Nokia Rebrands Ovi Amid Rumors of Microsoft Purchase

Nokia announced a transition plan to rebrand its Ovi services through 2012 on Monday, beginning with new devices arriving in July and August of this year. Ovi, the Finnish word for “door,” will be rebranded simply as Nokia(s nok) services after the transition is complete. According to the company’s blog, this is a name change only and doesn’t affect the strategies and timetables for any future service plans.

The name change isn’t completely unexpected, as Nokia is undergoing a massive shift from an independent handset company with its own operating system, app store and services into a Microsoft (s msft) partner. In February, Nokia announced it would drop its Symbian platform in favor of Windows Phone 7, and in March, we learned Nokia would receive $1 billion over five years from Microsoft as part of the deal. Microsoft will integrate Nokia’s Ovi Maps into Windows Phone 7 and Nokia began a transition of its Ovi Mail service to Yahoo in April(s yhoo).

Aside from the Ovi Store, which Nokia uses to sell software applications, there’s little left of Ovi, which was introduced in 2007 and first launched a year later. Ovi Music is still active, but the Comes With Music initiative bundled with some handsets was scaled back early this year. The Ovi Files service, which allowed for remote file access on mobiles, shut down last October. Essentially, Ovi services for smartphones have been slowly contracting, even as the smartphone market itself has been growing.

Nokia’s deal with Microsoft, and the decision to move away from Symbian, means the company doesn’t need Ovi much longer, although there will still be Symbian device owners for a few years yet. However, the timing of the Ovi re-branding coincides with a rumor that Nokia will begin talks next week to sell its handset business to Microsoft. Eldar Murtazin is the source, and he’s often had accurate information on Nokia’s doings, as well as early access to its handsets.

My first, primary thought about this development was that such a deal would never happen, because Microsoft wouldn’t want to alienate its Windows Phone partners by competing against them. The purchase of Nokia’s handset business would turn Microsoft into a hardware maker. But there’s reasonable evidence that Microsoft wants to own the entire mobile experience in terms of hardware and software, just as Apple (s aapl) and Research In Motion (s rimm) do.

Microsoft has set minimum hardware requirements for Windows Phone 7 devices, which gives partners very little leeway on what to produce. The company also has its Zune media store to rival iTunes (s aapl), as well as a gaming platform in Xbox Live for its handsets. Microsoft’s constantly improving Bing search property potentially eliminates the need for Google’s (s goog) core competency, while Microsoft’s mobile Office products and email could replace Google Docs and Gmail for some.

Microsoft has the pieces of the puzzle to completely own the mobile handset experience, assuming it does become a hardware maker by purchasing Nokia. So what would its current partners think? I’m not sure they’d mind at all because all of them — LG, Samsung, HTC, and Dell (s dell) — have Google Android handsets on the market that are likely far-outselling their Windows Phone 7 cousins.

An outright purchase of Nokia’s handset business may be a stretch given the company’s current total market cap of $32.8 billion; selling all or part of the Devices and Services line would leave Nokia with NAVTAQ NAVTEQ and Nokia Siemens Networks (s si). However, Microsoft is in a buying mood, having just dropped $8.5 billion in cash on Skype last week, which has the potential to help Windows Phone 7. As they say: When one Ovi, er, door, closes, another one opens.