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Is Nokia Out of Touch?

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Even with the holiday season already in full-swing, hot new gadgets keep popping up to vie for fewer and fewer consumer dollars. Nokia (NYSE: NOK  ) is the latest to take a crack at Apple's (Nasdaq: AAPL  ) iPhone, unveiling its rival N97 model on Tuesday. With a price tag close to $700 before carrier discounts, the N97 brings more competition to the iPhone and other touchscreen phones like Research In Motion's (Nasdaq: RIMM  ) Blackberry Storm, offered by Verizon (NYSE: VZ  ) , or Samsung's Instinct, purveyed by Sprint Nextel (NYSE: S  ) .

Nokia isn't just playing copycat, though -- the company has upped the ante with many enviable features. Like AT&T's (NYSE: T  ) Tilt, the N97 has a slide- out QWERTY keyboard well-suited for texting and mobile email. The huge 32 gigabytes of built-in memory, 3.5 inch touch screen that vibrates slightly when touched, and 5-megapixel camera that shoots near-DVD-quality video gives the device plenty of features that differentiate it from rivals.

Social-networking fans will also like its ability to run Flash applets, video, and animations (something the iPhone has yet to adopt) and easy access to social-networking sites. In a nod to Google's (Nasdaq: GOOG  ) Android, the device will dovetail with Nokia's Ovi Internet services and its app stores for music, games, and maps. With Apple adding iPhone applications at a rapid clip, it's hard to see how any device maker can be successful without offering a whole platform, rather than just a piece of hardware.

But while Nokia's latest offering looks to put up a real feature fight, it may fall flat right out of the starting gate. The device may not hit European shelves for six months, and there's no mention of when it will reach the U.S. While Nokia's CEO said it plans to market the N97 aggressively in the U.S., six months is eons in this market, giving competitors plenty of time to respond.

Nokia already learned some hard lessons in Japan, where it is calling it quits with a market share of 1% there. The iPhone has shown tremendous momentum in the U.S., more than tripling its share to 30% in the third quarter -- and didn't need to offer discounts on Black Friday. At this point, Nokia's worst enemy is time. Unless the Finnish giant can somehow freeze the competition while it catches up, it will continue to fall behind the pack in the U.S.

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Fool contributor Dave Mock offered the use of his time-machine to Nokia, but couldn't get the company to agree to the "results may vary" clause of the agreement. He owns no shares of companies mentioned here. Sprint Nextel and Nokia are Inside Value recommendations. Google is a Rule Breakers selection. Apple is a Stock Advisor pick. The Fool's disclosure policy once dated Heidi Klum when she was a nerdy high-school student.

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  • Report this Comment On December 04, 2008, at 4:28 PM, Inept wrote:

    Though longer than the typical gap Nokia employs between a product announcement and delivery, the gap is pretty typical for Nokia launches. Mind you that while the H1 2009 specification doesn't preclude an earlier launch, history suggests that the launch probably will hit the end of that window and not the beginning or middle.

    Perhaps the complexity of the device demands a longer production ramp up and test phase. Nokia has learned from experience that delays are better for the company and the customers than immature products. Perhaps Nokia doesn't want to launch into so much economic gloom. Perhaps Nokia wants to hit a trough in the iPhone's release cycle in the hopes of luring over some current iPhone users and those who are hoping to get an iPhone but unwilling to wait for the next iPhone iteration.

    It's hardly a case of being out of touch.

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