Nokia’s $6,800 Diamond-Crusted Vertu

When Mohammed Al-Haj, a 27-year-old marketing executive in Abu Dhabi, hinted to his girlfriend that he wanted a new cell phone for his birthday, he wasn’t after the latest Apple Inc. (AAPL) or Android 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 pave-set diamonds. “People look at it all the time and say, ‘Wow, that’s a nice phone.’ It feels good.”Vertu, started by Nokia Oyj (NOK1V)’s then-chief designer Frank Nuovo in 1998, has sold more than 300,000 phones in the last decade and seen “high double-digit sales growth” since the start of 2010, President Perry Oosting said. Vertu’s headcount of 840 has increased by over 50 percent since 2009 and has outgrown its space in Church Crookham, England, where an expansion is under way. Nokia said today it will cut an additional 3,500 jobs elsewhere in the company as part of Chief Executive Officer Stephen Elop’s cost-cutting drive.The division’s success is largely due to surging demand in the Persian Gulf, Russia, China and other status-conscious emerging markets, Bloomberg Businessweek reports in its Oct. 3 issue. The phones sell for an average of more than 5,000 euros ($6,800), but top-end models, such as those in Vertu’s Signature line, cost as much as 12,500 euros.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 still 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 Corp. (MSFT)’s 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. They’re objects to be fetishized, 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 jewelery,” 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.The 50-year-old is quick to admit 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 flagship “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. The service also got the 14-year-old daughter of another client a chance to play the organ at Notre Dame in Paris, said services chief Mark Izatt.Those offerings will help Vertu stand out from the competition: Luxury brands Giorgio Armani, TAG Heuer, Versace and Porsche all released handsets recently.Although Nuovo is remembered by Nokia fans for the 8810, the sleek, chrome-plated “cigarette-lighter” handset, Vertu phones are tougher, with a “V” blazon that recalls a vintage car. The arrow-shaped Signature, at 166 grams (about 6 ounces), makes a rocklike thud when dropped on a conference table.“Putting a camera on this would turn it into a utilitarian object rather than a real art piece,” says Hutch Hutchison, a former military hardware expert who designs the handsets with Nuovo’s input. His team has run over a Vertu with a Hummer (it survived), and a 14-ton bus (it didn’t). The auto-inspired Ascent range and the “more affordable” Constellation range, which will include the touchscreen phone, do have cameras.Another important way to stay ahead of competitors is 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 the boutique in one of Paris’s most exclusive districts, a security guard mans the door and staff wear black gloves while handling the merchandise. Vertu also has counters in high-end watch stores for a total of 500 points of sale. It’s customized Symbian to match its Qwerty phone with an enlarged watch face and buttons for the concierge and other Vertu functions. 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.”