Nokia streamlines web services activities under Ovi Store

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Nokia streamlines web services activities under Ovi Store

By CAROLINE GABRIEL

Published: 29 April, 2009

READ MORE: Nokia | App Store

Nokia's move into internet services is highly strategic, but long term, and so far its efforts have been somewhat piecemeal. It has made a string of acquisitions and product launches, but is now streamlining these, as promised, under the single umbrella brand of its upcoming Ovi Store, and in future plans to rely more heavily on third parties rather than a 'not invented here' approach. This will reduce the cost burden of the fledgling software operations during the downturn, but Nokia hopes will still create a strong springboard for its transition to being a web services giant in the early years of the next decade.

The immediate result of this repositioning is that up to 450 employees will be laid off worldwide in the internet services business, as part of the plan, announced last month, to reduce its workforce by 1,700. The number of these cuts coming from software, at almost 25% of the total, is higher than expected but reflects the risks associated with pushing a move to web services too aggressively during a downturn year, especially as the core handset business shows signs of recovery. As well as the 1,700 job cuts, Nokia plans to lay off a further 2,500 workers on a temporary basis and close a Finnish R&D center, which employs 320. All this is geared to hitting targets of saving $920m a year in costs.

Disconnected brands like N-Gage and MusicStore will be unified under the Ovi Store storefront, following the Apple example in developed markets, though Ovi Services will remain the brand for emerging markets, where Nokia's biggest potential upside lies after 2010. In established territories, Nokia plans to focus on fewer, more proven profit generators and reduce the number of investments it makes in software houses like mapping specialist Navteq. Its initial core services will be music, location/mapping, games and business offerings.

"The planned changes are aimed at improving and simplifying the user experience of Nokia services, increasing opportunities for third party developers and other partners to create compelling services and accelerating the development of a common platform for Nokia's different service offerings," Nokia services executive VP Niklas Savander said in a statement.

Nokia may have pioneered the concept of handset maker as service provider with the Ovi portal launch two years ago, but others have taken the idea of integrated mobile services/devices and run with it, notably Apple. Now the market leader needs to make its operations more focused and cost efficient in the near term while building for growth, especially in emerging markets where mobile broadband will drive massive social and economic change and new behaviors. It also needs to communicate its proposition more simply and clearly to consumers, a problem that analysts say has hit its Comes With Music unlimited music download service, with users not always recognizing the value of the deal.