April 28, 2009 / 5:30 PM / 10 years ago

Nokia to tackle Apple with leaner services push

MONACO (Reuters) - Nokia Oyj said on Tuesday it would combine its different Internet services tighter together as the world’s top cellphone maker tackles Apple’s hugely succesful App Store.

The corporate logo hangs on a wall at Nokia world headquarters in Helsinki July 9, 2008. Picture taken in this file photo from July 9, 2008. REUTERS/Bob Strong

To cope with slowing phone demand Nokia is building a new business from mobile Internet services — like games or maps — but is scaling back separate investment plans due to the slowdown, and focusing on merging the delivery of services.

“We are moving into Ovi, into a platform strategy,” Tero Ojanpera, head of the entertainment and communities operations at Nokia, told Reuters in an interview on the sidelines of the Nokia developer summit in Monaco. Ovi is Nokia’s much-anticipated online store which is set to launch in May.

Nokia, which made its first ever quarterly pretax loss in January-March, is cutting annual costs at its key handset unit alone by more than 700 million euros ($911 million) to counter plunging demand.

Nokia said on Tuesday it would cut up to 360 jobs at its Internet services unit, while it would cut an additional 90 jobs elsewhere in the organization.

The Apple store has proved the market for software supermarkets in the mobile world, with one billion applications downloaded in less than a year.

“As much as iPhone and App Store is a success for Apple, it’s a humiliating defeat for the rest of the mobile industry,” said Bengt Nordstrom, chief executive of telecoms consultant Northstream.

“Twenty years of efforts from operators and vendors to create mobile applications that customers like is overtaken in a heartbeat by someone that has never done it before,” Nordstrom said.

Many of the operators are now embracing different software stores aiming to generate more data traffic from its clients and to avoid customer turnover.

“We are going to make it as easy as possibly for our customers to buy from whatever shop,” said Steve Glagow, vice president for marketing operations at Orange.

But not all operators — Nokia said operator billing would not be available in the United States when its Ovi store opens, as it had said earlier.

SCALE KEY VS APPLE, GOOGLE

Nokia’s market is potentially bigger than Apple’s — it says the Ovi store will reach some 50 million consumers when it opens in May, while Apple has so far sold some 20 million iPhones.

“Nokia’s timing is absolutely right,” said Patrick Bossert, director of marketing strategies in Europe and Asia at telecoms services firm Convergys.

“Like any publishing market, its about the economies of scale,” Bossert said.

While hundreds of millions of people use its phones every day, Nokia has yet to match Apple’s success in getting people to pay for software downloads, while it has also lagged Apple in creating a major following among software developers.

“Nokia’s biggest challenge in the developer space is to win mindshare from Apple and Google, to provide tools and a platform to facilitate rapid development of innovative experiences,” said Ford Davidson, CEO of Seattle-based Dashwire, which makes software for linking cellphone content to the Web.

Nokia’s Ojanpera said the firm was trying to attract iPhone developers to create attractive programmes for Nokia phones.

“We will have the richest and the most interactive platform for the developers,” Ojanpera said in the interview. “This is not only about high-end, this is about scale.”

Nokia said it also hopes to benefit compared to other stores from its faster publishing of submitted applications or content, and more liberal policies on content which goes head to head with its own software offering.

“We are Switzerland, essentially,” Eric John, head of media products marketing at Nokia told the conference.

The overall mobile phone market is expected to shrink 10 percent this year, as consumers rein in spending and handset sellers try to clear out unsold phones. Including the job cuts announced on Tuesday Nokia has slashed some 3,500 jobs across the organization to cut costs this year.

($1=0.7683 euros)

Reporting by Tarmo Virki; Editing by Mike Nesbit and Jon Loades-Carter

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