Nokia: Mobile phone leader or 'Internet company?'

At Nokia's annual meeting yesterday, CEO Olli-Pekka Kallasvuo vowed to change the business model of the world's leading mobile phone maker, to make it, in his words, "more like an Internet company."

"Our goal is to act less like a traditional manufacturer, and more like an Internet company," Kallasvuo told Nokia shareholders yesterday. "Companies such as Apple, Google, and Microsoft are not our traditional competitors, but they are major forces that must be reckoned with. Make no mistake. We are taking on these challenges seriously and aggressively."

Although the Nokia chief has been pointing strongly in this same direction over the past year or so, this time he cited Apple, Google, and Microsoft as "forces to be reckoned with" all in the same breath.

At the Mobile World Congress in February of this year, Kallasvuo announced that Nokia intends to "reshape the Internet."

The previous June, at his behest, Nokia added a division devoted to services and software as the company reorganized into three main units: Devices, Services & Software, and Markets.

Along the way, Nokia has been rolling out Internet-oriented products and services such as the Ovi online photo sharing service, the Nokia Music Store, a Flickr-like application called Share Online, Nokia Maps, and Nokia's Internet Radio.

At the same time, Nokia officials have been taking individual potshots for months now at the same companies Kallasvuo mentioned collectively as "forces to be reckoned with" during his speech yesterday.

At the World Mobile Congress, for instance, Niklas Savander, Nokia's executive VP of services and software, acknowledged hat both Google and Nokia share a similar vision for "operator-independent cross-platform software stacks." But he also attacked Google's Android as "still a PowerPoint presentation."

Meanwhile, in other venues, Kallasvuo has publicly characterized Apple's iPod as "a niche application."

As an indication that Kallasvuo seeks greater control of the company as it moves toward a more Internet-like business model, he also announced a stock buyback program under which the company's board of directors will repurchase up to 370 million Nokia shares.

Some observers suggest that, with a healthy balance sheet in hand, Nokia needs to be careful not to lose its lead in the mobile phone market as the company experiments with new Internet products and services. On the other hand, margins in the mobile phone market have continued to slide downward, as companies like Siemens found out before exiting that business several years before, and as Motorola is finding out now.

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