Nokia: Outsmarted on Smartphones

Is Nokia (NOK) losing its mojo? The Finnish company has been the largest mobile-phone maker in the world for more than a decade, and it remains a financial juggernaut with $70 billion in revenue. But Nokia is losing ground in the fast-growing and lucrative smartphone business. Apple (AAPL), Research In Motion (RIMM), and companies such as HTC that use Google's (GOOG) Android operating system have come on strong, creating a serious challenge for the industry leader. "Apple has [created] a superior user experience; Android is also gaining a lot of traction," says Jari Honko, an analyst at eQ Bank in Helsinki. "Yes, Nokia is in trouble in smartphones."

Nokia is unlikely to lose its top spot in mobile phones. But it could see revenues and profits suffer if Apple takes over as the largest player in smartphones, which some analysts believe could happen. Generator Research, a British consulting firm, forecasts that Nokia's share of smartphones will slide from about 40% now to 20% by 2013, while Apple climbs into the top spot. "If Nokia gets dispositioned in the segment and Apple starts calling the shots—which is what's happening now—you are going to start seeing [a larger] impact in three to four years," says Andrew Sheehy, co-founder of Generator.