Nokia seen outlining smartphone, services push

BARCELONA (Reuters) - World mobile phone leader Nokia is expected to bolster its offering of high-end phones at a media and industry event in Barcelona on Tuesday, where it is also due to outline a push into Internet services.

Nokia still dominates the market for smartphones -- handsets with computer-like features such as e-mail -- but sales dropped in the third quarter from a year earlier and it lost share to Apple and Blackberry maker Research In Motion (RIM).

"I'm sure there will be a few new phones shown on Tuesday and Wednesday, something in the smartphone and touchscreen area," said Handelsbanken analyst Jan Dworsky.

The battle for smartphone business has heated up since Apple introduced the iPhone last year, with all vendors trying to grab a bigger slice of a market that is seen growing despite the backdrop of economic gloom.

"Smartphones should be a better-performing segment than others in 2009, even though growth will slow down versus 2008," Dworsky said.

While growth in the total mobile phone market slowed to just 3 percent in the third quarter, the smartphone market grew 28 percent from a year earlier to 40 million phones, according to research firm Canalys.

Surging demand for the latest iPhone and Blackberry models helped Apple and RIM to win a larger share of the smartphone market in the third quarter.

"Apple has redefined the whole category," said Sean Dalton, general partner at Highland Capital Partners, stressing the easy functionality of Internet use on the iPhone.

"I think the smartphone market really is two markets: In one there are two players: Apple and RIM. The other market is everybody else. No one of them has materially differentiated," Dalton said.

Nokia has led the smartphone market by a large margin for several years, but its sales fell on an annual basis for the first time in the third quarter as it was only ramping up production of new top-end models.

The drop has worried investors and analysts as it is expected to weigh on the Finnish group's profit margins.

Nokia's share of the market for smartphones fell to 38.9 percent from 51.4 percent a year before, Canalys said. Apple's market share jumped to 17.3 percent and RIM's to 15.2 percent.

To battle new rivals, Nokia said in June it would buy out other shareholders of UK-based smartphone software maker Symbian for $410 million and make its software royalty-free for other phone makers to counter new rivals.

Since then, 59 companies have said they plan to join the Symbian Foundation, including major mobile phone makers, making it larger than the alliance behind Google's Android.

Nokia would contribute Symbian's assets to the not-for-profit organization, the Symbian Foundation, uniting with handset makers, network operators and communications chipmakers to create an open-source platform.

Nokia has said it sees the Symbian Foundation as a faster way to bring new products to the markets. It expects to release the first unified Symbian Foundation software next year and introduce a new platform by June 2010.

Nokia's Symbian acquisition is still pending regulatory approvals, which Nokia expects by the end of the year.

(Reporting by Tarmo Virki, additional reporting by Brett Young; editing by John Stonestreet)