By Michal Lev-Ram

Remember when phone companies just made phones? That strategy no longer works in today’s Internet-accessing, mobile-gaming and MP3-playing world - and it definitely won’t work in 2008. That’s why Nokia (NOK), the world’s largest phone manufacturer, is in the midst of a reorganization it says will help the company grow beyond phones and cellular equipment. The new corporate structure, which takes effect January 1, 2008, will divide the Finland-based company into three main units: Devices, services and software and markets. It’s the services and software part that stands out for a phone manufacturer - typically more concerned with churning out devices than with providing services.

But the reorg is just part of newish CEO Olli-Pekka Kallasvuo’s overall strategy of morphing Nokia into a mobile Internet company, not just a phonemaker.

“The convergence of the mobile communications and Internet industries is opening up new growth opportunities for us, both in the devices business as well as in consumer Internet services and enterprise solutions,” Kallasvuo said last June when he first announced the reorg. Since he took on the chief executive role in 2006, Kallasvuo’s already led Nokia through several software and services-related acquisitions - including digital mapmaking giant Navteq, photo-sharing service Twango and Avvenu, a Palo Alto, Calif.-based company that lets users access content on their PC via cell phone. He’s also announced the launch of Ovi (which means “door” in Finnish), a one-stop Web portal which will combine Nokia’s various mapping, music, gaming and other mobile services. Some Ovi offerings are already available to wireless users in the United Kingdom, but recent software delays (welcome to the biz, Nokia) have forced the company to postpone the launch of one of its most anticipated services - a mobile gaming platform called N-Gage.

The shifting focus on software rather than pure hardware is a big step for the wireless industry. What’s more, it’s being pushed forward by many different types of companies (not just mobile operators) and could therefore end up driving competition and, ultimately, improving the consumer experience. But according to iSuppli analyst Tina Teng, the move is nothing new for Nokia.

“Nokia’s been doing this for a long time, and this is just the next step in moving beyond the devices themselves,” says Teng, who adds that the company’s music service in particular could be a game changer and a threat to carrier-operated stores, much like Apple’s (AAPL) iTunes. “Just look at what Apple did with their Wi-Fi enabled iPhones - you don’t have to go through the cellular networks to download music anymore.”

Speaking of Apple - the extension to software and services also means that Nokia’s circle of competitors is also growing. Once restricted to traditional phonemakers like Motorola (MOT) and Samsung, the company could soon find itself neck-and-neck with cellular operators who would rather sell their own branded services, Internet-centric companies like Google (GOOG) and Yahoo (YHOO) and mobile newcomers like, you guessed it, Apple. That’s probably why, as part of Nokia’s upcoming reorg, its new chief technology officer Bob Iannucci will be based in Palo Alto, the heart of Silicon Valley, and not in the company’s Finnish motherland.

Of course, while the demand for rich mobile experiences like location-based navigation applications, mobile Web access and on-the-go gaming is growing in many developed countries, lots of people - about 50 percent of the world’s population - are still just waiting to get their hands on their first cell phone. That means that Nokia still needs to focus on spreading and improving its physical goods. Sure, with an estimated 39 percent global market share the company’s the largest phone manufacturer in the world, but, as Motorola recently demonstrated the tables can turn much faster than you think - one minute you’re riding high on the Razr’s success, the next you’re posting a $138 million quarterly loss on your handset business.

As for Nokia, it will be a while before the results of the company’s reorg can be measured. For now, the Finnish phonemaker just needs to kick the door open - by launching Ovi, that is.

By Michal Lev-Ram

Half the world doesn’t even own a mobile phone but wireless carriers are already fighting over the next-generation cellular network.

Consumers may care less about whether they’ll be using WiMAX, LTE or UMB to download video to their phones or browse the Web faster than ever before. But one by one, mobile operators are aligning themselves with one of these competing next-generation, or 4G, technologies, placing billion-dollar bets on the horse they hope will win the race.

All three of the dueling technologies are Internet Protocol-based and tailored for mobile television, video chat and other data services that eat up a lot of bandwidth.

The first of these technologies to hit prime time will be WiMax, which Sprint (S) is expected to soon launch in three trial markets — Chicago, Washington D.C. and Baltimore. By the end of 2008 the company says it will reach 100 million people with its new network. Motorola (MOT), one of the suppliers of infrastructure equipment — and eventually WiMax-enabled phones — for Sprint’s upcoming service, says it has signed 15 contracts for commercial WiMax networks.

