Nokia fights back with cheap touchscreen phones

HELSINKI Wed Jun 6, 2012 12:15pm EDT

General view of the Nokia flagship store in Helsinki July 18, 2011. REUTERS/Jussi Helttunen/Lehitikuva

General view of the Nokia flagship store in Helsinki July 18, 2011.

Credit: Reuters/Jussi Helttunen/Lehitikuva

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HELSINKI (Reuters) - Struggling mobile phone maker Nokia Oyj has unveiled its first full touchscreen phones aimed at the budget end of the market, looking to fill a gap in its product range and catch up with rivals, particularly in emerging markets.

Nokia hopes the three new models will help it to claw back some of the lost ground at its basic phone business, which has tumbled in recent quarters alongside its even deeper problems in its smartphone business.

"Nokia urgently needed these products for emerging markets where rival Samsung has had full-touch, low cost devices like the Star since June 2009. Now Nokia needs to quickly make up lost ground with these new products," Ben Wood, head of research at CCS Insight, said.

Analysts at Strategy Analytics estimate that 105 million such handsets were sold globally last year, with demand particularly strong in emerging markets.

Nokia's basic phone sales fell 16 percent in the first three months of 2012 in part due to lack of touch screen models, and have fallen in four of the last five quarters, while competitors like China's ZTE and Huawei have been growing fast.

Due to this in its last quarter it lost the position of the world's largest volume cellphone maker, after leading the market for 14 years, to Samsung Electronics.

Samsung has also overtaken Nokia and Apple Inc in smartphone sales, where Nokia is trying to regain lost ground with new models using Microsoft software.

So far sales of Windows Phones have been slow to take off, but research firm IDC gave some hope to Nokia on Wednesday forecasting the platform to take No.2 position by 2016 after Google's Android.

IDC said it sees Windows market share rising four-fold to 19.2 percent by 2016, while Apple's share would dip to 19.0 percent. It sees Android still controlling 53 percent of the market then.

Shares in Nokia, which have more than halved over the last year, were up over 4 percent by 1500 GMT, outpacing a 2 percent firmer STOXX 600 European technology index.

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Nokia said on Wednesday its Asha 305 model would go on sale this month for 63 euros ($79), excluding subsidies and taxes. The Asha 306 and Asha 311 models will go on sale next quarter for 68 euros and 92 euros respectively.

"We are expecting Nokia to ship tens of millions of the new models during H2 with a visible financial impact on the feature phone business," said Nordea analyst Sami Sarkamies.

Previously Nokia has not had full touchscreen phones in non-smartphone segments.

The new phones, which combine a new swiping screen interface with Nokia's old S40 software, will be competing with similarly priced Android phones from the likes of Huawei, ZTE and Samsung.

"The modernization of user interface for touch screens is a step in the right direction and we think the new phones can compete against cheap Android models," said Pohjola analyst Hannu Rauhala.

"They are definitely heading in the right direction."

(Additional reporting by Eero Vassinen,; Editing by Mark Potter and Jon Loades-Carter)

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