Nokia's new cheap models bet on games, web access

HELSINKI Tue May 15, 2012 8:13am EDT

Illustration picture shows Nokia logo on used cell phone, in Zurich, April 30, 2012. REUTERS/Christian Hartmann

Illustration picture shows Nokia logo on used cell phone, in Zurich, April 30, 2012.

Credit: Reuters/Christian Hartmann

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HELSINKI (Reuters) - Nokia patched up its ailing basic phones offering on Tuesday with two models offering access to games, applications and the Internet, hoping to regain its footing in emerging markets.

After precipitously losing its position in the smartphone market to Apple's iPhone and models running Google's Android software, Nokia has also been losing its shine in the basic phone market, which had been a reliable generator of profits.

Nokia's basic phone sales fell 16 percent in the first three months of 2012, and have fallen in four of the last five quarters, while rivals like China's ZTE and Huawei have been growing fast.

China's largest search engine Baidu Inc is also planning to enter the cellphone market with a cheap smartphone.

The new Nokia 110 model will be sold for 35 euros ($45) and will start shipping in the second quarter, while the 112 model will be sold for 38 euros from the third quarter, with both using Nokia's Series 40 software, the Finnish phone maker said.

Nokia said new models would come with a license to download 40 games by Electronic Arts and offer Internet access with the a new browser built upon its 2010 acquisition of U.S. firm Novarra.

"These products are critical for Nokia to maintain traction in the face of mounting competition from Samsung and the Chinese rivals," said Geoff Blaber, analyst at CCS Insight.

"Nokia's Series 40 platform is under attack from all sides. Full touch support is a must if Nokia is to fend off the challenge from aggressively priced Android devices," he said.

Around 105 million full touch-screen basic phones were sold last year globally, but Nokia has been slow to react. It is due to unveil a full-touch 306 basic phone model only in the coming months.

Nokia's shares have lost 90 percent in five years, and two of the three major ratings agencies cut its debt to junk last month.

Nokia stock was 2.6 percent lower at 2.28 euros at 1150 GMT.

($1 = 0.7789 euros)

(Additional reporting by Eero Vassinen; Editing by Will Waterman)

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