This is why Vertu died: smartphones can't be luxury items

When parents say that having a smartphone is a luxury, they probably don't mean it the way Vertu does. While definitely not as big as Samsung or Apple, Vertu is famous, or infamous, for its ridiculously expensive, crystal-studded rendition of what has become an everyday tool. That, however, will now become history as Vertu itself becomes history, with the company being liquidated and employees laid off, to partly pay for its ridiculously high accounting deficit.

We remark about how smartphones are getting more and more expensive. The Samsung Galaxy Note 8 and the Apple iPhone 8 are expected to break through the $1,000 mark. But they have nothing on Vertu's smartphones, which cost 10,000 GBP ($13,000) on average.

Of course, Vertu doesn't sell ordinary smartphones. Its catalog is filled with smartphones decked with all sorts of premium materials, from crystals to gold to leather to titanium to even sapphire glass. There's nothing easy about cheap about these materials and they are very difficult to work with. While there is nothing wrong with wanting these things in a product, a smartphone is the worst thing to use them on.

Make no mistake, smartphones are precious to us. But they are also a fast-moving target. Analysts say that people change phones every 2 years on average, and that's not always because they want to. There is almost a planned obsolescence in the mobile market. Software and hardware advance at such a pace that a three year old phone might no longer be able to handle the demands of modern users.

And it's not like Vertu's smartphones are always the latest and greatest. They are mid-range at best, tragically outdated at worst. It was only recently that Vertu started catching up with more current hardware, but, by then, the smartphone world has already moved on. When you're paying $13,000 for something, you expect it to last almost a lifetime.

While that is the primary reason why Vertu's business flopped, mismanagement might have also played a hand in the background. Owned by Chinese company Godin Holdings, which acquired it from EQT which in turn bought it from Nokia, Vertu was on the brink of bankruptcy and administration last year. Turkish exile Murat Hakan Uzan agreed to buy the company to save it but never envisioned that his 1.9 million GBP ($2.46 million) purchase would come with a 128 million GBP ($166 million) accounting deficit. Uzan will keep the Vertu brand and licenses, but everything else, including 200 employees, will be going down the drain.

SOURCE: Financial Times