Nokia to Showcase N8 in Bid to Close Gap With Apple, Android

Nokia Oyj, the world’s biggest maker of mobile phones, has a lot riding on its annual showcase event next week as it tries to claw back ground lost to Apple Inc.’s iPhone and devices based on Google Inc.’s Android software.

The Finnish company is likely to focus attention at Nokia World in London on its high-end Symbian smartphone line, including the touchscreen N8, its latest effort to take on Android and iPhone handsets. The N8, announced in April, has an anodized aluminum case surrounding a 3.5-inch screen, with streaming and on-demand television services to show it off.

“This year, even more than last year, people are really eager to see what Nokia has done to close the gap with the competitors,” said Carolina Milanesi, a research director with Gartner Inc.’s U.K. unit. “With the N8 shipping, developers will have a product that will sell very well despite not being perhaps the high-end product people are expecting.”

For Chief Executive Officer Olli-Pekka Kallasvuo, the event offers a chance to show he can turn the company around amid speculation Nokia is seeking to replace him. Nokia shares have slumped 60 percent since Apple introduced the iPhone in June 2007 and the company’s market share in smartphones, the fastest- growing part of the industry, has shrunk.

Nokia will introduce devices and services on the revamped Symbian 3 operating system, according to a person with knowledge of the plans, with the N8 being the first of the new line. It’s unlikely to make major announcements on the MeeGo operating platform it’s developing with Intel Corp., the person said, declining to be identified because the plans aren’t public.

Promotional Push

Marketing efforts for the event on Sept. 14 and Sept. 15 include a press event in Helsinki today, a promotional film featuring former Playboy model and Baywatch star Pamela Anderson, shot with the N8 camera, and a prize winner chosen by lottery. Nokia has held the annual event for customers and the press since 1996. In Stuttgart in 2009, it drew 1,800 attendees.

This year’s event “will beat that number by a mile -- in fact it’ll be the largest Nokia World we’ve ever had,” spokesman James Etheridge said.

Nokia needs strong holiday sales with new devices to meet its goal of rebuilding device margins to 10 to 11 percent for the year after lowering forecasts for two consecutive quarters. The company has indicated it’s filling the pipeline with handsets running the new Symbian and also promised that MeeGo devices will start shipping this year.

‘Faster, Simpler’

Nokia shares rose as much as 2.9 percent, following a 4.5 percent gain yesterday after analysts at Morgan Stanley and Merrill Lynch said in reports they expect the N8 to sell well and raise Nokia’s average selling prices, or ASP, which have declined in recent quarters.

“The N8 is off to a good start,” Morgan Stanley analysts including Patrick Standaert wrote in their report. Early checks indicate “strong order intake from operators and a lower discount than feared,” they wrote.

The presentation in Helsinki today highlighted the N8’s 12- megapixel camera, high-definition video recording, navigable 3-D maps and ability to mirror its display on a television screen.

“This is faster, it’s simpler, and the capacitive display is more pleasant to use” compared with earlier Nokia touchscreens, said product manager Esa Alanen.

Fleet of Products

Kallasvuo said in July that Nokia plans to ship more than 50 million Symbian devices in coming years. The company’s last hit high-end smartphone, the N95 which introduced navigation, sold more than 10 million devices in the two years after it shipped in March 2007.

Nokia also signaled in July that it plans to have a fleet of Symbian 3 products for the holiday season, helped by the standardization of the new platform. The N8 was announced at an initial price of 370 euros ($489) before taxes and subsidies.

The N8 appears on Nokia’s websites for preorders and also appears on Vodafone Group Plc, T-Mobile, and Carphone Warehouse sites in the U.K.

Nokia may ship as many as 10,000 N8s a week during the early launch in the U.K. alone, Morgan Stanley said. The official ship date for N8 preorders in Finland is Sept. 30, spokesman Tapani Kaskinen said by e-mail.

The phone lists for 498.90 euros on the website of Finnish retailer Verkkokauppa and a more expensive version that includes all-you-can-eat track downloads from the Music Unlimited service will also be introduced in Finland, Nokia said.

C7 and E7

“I’m expecting to see a couple of other products, such as the C7, a cheaper version with a couple of features taken out and a more plastic look and feel, and the E7, an enterprise version of the N8 with a full Qwerty keyboard,” said Sami Sarkamies, a Helsinki-based analyst at Nordea Bank.

Neither model has been announced by Nokia although Mobile Review and other blogs have published reports about them. Nokia spokeswoman Arja Suominen declined to comment on speculation about the products or the content of Nokia World, citing the company’s longstanding policy.

“I think they’re going to focus on C7, which is more appealing than N8; it’s a smaller, cheaper, thinner version of the N8 and it’s probably a device that has more commercial appeal,” said Tero Kuittinen, an analyst at Greenwich, Connecticut-based MKM Partners.

Nokia said in July that the operating margin in devices could fall as low as 7 percent in the third quarter as it prepared to release the N8. The margin was 12.5 percent last year and 18.2 percent in 2008. In July, Nokia posted a 40 percent drop in second-quarter profit.

Shrinking Share

Nokia had 34.2 percent of the overall mobile-phone market, compared with 36.8 percent a year earlier, according to researcher Gartner Inc. Its smartphone share fell to 37.4 percent from 45 percent in the second quarter of 2009.

“Apple has been taking huge chunks of revenue and profit share from Nokia,” said Neil Mawston, a London-based analyst at Strategy Analytics. “Apple’s ASPs are only falling at about 2-3 percent year on year, whereas Nokia’s smartphone ASPs are declining at roughly 20 percent.”

Merrill Lynch analysts including Andrew Griffin wrote yesterday that the N8’s higher average selling price makes it likely Nokia will meet 2010 consensus earnings estimates.

Last year, Nokia showed the N900, its first product on MeeGo’s predecessor-platform Maemo, as well as the N97 mini, an improved follow-on for the N97 Symbian smartphone, the new X series music phones and a deal to link software to Facebook.

MeeGo Transition

“It will be interesting to see whether Nokia has come up with the upgrade to the N900 or waits longer to come up with proper MeeGo products,” said Milanesi.

Alberto Torres, the Nokia executive who leads MeeGo, isn’t currently listed in the speaker lineup for Nokia World.

“They’ll also have to address how they’re planning to segment the portfolio, exactly where Symbian stops and MeeGo begins,” said Mawston. “They’ll get so many questions on it, they’ll have to say something.”

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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