Nokia bolsters high-end with touch screen phone

* New N97 handset to be a flagship model
* Launch is “kicking off the next wave” of the N-series
* Key features include touch screen, full qwerty keyboard
* To hit markets by end-June at latest

(Recasts, adds CEO, analyst quotes; updates share price)

By Tarmo Virki

BARCELONA, Dec 2 (Reuters) – Nokia Oyj (NOK1V.HE), the world’s largest cellphone maker, unveiled its flagship N97 model smartphone on Tuesday, which drew a lukewarm response from analysts.

Nokia expects the handset — with a large touch screen, retailing for 550 euros ($693) before taxes and subsidies and due to reach market in the first half of 2009 — will bolster its N-Series smartphone offering.

It has promised to introduce touch screen models across its portfolio. Nokia was the last major handset maker to introduce touch screen phones after the runaway success of Apple Inc’s iPhone, and last month started to sell its first such model.

Its ailing position in the high end of the cellphone market worries investors and analysts as this is expected to weigh on the Finnish group’s profit margins.

“Without a doubt Nokia needed a high-end touch screen phone,” said Martti Larjo, analyst at Nordea.

The new N97 is a direct rival to Sony Ericsson’s X1 and HTC’s Touch Pro — both of which use Microsoft’s Windows software — and analysts said by the time it goes on sale more direct rivals will likely have appeared.

“It might give Nokia a little edge, but it’s six months until this reaches the market,” said Gartner analyst Carolina Milanesi.

CCS Insight’s Research Director, Ben Wood, said Nokia had faced difficult choices with the N97.

“It tried to cram in lots of different technologies such as a touch screen, full qwerty keyboard and plenty of memory, but it had to make trade-offs in its size and features,” he said.

“It has ended up with a relatively thick device that lacks some of the benchmark features expected in flagship products in mid-2009,” he said.

Nokia shares were up 2.46 percent at 10.82 euros by 1144 GMT, compared with a 1.44 percent rise in the Dow Jones Stoxx European technology index .


Nokia said at 550 euros, the new phone will retail at a price similar to the previous flagship models N95 and N96 when these were first came to market.

It introduced its last major N-series hit, the N95, in 2006 and started its sales early last year. To date it has sold more than 15 million N95s, creating revenues of several billion.

Nokia continues to dominate the global market for smartphones — handsets with computer-like features such as e-mail — but it sold less of them in the third quarter than a year ago, losing market share to Apple and Blackberry-maker RIM .

The Vice President of Nokia’s Devices unit, Jonas Geust, told Reuters of the N97: “This is really the start of the new N-series … really kicking off the next wave.”

Geust said touch screens and full-qwerty keyboards will be key features in the new wave of products.

“What would there be these days without touch … Touch for this category of devices is going to be important. Qwerty is also going to be important,” he said.

The battle for a bigger share of the smartphone business has heated up since Apple introduced its iPhone last year, and all vendors are after a bigger slice of the market, which is set to continue growing despite gloom in the wider markets.

“It’s clear no-one can escape the current economic situation,” Chief Executive Olli-Pekka Kallasvuo told a news conference, but declined to elaborate further as the company is set to update analysts on its market outlook on Dec. 4.

Meanwhile, the company also said it closed its acquisition of mobile software maker Symbian on Tuesday.

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