Nokia, having abandoned its ambition to develop a high-end Operating System (OS), is shifting its programming efforts toward creating software for its low-end phones, according to people familiar with the matter.
The project is a Linux-based Operating System code-named Meltemi, the Greek word for dry summer winds that blow across the Aegean Sea from the north.
It is being led by Mary McDowell, the handset maker's Executive Vice-president in charge of mobile phones, these people say.
A spokesman for Nokia, Doug Dawson, declined to comment on the Finland-based company's future products or technologies.
Nokia's attempt to build its own software is another sign that the value in the technology industry is shifting from hardware to software.
In the past year, Google's Android platform has dominated the midrange smartphone market while Apple's iPhone, which runs Apple's iOS Operating System, has captured the high end.
Analysts say mobile-handset makers that have their own platform, such as Apple, have big advantages.
They can better define their products against rivals and aren't dependent on other companies for growth.
Nokia's efforts mirror those of South Korea's Samsung, which is investing in its own Operating System called Bada and making high-end smartphones that run Android, people familiar with the matter say.
There is a danger in "being overcommitted to one platform," says Canalys analyst Tim Shepherd, referring to vendors who build smartphones that run Android.
"The key, important thing is to spread the risk," he adds.
The issue for Nokia, says one of the people familiar with the matter, is that even consumers in emerging markets now expect low-end feature phones to act like smartphones.
Feature phones offer limited Internet functionality and are used mainly for voice and text communications.
For Nokia, the low-end mobile-phone business is crucial to its survival.
Feature phones accounted for about 47% of the company's device-and-services sales in the second quarter.
In February, Nokia Chief Executive Stephen Elop pledged to boost the company's low-end phone business by targeting people in emerging markets who don't yet have mobile phones.
Emerging markets traditionally have been a source of strength for the Finnish company, but its lead in the category has been challenged by low-cost Chinese manufacturers.
Less-costly smartphones — in part thanks to Android, which Google offers to manufacturers free of charge — also threaten to eclipse the low-end phone market.
Feature-phone shipments fell 4% from a year earlier in the second quarter for the first time since 2009, according to market researcher IDC.
Nokia has a long history in developing its own software.
The company started work in 2003 on its own high-end Operating System, called Maemo, but the effort faced setbacks inside Nokia due to management changes and shifts in strategy.
Nokia initially envisioned the platform for use in tablet computers and electronic devices other than its phones, because the company didn't want to divert focus from its Symbian Operating System, according to people familiar with the matter.
After Apple launched the iPhone in 2007, Nokia started targeting Maemo for smartphones.
Then last year, Nokia said it would combine Maemo with software from Intel to create a next-generation Operating System called MeeGo.
But in February, Mr. Elop said Nokia would make smartphones using Microsoft platfor, Windows Phone 7, effectively ending Nokia's Intel partnership.
In the meantime, Nokia began shipping its N9 smartphone, its last and only MeeGo device.
The high-end smartphone features a 3.9" touch screen, and unlike Apple's iPhone and other touch-screen smartphones, lacks a home button at the bottom of the device.
The N9 is available in 50 markets including Russia, Brazil and China, but currently not the USA.
It retails for between €480 (US$644) and €560 (US$752), depending on storage size.
On Wednesday, Intel announced support for a new Operating System, called Tizen, reflecting its decision to reduce its focus on MeeGo, which was hurt when Nokia shifted its support to Microsoft's Windows Phone 7 system earlier this year.
While Nokia won't be making any more MeeGo devices, there are indications that the touch-screen user interface in the N9 could make its way down to Nokia's feature phones.
In announcing the Microsoft deal in February, Nokia said it planned to direct its MeeGo efforts toward next-generation devices and platforms.
Meltemi made its first appearance in an internal Nokia memo, uncovered in April by a UK technology website, the Register.
In the memo, Nokia said employees on the MeeGo teams would have opportunities within the Meltemi effort.
And in an internal video that leaked online in June, Mr. Elop cited efforts to bring "full touch activity" to mobile phones and mentioned the Meltemi software effort.
It is unclear how successful Nokia will be with its new platform.
To cope with the competitive challenges, Nokia introduced so-called dual-SIM phones that allow users to have two phone numbers, a popular feature in emerging markets.
It is also working to close the gap with smartphones by launching feature phones with touch capability and a keypad.
Source: WSJ
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