Nokia to buy Oz Communications

Nokia is bulking up its communications platform with the acquisition of Oz Communications, a privately held Montreal-based company that offers mobile e-mail and instant messaging.

On Tuesday, Nokia said it would buy Oz for an undisclosed amount, bringing Oz into its services and software unit. The deal is expected to close in the fourth quarter.

Oz has been around for about five years. And the company, which has been working with Nokia since 2003, has raised more than $71 million. Its IM, e-mail, and social-networking technologies are used by several mobile operators, including Verizon Wireless, Sprint Nextel, T-Mobile USA, Alltel, and Rogers Wireless. With just 220 employees, Oz claims to have 5.5 million monthly paid users using its products.

The acquisition should fit nicely with other mobile social media and communication buys Nokia has made over the past couple of years, including those of Twango, Plazes, Enpocket, and Navteq.

With these acquisitions, Nokia has been amassing a portfolio that extends far beyond handsets. It is looking to extend its reach to services and applications, integrating devices with services and packing them with cool features such as navigation, mapping, and music. The idea is that the services will help differentiate the handsets from others on the market and also provide the company with additional revenue.

Nokia is still in the early days of executing on this strategy. It just officially launched its Ovi platform, which serves as a hub for many of its services. So it's difficult to say how successful it will be. The company leads the market, in terms of handset sales worldwide. But it's had a weak standing in the United States, where some of these more advanced services would likely play well.

Meanwhile, Nokia is facing competition from new entrants in the mobile market, such as Apple, with the iPhone, and Google, with the new Android operating system. These companies are also emphasizing services and applications as way to differentiate their products.

Apple launched the App Store earlier this year, when it released the new iPhone 3G. And the first Google Android phone will go on sale next month on T-Mobile USA's network. Like Apple's App store, Android also has a marketplace in which third-party developers can distribute applications for Android phones.