Nokia's Netbook: Destined to be Niche

News came out yesterday that Nokia (NOK) will be entering the crowded netbook market. For those who aren’t familiar with the product, a netbook is a small laptop that can access the Web over a cellular connection.

I happened to have sat down yesterday with the company’s chief development officer, Mary T. McDowell, and strangely, the new netbook never came up…

Instead, based on what McDowell had to say, Nokia's main push these days is software. We spoke about the next wave of innovation in the mobile market, which McDowell believes will be in software applications. In fact, she said Nokia is becoming more 50/50 software and hardware mixed.

For example, the wireless company released Nokia Life Tools late last year, a bundle of agriculture and education applications for consumers in emerging markets. And it released Comes with Music phones in non-U.S. markets, which allow consumers to download unlimited music from their phones for a year.

McDowell also said Nokia's devices will increasingly become entertainment platforms—music, movies, applications, etc... The company is eager to expand its Ovi Store to sell this type of content.

So where does that place the new netbook, or mini-pc, as Nokia is calling it? Squarely in the niche market category. This doesn't represent a new approach for the company.

There are two main reasons: One, it runs Windows. This is obviously a play to the working crowd, otherwise, it would be running the company's Symbian operating system, which Nokia turned open-source last year. Two, it's a cellular-connected, 3G device. Selling it in the U.S. would be tons tougher, because of the closed nature of the telecom business here. The netbook has its best chance in Europe, where Nokia has better relationships with providers.

So let's call this a mini-laptop for white collar workers who reside in Europe. Nokia's business is about scale, not niche.

That's not to say it won't be successful. I walked over to ask my colleague Arik Hesseldahl, a BusinessWeek technology writer, his thoughts on the situation. He said the netbook "has a business case where 3G is reliable," but ultimately, "it will come down to its marketing and cell plans."

Here's a YouTube clip previewing the new netbook.

And here's BusinessWeek writer Olga Kharif's take on the news.

Before it's here, it's on the Bloomberg Terminal.