Nokia takes on rivals with N97 touch-screen phone

BARCELONA (Reuters) - Nokia launched a flagship phone to update its aging high-end offering, but analysts said the device would not be enough on its own to help the world's top mobile phone maker recover lost market share.

Nokia continues to lead the global market for smartphones -- handsets with computer-like features such as email -- but it has lost significant share to Apple's iPhone and RIM's Blackberry, worrying investors and analysts as this is expected to weigh on the Finnish group's profit margins.

All vendors are after a bigger slice of the smartphone market, which is set to continue growing next year despite gloom in the wider handset market.

"Without a doubt Nokia needed a high-end touch-screen phone," said Martti Larjo, analyst at Nordea.

The new Nokia N97 handset comes with a large touch screen, will retail for 550 euros ($693) before taxes and subsidies and is due to reach the market by end-June next year.

It has promised to introduce touch-screen models across its portfolio. Nokia was the last major handset maker to introduce touch-screen phones after the runaway success of Apple's iPhone, and last month started to sell its first such model.

The new N97 is a direct rival to Sony Ericsson's X1 and HTC's Touch Pro -- both of which use Microsoft's Windows software and are in shops already -- and analysts said by the time it goes on sale more direct rivals will likely have appeared.

"It might give Nokia a little edge, but it's six months until this reaches the market," said Gartner analyst Carolina Milanesi.

CCS Insight's Research Director, Ben Wood, said Nokia had faced difficult choices with the N97.

"It tried to cram in lots of different technologies such as a touch screen, full qwerty keyboard and plenty of memory, but it had to make trade-offs in its size and features," he said.

"It has ended up with a relatively thick device that lacks some of the benchmark features expected in flagship products in mid-2009," he said.

Nokia shares were up 0.2 percent at 10.58 euros by 1415 GMT, broadly in line with the DJ Stoxx European technology index.

HIGH HOPES

The new phone will retail at a price similar to the previous flagship models N95 and N96 when these were first came to market, and Nokia said it does not expect the high price to hurt sales in the economic downturn.

"Our target group, 200 to 300 million technology leaders, in all times buy devices they are interested in," Nokia's head of sales Anssi Vanjoki told reporters, adding he also expects operators to subsidize phones.

"Operators have to compete for these clients, regardless of (the market)," he said.

Nokia introduced its last major N-series hit, the N95, in 2006 and started its sales early last year. To date it has sold more than 15 million N95s, creating revenues of several billion.

The Vice President of Nokia's Devices unit, Jonas Geust, told Reuters of the N97: "This is really the start of the new N-series ... really kicking off the next wave."

Geust said touch screens and full-qwerty keyboards will be key features in the new wave of products.

"It's clear no-one can escape the current economic situation," Chief Executive Olli-Pekka Kallasvuo told a news conference, but declined to elaborate further as the company is set to update analysts on its market outlook on December 4.

Meanwhile, the company also said it closed its acquisition of mobile software maker Symbian on Tuesday.

(Additional reporting by Sakari Suoninen in Helsinki; Editing by Andrew Macdonald and Erica Billingham)