Nokia To Sell Vertu Luxury Division

Troubled Finnish handset manufacturer Nokia is planning to sell off Vertu, “the world’s most expensive mobile phone brand”, to plug the hole in its balance sheets left after losing €1.34 billion (£1.1bn) in the first quarter of 2012.

Nokia’s UK subsidiary could be acquired by the private equity group Permira, which already manages several luxury brands. The price of the deal is rumoured to be €200 million (£162.5m), reports Financial Times.

Vertu is known for its “status symbol” phones handmade in England from exotic materials, with a price tag of up to £200,000. H owever, the fact that all its phones run the more-or-less obsolete operating system Symbian might be considered a drawback to their luxury status.

Gem of a phone

A UK subsidiary of Nokia, Vertu was founded  in 1998 to design and manufacture some of the most expensive mobile phones in the world. The company prides itself on using precious metals, leathers and gemstones in its products. Each sapphire key of every Vertu keypad takes 25 hours to manufacture.

Appropriately, Vertu scored the perfect product placement last year, with the Vertu featuring as the cameraphone used by dominatrix Irene Adler (played by Laura Pulver, pictured) to compromise the Royal Family, and frustrate Sherlock Holmes in the BBC series Sherlock.

Apprently,  it’s not just the looks that set Vertu phones apart: its engineers have acquired more than seventy patents in the past five years alone. The company also offers other “unique” services. These include the “Vertu Concierge”, a 24 hour personal booking/assistance hotline for the members of the C-suite which is unique apart from organisations like Quintessentially, and “Vertu Fortress” – a one-button Cloud backup feature, again unique apart from other services, such as iCloud and EMC Mozy. Annual revenue for the Vertu business has been estimated to be between €200 and €300 million (£162.5m – £244m).

The potential buyer Permira already owns several luxury brands including Hugo Boss and Valentino. They have also invested in the European high-street apparel retailer New Look. Another private equity group, EQT from Northern Europe, has also expressed its interest in buying into overdesigned superphones. Goldman Sachs is reportedly advising Nokia on the sales process.

Nokia has been considering selling Vertu after its switch to Windows Phone OS and Lumia smartphones didn’t go as well as expected. The company has recently announced €1.34 billion quarterly loss, and has been downgraded by the three major credit rating agencies, with its debt now close to “junk” status. Last week, Nokia’s shares fell to a 15-year low.

The company has promised to “increase its focus on lowering the company’s cost structure, improving cash flow and maintaining a strong financial position”, and selling Vertu must be part of this strategy. It should be noted that the sale hasn’t been finalised just yet.

Nokia’s still has plenty of cash reserves. As of March 31, 2012, it had gross cash balances of €9.8 billion (£6b), and a net cash position of €4.9 billion (£3b). However, the strong competition from Apple, Samsung and Google, together with the uneasy transition to Microsoft’s mobile platform means the future of the company is uncertain.

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