Nokia plans to fold all its mobile phone development efforts into a single new business unit, reflecting the growing importance of its business of multimedia and Internet-enabled devices.

The new Device unit, as it will be called, will produce all of Nokia's mobile devices, including more traditional mobile phones, as well as Internet-enabled devices like the N series. The products were previously produced by three separate divisions, for mobile phones, multimedia, and enterprise solutions. As part of the reorganization Nokia will also create two other new divisions, called Software & Services, and Markets, to replace its existing structure. The divisions will all be launched on Jan. 1, 2008, the company announced Wednesday.

"When we introduced the [current] structure in early 2004, the market was still very voice centric at the time," said Nokia spokeswoman Arja Suominen. "The other areas were small but have grown much since then. So it makes sense to bring all these together in one unit."

Nokia said the changes will help to make its product development and manufacturing operations more effective and reduce the time it takes to bring new products to market.

"This isn't a cost-cutting exercise," Suominen said. "We seek greater efficiency."

The move comes as Nokia faces new low-cost challengers from Asia, as well as markets with high levels of phone penetration in developed countries. The current enterprise solutions unit will be split up, with business phones such as the E90 Communicator and the E61 smart phone to be merged into the device unit, and enterprise systems such as e-mail and security to be rolled into the services & software unit.

The services & software unit will also be in charge of all software products, including games, and Internet services, including navigation and music, that consumers can purchase separately.

Operating system software, such as the Series 60 OS, will be part of the device unit.

The device and services & software units will have their own research and development (R&D) teams. The Nokia Research Center will continue to pursue long-term research at the corporate level.

The third new unit, markets, comprises manufacturing, distribution, sales and marketing.

The changes will also be reflected in Nokia's financial reporting. Beginning next year it will publish financial figures for two segments: devices & services and Nokia Siemens Networks. Nokia joined forces with Germany's Siemens last year to form the joint venture Nokia Siemens Networks.

The new device unit will be headed by Kai Oistamo, who is currently in charge of Nokia's mobile phones business group. Niklas Savander, currently in charge of technology platforms, will head the services & software unit. The markets unit will be the responsibility of Anssi Vanjoki, who is currently heading the multimedia business group.