The company, best known for its dominant share of the mobile phone handset market, is in the midst of stretching its corporate arms into the software and service businesses. With its second version of its wireless Web browser, it's taking closer aim at Silicon Valley's Phone.com, whose blitzkrieg market tactics have helped sew up a dominant share of the mobile Web software market.
It's in part the mark of a still-young market that hardware, software and service companies are taking aim so heavily at each other's businesses. But analysts say this developing software competition also is in part a smoke screen; each of the players is trying desperately to expand its own market niche and is trying to boost the consumer software business to help it reach its goals.
"The reason the phone manufacturers are getting into the browser and gateway (infrastructure) markets is that they want to make sure that content can be displayed on their phones," said Jane Zweig, executive vice president of Herschel Shosteck Associates, a wireless research firm.
The software being released today is the second full release of Nokia's Web browser, the mobile phone's version of Netscape's Communicator or Microsoft's Internet Explorer. While Phone.com has dominated this market to date, it also has drawn attention from most of the big handset manufacturers and even Microsoft itself, leading to market positions that are still rapidly evolving.
But the analogy to personal computing software can be drawn only so far. Wireless phone browsers are almost wholly invisible to most people, nearly indistinguishable from the text menus that allow someone to check messages or change settings on a telephone.
Nor does the browser function the same way as on the traditional Internet. Because phones have very little processing power, much of the behind-the-scenes technology instead resides on the other side of the connection, inside a "gateway" controlled by the telephone carrier.
These gateways are the real point of contention. Phone.com, for example, gives away its handset browser free, as a way to help sell its gateway and service packages to service providers. Because past compatibility problems have prevented one company's browser from talking flawlessly to another company's gateway, this market share of browsers has been important, analysts say.
"Basically, the microbrowser is a (way to sell) the gateway," said Dataquest analyst Tole Hart. "The endgame is selling gateways and the services that go along with the gateways."
In Phone.com's case, the gateway is the core business, along with persuading its carrier customers to sign up for other services such as voice mail, email or unified messaging.
Nokia also sells a gateway but has had only limited success in breaking into the market. WR Hambrecht analyst Peter Friedland estimates that Phone.com controls about 60 percent of this global market, with Nokia, Ericsson and NTT DoCoMo splitting the rest.
But Nokia has a broader aim: ensuring that the worldwide market for telephone handsets grows as large as possible. Making sure that people are using their phones for data and Web browsing--and that the experience is as seamless as possible--will sell more phones, the company hopes.
Nokia is betting on a new strategy: releasing the browser's "source code"--the programming instructions that create the software--to its customers, allowing them to modify it in whatever way they choose. While this doesn't match the full "open source" strategy that Netscape has pursued with its Mozilla Web browser project, it will allow potential licensees to tailor the software to their own devices.
"This doesn't mean it's going to be Mozilla open source. It needs to be better supported than that," said Paul Chapple, manager of Nokia's U.S. business development team. "But we've learned that you have to provide the source so the customers can control the destinies of their own products."
That's a critical step for the Wireless Access Protocol (WAP) technology underlying the browser, analysts say. Although WAP has attracted considerable attention in the financial and media communities, it is still immature and can always benefit from more developer review, they say.
"Nokia has recognized this is a way to deal with some of the problems that WAP is facing," Zweig said. "The real issue is going to be if--and when--somebody begins to open the code to the gateways. WAP is going to be full of so many problems, I think somebody is going to have to do this."
The company is selling primarily to other handset manufacturers and developers, Chapple said. No strategy for selling directly to carriers, its customers for the gateway systems, has yet been put in place. The browser will be installed in all Nokia phones sold in Europe, one of the strongest existing wireless markets, however.
Like Phone.com, Nokia is not depending on the browser itself to jump-start profits. The company says it's looking to bring as many developers as possible on board to work on wireless software and content, a market that is still somewhat sparsely populated.
"The goal is not to create a strong new revenue stream from client software," Chapple said. "The idea is to grow the market."