Nokia's Application Store Faces Apple Dominance

Nokia (NOK) is the world's largest handset company. It has been late to the high-end smart-phone market, but it has distribution leverage all over the world because of its 37% global market share. One of the things Nokia will need to cement its place in the smart-phone market is an application store like the one Apple (AAPL) has. Apple apps have been downloaded over one billion times, mostly onto its iPhone.

The Apple App store gives the company two significant advantages over its competition. The first is that outside developers make the software apps saving Apple engineers huge amounts of time and effort by building a worldwide network of people all working on products for the relatively new iPhone. Second, the apps are useful tools for entertainment, business management, and daily tasks. People with a handset that gives them so many features are unlikely to switch to competing products. (See pictures of iPhone applications.)

Nokia will launch its app store, Ovi, this week. According to Reuters, the store "will appeal globally to some 50 million phone users." That customer base dwarfs the number of iPhones. (See the top ten applications of 2008.)

Nokia cannot be counted out in the app download business even though Apple's store launched months ago. Developers may not want to miss the opportunity to offer products to such a huge customer base. Software made for the iPhone will often not have to be re-engineered from the ground up to work on Nokia phones. There are financial advantages to having access to two smart-phone platforms. (See pictures of the iPhone.)

The losers in the race to offer thousands of useful smart-phone applications may be Motorola (MOT) and Samsung which still do not have major initiatives to bring in software developers and the customers that often come as a by-product when attractive products are available for handsets.

Apple has a big enough lead in terms of when it launched its App store to make it a success. Nokia has enough users to do just as well.

— Douglas A. McIntyre

See pictures of iPhone applications.

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