A decade ago, Vertu made its name selling diamond-studded mobile phones to the nouveaux riches, especially in Asia, the Middle East, and Russia. Established in 1998 as a subsidiary of Nokia (NOK), the company was guided by the notion that a glitzy, jewel-encrusted cell phone ought to sell for as much as a Patek Philippe watch. In technology, though, Vertu phones lagged the competition. Its smartphones were pretty, but they weren’t that smart. The company’s flagship product, the Vertu Signature, still has a tiny screen and a button keypad. (Granted, a button keypad embedded with about 5 carats of rubies.)
By the time Nokia sold the company to buyout firm EQT Partners (INVEB:SS) in 2012, Vertu had been mostly given up for dead; the major market analysts no longer keep tabs on it. In an April report on its portfolio, EQT said that Vertu’s sales totaled £192 million ($309 million) last year. The private company, which has 970 employees, wouldn’t disclose recent financials, saying only that it’s sold about 400,000 phones in the past decade and that sales have grown in most years.
Now Vertu is trying to tone down the flash and improve its tech. Based southwest of London in the village of Church Crookham, Vertu “is taking a more understated luxury approach to match what the consumer is today,” says Chief Executive Officer Max Pogliani. “The world has changed in terms of phones and in terms of customers.” The company’s latest phone, released on Oct. 2, is restrained, at least by Vertu’s standards. A leather-clad Android handset called the Aster, the smartphone has most of the usual bells and whistles. (Its camera has 13 megapixels, more than the iPhone 6, not quite as many as the Samsung (005930:KS) Galaxy S5.)
Even without the gold or gemstones, the Aster isn’t cheap. Coming in five colors with names such as cognac and caviar, the line starts at £4,200 ($6,756) for a basic, calf-leather model. Versions in more exotic hides, such as ostrich, cost as much as £5,900 ($9,490). That’s more than 10 times the cost of the highest-end, unsubsidized iPhone 6, one of the most expensive smartphones on the market. Vertu customers can pay even more to customize their Aster with gems. The older, blingier models will also still be available.
Pogliani says the gobsmacking price tag is part of the plan—that Vertu needs to maintain its luxury image while hewing to more current technological trends. Pogliani, previously Vertu’s marketing chief, took over as CEO last year. He describes himself as a “brand builder”: Before joining the phone maker in 2012, he worked for Nestlé (NESN:VX), where he recruited George Clooney to endorse the company’s Nespresso coffee machines.
When Pogliani arrived at Vertu, the company was struggling to modernize after separating from Nokia. EQT, the Stockholm-based buyout firm that owns Scandic Hotels and catering group SSP (SSPG:LN), bought Vertu in a deal that valued the company at about €200 million ($253 million), people familiar with the deal said at the time. Until the sale, Vertu phones ran the defunct Symbian operating system and couldn’t stream much of anything. The new phone comes with 10 antennas that will enable 4G access almost anywhere in the world, Pogliani says. “Having the technology is a prerequisite now,” he acknowledges.
One way to insulate Vertu’s phones against the march of technology may be with luxury services, says Jez Frampton, the CEO of consultant Interbrand (OMC). Pogliani says he’s adding tiered concierge services to Vertu, dedicating personal-assistance hotlines to recommend or book hotels, restaurants, and VIP packages for the best-paying customers.
The challenge for Vertu lies in making a phone as timeless as a Rolex or Patek Philippe watch. With smartphone technology constantly improving and many people looking to replace their phone every few years, the company may have trouble expanding the audience for a $10,000 phone from the superrich down to the merely very rich, says Jim Prior, CEO of brand consultant Lambie-Nairn. “The bulk of the people who buy Louis Vuitton bags and Rolex watches are not the superwealthy,” says Prior, who advised Vertu when it was owned by Nokia. “If they want to appeal to that audience, they’re going to have to get a much more compelling … product design.”
