Nokia Shrinks Services, Cuts Jobs

Nokia Corp. (NYSE: NOK) plans to scale back its services business and cut 450 jobs in the division as part of an ongoing cost reduction program.

The Finnish phone maker, which has ventured into developing and delivering Ovi-branded mobile Internet services that are tied to Nokia devices, said it will limit new service initiatives and rely more on third-party partners for certain features on its phones. (See Nokia Stakes Claim on Services.)

The move is part of Nokia's wider plans to cut operating costs by €700 million (US$910 million) by the end of 2010. And it's not the first time the services division has been the target for job cuts: In August, Nokia trimmed 200 positions from its services and software divisions. (See Nokia Cuts Jobs, Nokia's Cellphone Hope, and What Do Nokia’s Results Portend?)

The company said that investment in the services business will be focused on fewer initiatives and that it will look for ways to use more "common enablers" across different services. (See Mail on Ovi Goes Beta.)

For example, all mobile games will now be available from the Ovi store as well as the existing sales channels. (See Nokia N-Gages With Mobile Games and Nokia Beefs Up Map, Messaging Services.)

In addition, Nokia will also look to work with more third-party partners, especially for "image capture" and "sharing features" on its handsets. The company aims to bring in third-party image and social networking sites so that people can access on Nokia handsets the social networking applications they're accustomed to using on their PCs.

Nokia has partnered with several mobile operators to develop Ovi services, including Telefónica SA (NYSE: TEF), Telecom Italia Mobile SpA (Milan: TIM), T-Mobile International AG , and Vodafone Group plc (NYSE: VOD). (See Telefónica Hugs Ovi, Vodafone Opens the Ovi, Nokia, TIM Do the Net, T-Mobile, Nokia Collaborate, and Etisalat Offers Nokia's Ovi Services.)

Nokia's services business unit recorded revenues of €150 million ($195 million) in the first quarter of this year, down 5 percent sequentially and up 79 percent compared with the same period a year earlier.

— Michelle Donegan, European Editor, Unstrung

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