Publish date:

Nokia Juices Email War

A services push targets Apple along with Blackberry maker RIMM.

Nokia (NOK) - Get Report is setting its sights on services like email in an effort to best rivals like Research in Motion (RIMM) and Apple (AAPL) - Get Report.

"I'm paying a lot of attention here to Apple and RIMM," Nokia CEO Olli-Pekka Kallasvuo told analysts on a conference call Thursday. He added that it was Nokia's intention to "match and beat that competition."

We are a "hardware company with software and services," Kallasvuo said. "We believe the link created between our mobile devices and mobile services will lead to stickiness with the consumer."

The comment highlights a major shift in Nokia's strategy away from being a pure mobile phone maker toward more of a service provider role. Selling email to business users and consumers, opening an Internet music sales site, even providing wireless navigation and traffic report services (as the deal for Navteq indicates) is part of Nokia's big plan.

It's a bold plan that pits Nokia's services against the new revenue aspirations of its phone company partners. But as both Apple and BlackBerry maker Rimm have shown, sleek devices with attractive applications can win customers. And phone companies have been willing to play along by paying these two phone makers a portion of their take.

The shift in strategy can't come fast enough.


TheStreet Recommends


, for example, has opted to avoid offending carriers and stick with its mobile phone focus. The approach has led to some scorching highs with the Razr phone followed by some painful lows in the post-Razr years that followed.


posted strong third-quarter profits, but sales of 12.9 billion euros missed analysts' target of 13.6 billion euros. And though the company shipped 111.7 million phones in the quarter, 1.7 million more than expected, the average selling price per phone fell at an alarming rate to 82 euros, nearly 10% below Wall Street's expectations for 89 euros.

Nokia executives, on the conference call with analysts, gave assurances that the company is still "taking profitable market share" as it slugs it out with low-price rivals in new growth markets like China, India, Indonesia and Africa.

But the plunging phone prices renew concerns that mobile phone makers are merely following the same path as PC makers. Critics fear that slashing costs and cutthroat pricing makes for a messy battlefield with only pyrrhic victories.

Fans of the new strategy say the move will pay off for the stock as analysts start to modify their view of Nokia as more of a service seller. "I think you'll start to see it in the multiple," says one Nokia investor, referring to analysts' calculation of the price of the stock related to its projected earnings.

Nokia shares rose $1.33 to $37.86 in midmorning trading Thursday.