Blog Post

Nokia Rebrands Ovi Amid Rumors of Microsoft Purchase

Nokia announced a transition plan to rebrand its Ovi services through 2012 on Monday, beginning with new devices arriving in July and August of this year. Ovi, the Finnish word for “door,” will be rebranded simply as Nokia(s nok) services after the transition is complete. According to the company’s blog, this is a name change only and doesn’t affect the strategies and timetables for any future service plans.

The name change isn’t completely unexpected, as Nokia is undergoing a massive shift from an independent handset company with its own operating system, app store and services into a Microsoft (s msft) partner. In February, Nokia announced it would drop its Symbian platform in favor of Windows Phone 7, and in March, we learned Nokia would receive $1 billion over five years from Microsoft as part of the deal. Microsoft will integrate Nokia’s Ovi Maps into Windows Phone 7 and Nokia began a transition of its Ovi Mail service to Yahoo in April(s yhoo).

Aside from the Ovi Store, which Nokia uses to sell software applications, there’s little left of Ovi, which was introduced in 2007 and first launched a year later. Ovi Music is still active, but the Comes With Music initiative bundled with some handsets was scaled back early this year. The Ovi Files service, which allowed for remote file access on mobiles, shut down last October. Essentially, Ovi services for smartphones have been slowly contracting, even as the smartphone market itself has been growing.

Nokia’s deal with Microsoft, and the decision to move away from Symbian, means the company doesn’t need Ovi much longer, although there will still be Symbian device owners for a few years yet. However, the timing of the Ovi re-branding coincides with a rumor that Nokia will begin talks next week to sell its handset business to Microsoft. Eldar Murtazin is the source, and he’s often had accurate information on Nokia’s doings, as well as early access to its handsets.

My first, primary thought about this development was that such a deal would never happen, because Microsoft wouldn’t want to alienate its Windows Phone partners by competing against them. The purchase of Nokia’s handset business would turn Microsoft into a hardware maker. But there’s reasonable evidence that Microsoft wants to own the entire mobile experience in terms of hardware and software, just as Apple (s aapl) and Research In Motion (s rimm) do.

Microsoft has set minimum hardware requirements for Windows Phone 7 devices, which gives partners very little leeway on what to produce. The company also has its Zune media store to rival iTunes (s aapl), as well as a gaming platform in Xbox Live for its handsets. Microsoft’s constantly improving Bing search property potentially eliminates the need for Google’s (s goog) core competency, while Microsoft’s mobile Office products and email could replace Google Docs and Gmail for some.

Microsoft has the pieces of the puzzle to completely own the mobile handset experience, assuming it does become a hardware maker by purchasing Nokia. So what would its current partners think? I’m not sure they’d mind at all because all of them — LG, Samsung, HTC, and Dell (s dell) — have Google Android handsets on the market that are likely far-outselling their Windows Phone 7 cousins.

An outright purchase of Nokia’s handset business may be a stretch given the company’s current total market cap of $32.8 billion; selling all or part of the Devices and Services line would leave Nokia with NAVTAQ NAVTEQ and Nokia Siemens Networks (s si). However, Microsoft is in a buying mood, having just dropped $8.5 billion in cash on Skype last week, which has the potential to help Windows Phone 7. As they say: When one Ovi, er, door, closes, another one opens.

9 Responses to “Nokia Rebrands Ovi Amid Rumors of Microsoft Purchase”

  1. I for one do believe it may happen. 10 days ago, I never thought Microsoft would buy Skype, for an outrageous sum like $8.4 billion. Apple and RIM both make the entire widget themselves. Google less so. Microsoft and Nokia would be a good fit. They might almost be two separate sides to a same coin. It could work and Nokia is sinking slowly. A buy out would revive its fortunes.

  2. I am starting to see the logic in the sentence – the bigger they are the harder they fall.
    Man, instead of going out slowly these companies prefer to have a grand vanishing act. Larry Page must have celebrated today. Nothing is better for him than this rumor. Everyone is talking about it and we can all bet on no handset manufacturer to remain indifferent.
    Microsoft will accelerate their demise by 5 years or more with this ingenious strategy.
    Sometime its better to let go and rethink. If I were to give them an advice I would target the home tablet segment and leave the mobile. Or at least concentrate on apps for mobile that can interface with their OS for tablet and desktop.
    Get back to the basics. They have the advantage with win7 – and should build the best OS for tablets based on desktop characteristics. Exactly where Android is struggling. Problem with those companies is balance between strategy and focus. Vision is great but focus is just as important.

  3. Jukka

    Is it really a slow news day or what? There is about as much merit to this report as there is to…well, something very unlikely.

    Nokia is, in many respects, an unbuyable company. First of all, there are no major shareholders, just lots and lots of small ownership stakes. Getting them all to agree would be challenging. Second, the non smartphone assets of Nokia would be very burdensome to a purchaser. S40 and the lower end devices do not and should not interest Microsoft. Yet, that is where Nokia is really strongest today. Finally, leaving NSN and Navteq does not leave much of a company. Who wants to the one holding that bag?

    Furthermore, saying that MSFT is in a buying mood because of their Skype deal is kind of a stretch. That was a very uncharacteristic move for MSFT. One that the markets did not look too favorably on. Going into an even bigger acquisition ($30-40 billion), especially one with the baggage that Nokia comes along with, might make the markets retaliate…perhaps violently this time.

    Finally, even though MSFT may want to own the experience, I think they already have a good deal. They got the best hardware maunfacturer into bed with them. Nokia’s fortunes are now significantly tied to making sure that the Windows platform succeeds. Is MSFT going to be able to manage the HW side of that better than Nokia? I think not.

    Come on Kevin, you can come up with something better than this.

    • Nokia dropping Symbian was unlikely as well although we’d been calling for that happen for more than a year before it actually did. ;) I agree that there are major hurdles that could prevent this: you named several fairly accurate ones in my opinion. But I still don’t think it’s out of the question.

      One interesting point you make about S40 and the low end devices where Nokia is currently successful. There’s no reason that piece couldn’t stay with Nokia because I agree: Microsoft won’t want it. That market is transitioning away in favor of smartphones. There are plenty of possibilities here.

      In fairness to your points, I wouldn’t have written about the Microsoft purchase rumor if the source hadn’t been Murtazin. He’s been right about many things: the Ovi change, the WP7 deal with Microsoft and much more. Nope, that doesn’t mean this is a done deal, but I think it was at least worth sharing and having the discussion.

  4. Nokia acquisition by Microsoft could be huge, given the recent purchase of Skype. That way Microsoft would be into telecommunication market that has a huge potential.