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Nokia's Slim Pickings for 2007

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
11/29/2006

Nokia Corp. (NYSE: NOK) is getting closer to launching new thin cellphones that it hopes will improve its profitability and market share in North America, home of its major rival, Motorola Inc. (NYSE: MOT). The Finnish vendor, however, is unlikely to see a major turnaround stateside before 2008, analysts predict.

Nokia has been showing off some of its new products for 2007 at its analyst conference in Amsterdam. The vendor has made no secret of the fact that it intends to bring out more skinny cellphones in a bid to compete with Motorola's world-beating RAZR line. (See Nokia: Thin Is In.) The company added a little more color to its skinny story at the analyst day.

"Nokia's presentations were dominated by the issue of thin devices," writes Nomura Securities analyst Richard Windsor in a research note. "Nokia has spent the last year migrating its mid-range platform to support thin devices which should allow 'thin' to be incorporated into almost any device Nokia chooses to make."

The Nokia 6300 will be the first of these products available in 2007. The vendor also gave sneak previews of a thin multimedia device -- the N76 -- and a skinny sub-$80 phone, codenamed "Barracuda."

The pressure's on Nokia, which last month reported a 4 percent drop in quarterly earnings, despite selling more phones. (See Nokia Stumbles in Q2.) "Nokia is promising to become a stronger competitor in the US, taking their CDMA engineers and transitioning them toward designing handsets specifically for the US market," notes Citigroup analyst Daryl Armstrong. "We do not expect that Motorola will have to deal with these phones competitively until 2008."

Overall, Nokia is predicting that phone volumes will grow by up to 10 percent in 2007. This is mildly bullish compared to numbers from Citigroup Investment Research, which is predicting growth of around 7 percent for the market next year. "Nokia seems to be more constructive on the prospects for replacement demand in emerging markets than we are," says Armstrong.

Nokia does say, however, that the average selling price of a device is likely to fall, in part because of more sales into developing markets.

— Dan Jones, Site Editor, Unstrung

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