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Nokia, RIM & Moto: 'Prosumer' Trinity

This week has changed the rules of the game in the smartphone market.

Following Motorola Inc. (NYSE: MOT)'s lead earlier this year with the Q phone, BlackBerry unveiled the Pearl on Wednesday -- a $200 phone with a feature set that should appeal to both business and consumer users. (See RIM Polishes Its Pearl and Moto's Q Pulls Up to the Curb.) Nokia Corp. (NYSE: NOK) capped the week on Friday with the debut of its $250 E62 handset with Rogers Wireless Communications Inc. (NYSE: RCN; Toronto: RCM) in Canada -- the first sight of the company's elusive enterprise-series in North America.

Analysts don't yet know which -- if any -- of these phones will be top-sellers. Some, however, expect that the influx of hip and relatively inexpensive new designs could be bad news for Palm Inc. and its ageing Treo family of phones.

The Nokia E62 is a color-screen, qwerty-keyboard, mobile email device that will cost $250 with a three-year contract and comes with data plans starting around $45. It doesn't, however, offer the WiFi connectivity option of its older European cousin, the E61.

Nonetheless, the new arrivals from Nokia and RIM spell more trouble for Palm, according to Gartner Inc. analyst Todd Kort. "The Treo is in trouble because the new 700-series models are not selling as well as anyone expected," Kort tells Unstrung. "The Treo 700 models are now priced in the high-end of the spectrum, and the old 650 is still producing a large portion of Treo volume because it is the only Treo that is competitively priced and it is not very different from the 700p."

"Palm will continue to do well in the near term because of the brand, but differentiation will be tougher as they're on the Windows Mobile train now," says Craig Mathias at the Farpoint Group . "Many Palm users are disappointed that the Palm OS isn't synonymous with Palm handhelds anymore." For, as Unstrung reported recently, the future of Palm's ace in the hole, its beloved mobile operating system, could be in doubt. (See Palm Platform in Doubt.) "What will become of Palm OS?" wonders Mathias. "Does anyone care that it's now based on open-source underpinnings?"

"Next year will be painful for Palm as Palm OS falls farther behind the competition and Palm attempts to get rolling with a new line of Treos based on Linux," adds Gartner's Kort. "Palm does most of its business in North America, and Linux phones have only been popular in Japan and China, with the backing of strong local wireless carriers."

The consensus is that Nokia could do well with enterprise customers but needs a wider American launch, a CDMA model E-Series phone, and WiFi connectivity to really push forward.

"The Nokia E62 is hard to judge because Cingular is still testing it and we do not know how it or the service will be priced," notes Kort. "Unlike the Pearl and Q, the E62 is going to be more strongly positioned for the enterprise, and because the enterprise market is much smaller than the consumer/prosumer smartphone market there is little chance that the E62 will achieve the sales volume of either the Pearl or Q in the U.S. market."

Farpoint's Mathias expects that the Q will be the most popular of the new breed of smartphones -- at least for now. "The Q will be the most popular, because Motorola's marketing folks will stay on top of the situation better than the other guys," he opines. "But expect many, many more products in this space over the next year, so marketing advantage will have to be earned continually."

Rob Enderle, principal at the Enderle Group agrees that the Motorola still retains the hip high ground in this style-conscious market: "Of the three devices, the Motorola had the greatest lust factor associated with it, due to the sharpest design, and that should allow it to outsell the others if all else was equal. Unfortunately, with carriers and plans all else is seldom equal, but it would still be my bet."

Gartner's Kort, however, fancies RIM's new Pearl, which he says is positioned for high volume sales because of its extremely competitive pricing. "I think it is the most important product RIM has released in several years," he says. "RIM has developed a very attractive design and is offering a good range of multimedia capabilities in a three-ounce device."

Jack Gold at J.Gold Associates notes that all the vendors are fighting over a relatively small market at the moment, although these and other devices could start to change that.

"I am expecting the smartphone market to be 200 million units within three to four years... up from 15 to 20 million units today," Gold says. "All of these companies have to be in the market and establish a position now."

There could be more "prosumer" phones to come. LG Telecom , Samsung Corp. , and Sony Ericsson Mobile Communications have all yet to launch devices in this market niche, Gold notes.

— Dan Jones, Site Editor, Unstrung

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