August 29, 2007 / 9:48 AM / 12 years ago

Nokia wades into new music, gaming services

LONDON (Reuters) - Nokia NOK1V.HE, the world’s largest cell phone maker, unveiled an online music store, a gaming service and four new multimedia handsets in a move to take a greater share of consumer spending from mobile operators.

Nokia's new music and gaming phone, the N81, in an undated handout photo. Nokia, the world's top mobile phone maker, unveiled on Wednesday a new online music store, new top-end handsets and a global gaming service as it takes on recent rival U.S. rival Apple. REUTERS/Nokia/Handout

Nokia, which sells more than one third of the world’s cell phones and is seeking new sources of revenue as that industry matures, said its core market of making mobile handsets was just “not enough anymore.”

“We are trying to make the cake bigger for everyone: our piece grows, but also operators will benefit through data revenues,” Tapio Hedman, head of marketing for Nokia’s multimedia unit, told Reuters.

Nokia’s shares jumped to their highest level in more than five years on the news. But some of its top customers — mobile phone operators that have built their own music service offerings — reacted with caution.

“Some operators in Europe will not like this at all,” said Shaun Collins, managing director at research firm CCS Insight.

Nokia Chief Executive Olli-Pekka Kallasvuo said at an all-day event in London that the company would start to sell touch-screen phones — Nokia’s answer to Apple Inc’s (AAPL.O) iPhone handsets — using its popular S60 software next year.

Nokia shares jumped to levels last seen in April 2002 and then closed 4.6 percent higher at 23.31 euros in Helsinki.

NOKIA OPENS DOOR TO MUSIC, GAMES

Nokia said it would wrap mapping services, its new music store and gaming services into an Internet service offering under new brand “Ovi,” a Finnish word for “door.”

“Nokia is seeking to become a gatekeeper to services to increase brand loyalty — one brand with several hooks,” said Glitnir analyst Jussi Hyoty. Nokia said it aimed to introduce the brand to consumers on a step-by-step basis, combined with its other advertising campaigns.

Nokia unveiled a top-end music and gaming phone, the N81, and a new version of its top profit generator, the N95 handset, its key rival to the iPhone. Nokia also unveiled two mid-priced music phones: the Nokia 5310 and 5610.

“The range of new handsets with good storage steals a march perhaps on iPhone. If they can get the high-storage device out before the iPhone hits (Europe), that would be a good idea,” said Daniel Winterbottom, an analyst at research firm Informa.

Apple, which broke into the cell phone industry this year, saw its long-awaited iPhone handsets fly off shelves when the sleek, touch-screen multimedia device hit U.S. stores in June. Its European launch is expected later this year.

Nokia said it would roll out its own music store in key European markets — Britain, Germany, France, Italy and Spain — later this year, with songs selling for 1 euro ($1.36) each, a similar price point to Apple’s iTunes.

Nokia’s music store will start with a couple of million songs, compared to more than 5 million titles in iTunes.

Nokia's new music and gaming phone, the N81, in an undated handout photo. Nokia, the world's top mobile phone maker, unveiled on Wednesday a new online music store, new top-end handsets and a global gaming service as it takes on recent rival U.S. rival Apple. REUTERS/Nokia/Handout

“This service isn’t sufficiently differentiated to make a major impact in terms of convincing consumers to either start using legal download services, or wean them off of Apple’s service and dedicated music devices,” said analysts at Forrester.

Nokia said it hopes to benefit from its presence in more than 130 countries in tailoring music offerings to local tastes.

Analysts said the music industry would welcome a serious alternative to iTunes, which dominates the digital music distribution market. But shares in Apple rose nonetheless, fueled by excitement over the pending launch of new iPods.

Additional reporting by Kirstin Ridley in London and Sakari Suoninen in Helsinki

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