“We’re driving it at about twice the pace of traditional cellular technologies,” Fred Wright, senior VP of Motorola’s home and networks mobility unit, told reporters earlier this week.

WiMax proponents claim that the technology is superior to other 4G standards because it’s faster and more affordable. But Philip Solis, an analyst with New York-based ABI Research, says all 4G networks are more or less created equal.

“The three major 4G technologies are pretty much on par with each other,” says Solis, though he adds that WiMax has already been standardized and deployed.

That didn’t stop Verizon Wireless (VZ) from picking LTE — Long Term Evolution. Solis says LTE isn’t expected to become widely available until 2010, but Verizon says it chose the technology partly because the roaming potential it will have with Vodafone. The British company owns a 40 percent stake in Verizon and has already chosen LTE as its next generation technology.

Although the two largest CDMA carriers in the United States have picked opposing 4G technologies, Motorola’s Wright says that won’t slow adoption of next-gen networks.

“There’s probably more industry confusion that was created than anything else,” he says.

The U.S.’s No. 1 wireless carrier, AT&T (T), has not decided which 4G network it will deploy.

In addition to WiMAX and LTE, AT&T has yet another technology to choose from — Qualcomm’s (QCOM) UMB, or Ultra Mobile Broadband. So far, though, no mobile operator has committed to UBM.

But the bigger question — beyond whether the 4G network of choice will be WiMAX, LTE or UMB –– is whether consumers are as hungry for wireless broadband as carriers think they are.

“We’re all hoping they’ll want to watch TV on their cell phones,” says Qualcomm executive Joe Lawrence.

By Michal Lev-Ram

Mention Motorola and most people think cell phones. But if speculation that the company might say goodbye to its phone business proves true, Motorola will lose its core brand.

What would a Razr-less Motorola do? While its best known for phones, which account for about two-thirds of revenues, the embattled company has two other big business units: Enterprise mobility, which sells radios to the government, and home and networks mobility, which makes cellular infrastructure equipment and cable set-top boxes, among other products. And unlike its cell phone unit — which last quarter incurred an operating loss of $138 million — some of these other businesses are actually showing strong growth.

That’s why some analysts (and activist investor Carl Icahn) argue that hanging up on the cell phone business could benefit Motorola (MOT) shareholders. Case in point: While phones sales were down 36 percent last quarter compared to the previous year, sales of home and networks mobility products were up 6 percent and the enterprise mobility solutions business was up 47 percent.

“Motorola does have a leadership position in several markets,” notes Lawrence Harris, an analyst with Oppenheimer & Co.

Of course, not all of Motorola’s secondary businesses are booming. Ping Zhao, a senior analyst with CreditSights, says sales of cellular infrastructure equipment are in an industry-wide slump. Still, she puts Motorola’s total value without its handset business, at about $29 billion.

“Without the handsets you’ve got some businesses that are very interesting and very strong,” says Zhao. “Basically, the sum of its parts is greater than than its stock price would suggest.” Though Zhao says breaking up the company would be advantageous from a shareholder’s perspective, she adds that it’s not clear what it would mean for Motorola in the long run.

Motorola declined to comment on whether it would consider selling off its phone division.

Icahn recently claimed that doing so would produce almost $20 billion of additional shareholder value. The company’s third-largest shareholder has been pushing to split up the company since the Razr started its downward spiral. Former CEO Ed Zander opposed Icahn’s plan but new chief executive Greg Brown may be more amenable to making changes.

“While I do think the new CEO is going to take the opportunity to review the company’s portfolio, I would be surprised if we were to see significant action in the near term,” says Harris, the Oppenheimer & Co. analyst.

One of the reasons Motorola might be reluctant to sell its mobile devices unit, says Harris, is that it has synergies with other businesses within the company, such as cellular infrastructure equipment.

But last week acting Motorola finance chief Tom Meredith opened the door slightly by telling a group of investors that while Motorola could remain intact, “A change in circumstance sometimes requires a change in action. So I will leave it at that.”

Changing circumstances are the nature of the wireless market. Just two years ago, everyone wanted to own a super-thin Razr. But then competitors caught up with the clamshell phone while Apple (AAPL), Nokia (NOK) and other phonemakers started coming out with multimedia devices that left Motorola in the dust.

Of course, the company founded in 1928 as a manufacturer of in-car radios and other products has played a key role in the development of cell phones and has bounced back before. If the handset business stays with the company, it’s not impossible the phonemaker could regain its former glory.