Nokia’s Virtual-Reality Camera Means Real Profits

It looks like the phoenix is rising again in Finland.
The company that has reinvented itself a number of times in its 150-year history – Nokia (NYSE: NOK) – is at it again.

The once-dominant cellphone maker sold its handset business last year to Microsoft (NASDAQ: MSFT) for $7.52 billion. And it recently sold its mapping business, HERE, to three German automakers: BMW (OTC: BAMXY), Daimler (OTC: DDAIY) and Audi (OTC: AUDVF).
However, its remaining business – network equipment – seems to picking up. And Nokia is also getting back into the consumer space in a big way – with a virtual-reality camera.

Network Business at Nokia and Alcatel Improving

Operating profit at Nokia’s networking business rose by 11% over the prior year. The company’s CEO, Ranjeev Suri, called the latest quarter the most profitable three months since the “new Nokia” was reborn again last year.
There was also good news at its proposed merger partner, Alcatel-Lucent (NYSE: ALU). Free cash flow was 65 million euros in the second quarter. That is up 270 million euros from a year ago. It was the company’s first reported positive free cash flow since the merger of Alcatel and Lucent in 2006.
The CEO of Alcatel, Michel Combes, said this marked a turning point for the company. Its restructuring plan was launched two years ago.
If this truly marks a turnaround for Alcatel, it is good timing for Nokia’s purchase. The deal is expected to close in the first half of 2016.

Return to Consumer Products

For me, though, the real excitement lies in the Nokia Technologies division. Sales there were up 31%. Revenues more than doubled from a year ago to $292 million.
In late July, that division unveiled Nokia’s return to consumer technology. It’s a virtual-reality camera called Ozo. Nokia called it “the first in a planned portfolio of digital media solutions.”

Nokia Ozo VR Camera

Source: Engadget

Many see virtual reality as the future of entertainment.
So it comes as no surprise that the market for virtual-reality headsets is a crowded one. The likes of Google (NASDAQ: GOOGL), Facebook (NASDAQ: FB), Sony (NYSE: SNE) and others are fighting for market share.
Nokia is wisely avoiding that melee and focusing instead on the need to produce content for these devices. The company’s goal is to fill the demand by studios to film and edit in real time. Currently, studios have to splice together a number of shots to create 3D virtual-reality footage.
That’s where Nokia’s virtual-reality camera comes in. It uses eight shutter sensors and eight microphones to capture 360-degree video and audio. This will allow for the development of professional-quality VR films in a quick and efficient manner. Nokia expects to begin shipping Ozo in the fourth quarter of 2015.
It’s true that the market for virtual-reality devices is still small. But research firm TrendForce thinks that will change. It predicts virtual-reality device sales will hit 14 million units in 2016 and 38 million units by 2020.
The president of Nokia Technologies, Ramzi Haidamus, thinks more content will increase VR device sales. He told the Financial Times: “People will need a reason to put the headsets on. The thing is compelling content, which is going to have to come from professionals.”
I assume what he envisions is professionals using Nokia’s Ozo, though the company also plans to expand its product line to “pro-sumers.” These are amateurs, but with enough training and skill to be able to use the equipment.
I would not be astonished if Nokia pulls a rabbit out of the hat again. Maybe it can become dominant in virtual-reality cameras and other related products geared for consumers.

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