Nokia's Top Position Erodes

Like us on Facebook

"When mobile phones were more voice-centric, they were at their best. With these mobile phones becoming portable media computers, they have stumbled. You could point to Blackberry, iPhone and Android-powered smart phones and see how they have fallen off by comparison," Versace said. "There are two reasons: one is they have a lackluster product portfolio of smartphones. And two, they have little market share in the US." He noted that smartphones have historically sold better in the U.S. than in Europe and Asia.

"The N8 launches next quarter. It's a touch screen smartphone on Symbian version 3. It's a high spec device with a 12-megapixel camera," said Versace, who added that phone will go a long way in determining Nokia's future. "If that can't hold their market share internationally, it'll be a slow erosion of their market share."

If Nokia is going to turn around its declining smartphone fortunes, it will have to look further than its upcoming E73 Mode phone to make an impact, said Matt Thornton, senior analyst at Avian Securities. The E73 is getting released this month, but it looks more like a traditional Blackberry rather than the more futuristic touch screen models. He said the N8 phone will be its best chance at redemption, as it has features such as a high-end camera.

Versace added that Google's Android Operating System will likely become a popular operating system for many cell phone companies that want to compete with the iPhone. "HTC just switched over to the Android operating system. A number of players are going to try and utilize the Android operating system. Samsung, Motorola, Dell, Acer and Lenovo are a few others," he said.

Tina Teng, senior wireless communications analyst at iSuppli, disputes the notion that Nokia has failed to launch high-end phones. She said Nokia's smartphones are actually better in some areas than Apple's or HTC's.

"If you look at the hardware specs, they are not behind Apple at all. In fact, in some cases they are ahead. For example, Apple just introduced video conferencing. Nokia has had that for a few years," Teng said. Nokia's main issues are marketing and visibility. "A device is just a device. The market depends on what can you do with it. Apple shows people how they can use their iPhone and the app store. They have an ecosystem set up that Nokia doesn't," she said.

Not everybody thinks Nokia is in that much trouble. Pete Cunningham, senior analyst at Canalys in London, said Nokia and Samsung are the only handset providers in a position to sell in both the high- and low-end of the market. Nokia, he said, can sell smartphones but also still has room to grow its lower-priced models in countries such as China, where mobile phone penetration is still relatively low.ANd Nokia, he said, has pushed aggressively into the middle tier of the market.

In addition, the other makers of smartphones have been forced to focus on higher-margin models. The iPhone is an example of that -- Apple simply doesn't make a basic phone. But Motorola, Sony Ericsson and HTC have all been forced to concentrate on smartphones.

Cunningham also said that while Nokia has struggled in the high-end market segment, that may not be the case for long. Nokia restructured itself last year, and the rollout of the new version of the Symbian operating system could prove a boon to the sales of its N8.