted our brand from 335 to 188, making Nokia a top 200 global brand again ahead of many other renowned companies (source: Brand Finance 2018 ranking).

For our strategy more broadly, we remain committed to incubating select new businesses. They are vital sources of innovation, they present opportunities to pivot Nokia and they keep us agile in a challenging and fast-moving market. Let’s not forget the early success of a number of incubation projects: SDN and SD-WAN (Nuage), Managed Services for IoT (WING) and Nokia Digital Automation Cloud (NDAC) are good examples here.

Digital Health has given us a perspective on a new sector. It has opened conversations with companies and influencers outside our core business. We have learned from this, and with a sharper focus are using that knowledge to our advantage, just as 5G and IoT opportunities are accelerating.

As I commented in our internal story today, “Failing fast isn’t failure, it is accelerated learning.”

At Nokia, we dare.

Warm personal regards,

Kathrin

Comments

Withing Writhing

They’ve seen the Withings in the wall

That’s too bad. I absolutely love my Nokia Steel watch, mostly because it is an attractive watch that happens to track my activities.

The follies of buying into an ecosystem.

Now I’m fully expecting my Nokia Steel and Body Cardio to turn completely useless in the near future. It’s pretty sad as I actually like them.

Bummer, our company uses their app to tie other vendor smartwatch steps etc. into their health program (Limeade) and the smartphone app that does all this has been great.

I just purchased the Steel HR and Body Scale and love them both. I’ve received numerous compliments on the Steel HR and it’s tracking is on par with my Fitbit Charge HR. Not only that, the setup was quick and painless, the app runs great, the phone support is quick and friendly. I just don’t get the trashing on it… Not to mention, when I unboxed the watch, it had 70% battery life and I used it for two weeks until it hit 20% when I charged it to full. I could have probably squeezed a few more days out of it. Yeah, it doesn’t do a ton of notifications (they said they’re working on more) but I don’t want my smart watch to tell me everytime I get a Instagram like/follow, a tag on Facebook or a snap on Snapchat. I want it to tell me someone is contacting me or what’s coming up in my day, but nothing more. It does all of these things wonderfully well and doesn’t look like a kids toy on your wrist – either.

I feel like it was a mistake when they pushed back adding more notifications in favour of redesigning the app. I personally get very little use out of them as no one in the EU uses text messages and I barely ever call with the normal phone. IMO they should use the same API’s that Google Wear on iOS/Lightflow on Android uses to support notifications and just let us choose.

Given the rebrand only completed last summer and the new Steel HR only arrived near end of year its surprising they’d give up so soon. Especially since the phone sales have shown the brand can still resonate and cross promotional opportunities they could consider with HMD.

Right! Especially considering one of their first moves was to recall and replace all the Withings Steel HR’s, give effected customers a free scale, and redesign the app. I can’t imagine any of these things being anything but massive costs.

I’ve been a fan of the Steel HR from before the Nokia buyout, and it’s a great watch… gives me everything I want with basic health/sleep tracking and a single charge lasts over a week – and when I do charge it up, it takes very little time to fully charge.

Instead of shut down, I hope they spin Withings back off into their own company. As recent as the acquisition was, and as successful as it was as an independent company, I think it should be possible to undo that which has been done.

I guess it’s good I use IFTTT to export my body scale measurements to a google drive sheet, such a shame they’re ruining withings…

Why did they even buy Withings if they weren’t willing to put any effort into growing it. They learned too well from their partnership with Microsoft.

I’m not sure what this is going to mean for the Withings Nokia Thermo but I’m concerned. The Thermo is amazing and I would really hate to see it stop working or lose features because Nokia folded the product.

Always nice when they buy a great startup and run it into the ground… good thing they crippled the Withings Body Cardio by removing its best feature before doing so.

I guess the next question is when they will brick all our devices by turning off the servers…

"our digital health business has struggled to scale and meet its growth expectations."

¯\(ツ)

I hope Whitings become independent company again

Nokia’s plan:

1) Buy Withings
2) Totally mess up the app
3) ????
4) Proft!

Not a great loss to be fair. I bought the Withings WS-50 scales and the blood pressure cuff and both looked the part but were functionally mediocre at best. If I step on and off the scales 3 or 4 times in a row they’ll give me a random assortment of measurements, an accurate piece of equipment should be able to produce the same result more than once. The blood pressure cuff works about 40% of the times I use it, which is likely to increase blood pressure due to frustration.

I stupidly hoped that Nokia might improve things but the realist in me knew they’d do exactly the same things that saw them get crushed out of the mobile phone market, and they did exactly that. They completely changed the already poor quality Withings app with an even worse app that made the previous effort seem passable. Despite an absolute deluge of complaints and negative reviews they failed to actually listen to anyone, or make the required changes. Good riddance, I definitely won’t miss them.

In my own experience, my Withings WS-30 Scale has given pretty consistent readings, set-up on a hard surface – I only use it to see trends in my weight though – whether I’m losing or gaining pounds.

I totally agree regarding the redesigned app. I don’t know why Nokia didn’t just replace the Withings branding with Nokia, instead of creating a functionally-worse app from scratch. And I’m still waiting for an iPad version. Personally, like others, I wish Withings had stayed an independent company (and here’s hoping it could be spun off again).

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