Nokia Corp., the world's biggest maker of mobile phones, is trying to position itself as a powerhouse in software.
The Finnish giant unveiled here Monday a new mobile-phone handset, called the 7650, with a large color screen and built-in digital camera, but many people in the industry were looking beyond the flashy new hardware to the software inside the gizmo. As handsets become miniature computers -- able to access the Internet, play games and even run video clips -- the software that runs all these new features is taking center stage.
The 7650, to be launched in Europe in the second quarter of next year at a retail price of 550 euros ($483), is a showcase for Nokia's multimedia messaging software, which can send pictures, sounds and text to other handsets or Web sites.
Nokia said last week that it will license out this multimedia messaging system and other handset software to rival phone makers. If it is successful, the company may be able to use its handset software as a springboard to sell other products just as Microsoft Corp. has exploited the dominance of its Windows software in the personal-computer market.
Jorma Ollila, chairman and chief executive officer of Nokia, said 60% of the Espoo, Finland, firm's research and development engineers are working on software.
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Though Nokia doesn't disclose revenue from licensing of handset software, analysts believe that business is still very small. But some analysts estimate that Nokia obtains 300 million euros of revenue a year by selling server software, dubbed the m-platform, to help mobile-phone concerns manage messaging services.
Adnaan Ahmad, a London-based analyst with Merrill Lynch, says Nokia's move to license its handset software to other phone makers will boost sales of the m-platform and help it sell more games, ringtones and other software from its Club Nokia wireless Internet portal.
In competition with other messaging software suppliers, such as Logica PLC and CMG PLC, Nokia is revamping the m-platform so that it can handle messages incorporating pictures, music and video. That is where the new handsets come in. At first glance, the 7650 is dominated by its color screen, but a keypad slides out from the back of the phone to show a digital camera. The screen acts as a viewfinder, allowing the user to frame a picture that can be sent to other users with a phone running the same software. The handset runs Nokia's multimedia messaging software on top of the EPOC operating system from Symbian Ltd., the London-based consortium in which Nokia has a minority stake.
Nokia hopes the m-platform eventually will be used by mobile-phone operators to provide a host of wireless services, such as location finding or electronic payments.
Per Lindberg, a London-based analyst with Dresdner Kleinwort Wasserstein, believes that the major mobile-phone operators -- Nokia's primary customers -- have forced the company to license its handset software to rivals so that they can piece together their own services using standard components from many different technology suppliers. In the handset software market, Nokia faces competition from specialist software suppliers such as Openwave Systems Inc. and Microsoft. Several major mobile-phone operators, such as Telecom Italia SpA's Telecom Italia Mobile, have said they regard Club Nokia as competing with their own wireless portals.
But Mr. Ollila argued that Nokia still has a technological edge on its rivals and that it has successfully allayed operators' concerns about Club Nokia. The Finnish company has offered to share revenues from the service with operators, and Mr. Ollila maintains that the operators will continue to "own the customer."
In any case, Nokia is pouring huge sums into software development that few rivals, with the exception of Microsoft, will be able to match. For example, analysts at Credit Suisse First Boston estimate that Nokia has committed 1,000 staff and $200 million per year to developing new messaging systems. By contrast, Logica's Mobile Networks division spent GBP 28.3 million on research and development in the year ended June 30.
Although Nokia was late with GPRS handsets, Chris Gent, chief executive officer of Vodafone Group PLC, said last week the Finnish company is likely to be one of only three phone makers to have third generation handsets, capable of downloading data at high speeds, available in time for the giant operator's U.K. launch of 3G services next October.
Even so Nokia may still find that powerful operators, such as Vodafone, drive an increasingly hard bargain with their suppliers as they come under pressure to justify their huge investments in 3G. "The real question is: How is the value going to be distributed?" says Mr. Ahmad at Merrill Lynch. |
