Nokia drops Ovi as Microsoft rumors resurface

As indicated when it announced its alliance with Microsoft, Nokia is dropping the Ovi brand in preparation for merging its web services with those of its new best friend. Some analysts are reviving previous rumors that the merger might go further, with Nokia blogger Eldar Murtazin sparking the latest round of speculation that Microsoft might buy Nokia’s handset division.

Murtazin suggested in a blog post that negotiations were starting this month and a deal could be announced shortly though no sources were named. As many observers point out, a deal would be complex and expensive. Microsoft would have to pay a huge premium to avoid a shareholder revolt, given the huge impact of the loss of Nokia on the Finnish economy. The US company would undoubtedly insist that the Navteq unit was included in the sale but other divisions, including the stake in Nokia Siemens, would presumably be sold off.

Just as importantly, it is questionable why Microsoft needs to own a handset company whose economics and cost structures would alter its own financial balance. The aim would be to create a vertically integrated, fully controlled hardware/software platform like Apple’s, but given the closeness of the two companies and Nokia’s full commitment to Windows Phone 7, this could be achieved without the disruption and risk of a merger, and of alienating other WP7 partners terminally. Nokia’ market cap is about $32.8bn though that includes all its units.

So Nokia’s phone company may not yet become a thing of the past, but Ovi has. The Finnish giant has announced its plan to progressively rebrand its services and stores between now and 2012, starting with any new devices that launch from July this year. Ovi will be rebranded as Nokia Services, though the company insists that does not affect its roadmap for new apps, only the name.

Under its Microsoft deal, the Ovi services, notably Maps, will be integrated into WP7 and also more broadly into the US partners’ web platform, increasingly focused around the Bing search engine (which may eventually provide the overall branding for both partners). Several of the Ovi services have been sidelined anyway, though Maps remains a key weapon and the Ovi Store is very successful in some emerging markets like India. Ovi Music is still active, though the more innovative Comes With Music offering has been scaled down, while Ovi Files was shut down last fall.

Referring to the change of brand to just Nokia, CMO Jerri DeVard wrote in a blog post: "Our mobile experiences are tightly integrated with our devices – there is no longer a differentiation. By centralizing our services identity under one brand, not two, we will reinforce the powerful master brand of Nokia and unify our brand architecture.”

The Ovi brand may be on its way out, but Nokia is still enhancing its app store, and its latest move is to give operators the ability to brand their own channels within Ovi Store. In particular, Ovi is strong on localized languages and content, and in carrier billing deals, which currently cover 112 operators. Making Ovi and, in future, WP7 ‘carrier friendly’ – as a defense against Google’s power – is a key strategy for both Nokia and Microsoft, and that is seen in the latest Ovi Store development. Nokia is likely to have its own brand and user experience on its storefront when it launches its WP7 devices, and it is already experimenting with the idea of a ‘store within a store’ for Ovi. It is working with Deutsche Telekom and Orange France so they can launch their own-branded channels within that market, linking to their carrier billing systems and reflecting their own content priorities.

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