Mobile

Nokia’s Bright Spot: Luxury Handset Maker Vertu


For his 27th birthday, Mohammed Al-Haj, a marketing executive in Abu Dhabi, hinted to his girlfriend that he wanted a new cell phone. He wasn’t after the latest Apple (AAPL) or Android (GOOG) device. He wanted a Nokia. Or rather, he wanted a Vertu, from the Finnish company’s luxury division. “It’s an accessory, part of my outfit,” Al-Haj says of his Vertu, with its keypad bordered by pavé-set diamonds. “People look at it all the time and say, ‘Wow, that’s a nice phone.’ It feels good.”

Although Vertu, started by Nokia’s then-chief designer Frank Nuovo in 1998, doesn’t release detailed sales figures, the unit has sold more than 300,000 phones in the past decade and seen “high double-digit sales growth” since the beginning of 2010, President Perry Oosting says. As Nokia sheds 7,000 employees as part of Chief Executive Officer Stephen Elop’s cost-cutting drive, Vertu’s staff of 840 has increased by more than 50 percent since 2009 and has outgrown its space in Church Crookham, England, where an expansion is under way. The division’s success is due largely to surging demand in the Persian Gulf, Russia, China, and other status-conscious emerging markets. The phones sell for an average of more than €5,000 ($6,800), but top-end models, such as those in Vertu’s Signature line, cost as much as €12,500.

Vertu has become the dominant player in the luxury smartphone world—with about 60 percent of the Western European market last year, according to researcher IDC—despite remaining decidedly low-tech. Phones in the Signature line lack a camera, and Vertu’s first touchscreen device will be released in October. Vertu smartphones run Symbian, the old Nokia smartphone operating system being phased out in favor of Microsoft’s (MSFT) Windows Phone 7.

As a result, Vertus aren’t always practical. “A lot of Vertu owners have another device for everyday use,” says Armando Branchini, the founder of Milan-based luxury consultancy InterCorporate. The phones are assembled by hand out of materials such as titanium and steel and with screens covered by slices of sapphire crystal. Keys pivot on ruby bearings. Customers “are not buying a phone. They’re buying a piece of jewelry,” says Francisco Jeronimo of IDC.

Oosting, a former goldsmith who worked at Bulgari, bristles at that idea. During a recent visit, he steered reporters away from a diamond-studded handset with a gold casing being polished for shipment. Such blinged-out baubles represent “the lowest single-digit proportion of our sales,” he says. He is quick to concede that Vertu needs to catch up technologically. He says the company is shifting its focus to smartphones, starting with a Qwerty-keyboard phone introduced last year that runs customized Symbian applications such as exclusive city guides.

A big draw for old and new Vertu customers is the company’s “concierge” function, which is free for the first year and about $3,000 annually thereafter. The 24-hour hotline’s staff—who speak nine languages including Chinese, Russian, and Arabic—handle requests such as restaurant reservations and travel planning, as well as more exotic whims like sending a box of live butterflies as an anniversary gift. It’ll help Vertu stand out from the competition: Luxury brands Giorgio Armani, TAG Heuer, Versace, and Porsche all released handsets recently.

To keep its upscale image, Vertu has to maintain some distance from Nokia. References to the Finnish manufacturer are hard to find on Vertu’s website and in its more than 80 retail stores, which occupy space on streets such as Rodeo Drive in Beverly Hills. At Vertu’s boutique in one of Paris’s toniest districts, a security guard mans the door and staff wear black gloves while handling the merchandise. Even the ringtones are different from the standard Nokia fare. “They’ve been quite clever and successful in keeping Vertu separate from the Nokia brand,” says professor Omar Merlo, who studies marketing at Imperial College London. “They obviously want to avoid customers applying the same mass-market associations.”

The bottom line: Vertu, with about 60 percent of the luxury smartphone market in Western Europe, is upgrading its technology to keep up with new rivals.

With Vivian Salama and Katie Linsell
Ben-Aaron is a reporter for Bloomberg News in Helsinki.
Campbell is a reporter for Bloomberg News in London.

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