I applaud their bravado in responding to an untapped market - Satisfied Android users who wanted a Nokia phone optimized for their needs. I suspect that when Nokia longtime users needed to upgrade their Symbian phones, they either elected to buy a Samsung Galaxy or an iPhone because the only alternative available to them was a Windows Phone with limited apps availablity.
Although they do have the talent of former Nokia employees, they are going to be restricted by the Nokia hardware patents now owned by Microsoft. Therefore, they will have to come up with truly new and innovative hardware which won't infringe on those patents yet still allow them to produce their Android alternative smartphone. I've seen reader comments asking "What are they going to do different than HTC because Samsung has pretty much cornered the Android smartphone market."
I think in order for them to succeed, not only do they have to find a way to lure former Nokia consumers back to their familiar hardware look and feel, they have to differentiate themselves on the software functionality side as well. They need to focus their efforts on two primary markets: business and consumer.
On the consumer side, because Android is based on Linux, which is under the GNU/Linux Public License, they can create their own custom Android User Interface that allows them to optimize the software for their hardware and add more features. Battery life is a major thing for a lot of smartphone users because the more apps you add, the more it strains your battery usage. If they can find a way to optimize battery life while being able to retain what the average user considers a maximum number of apps, consumers will take notice.
On the business side, Ubuntu came out with a cutting edge concept of a desktop converged on a smartphone when docked. If Newkia is able to partner with Ubuntu to make that concept come to fruition in an effective and exciting way, the corporate world will definitely take notice. That would be one way both Canonical (Ubuntu's parent company) and Newkia can corner the enterprise market. With the way technology is transforming how work is conducted and executed today, work is becoming more and more "mobile". As far as I'm concerned, it would be an ideal pairing with Canonical's software expertise and Newkia's hardware expertise converged in one device.
As a side-note, the cool thing about Linux is it is "modular". You can strip off what you don't need from any base "distro" and add the programs you do need to optimize the operating system software for the hardware and its components. Just look at what the PC gaming company, Valve, has done with the SteamOS.