Nokia Targets the U.S. Market

AT&T will carry Nokia's super-thin e71x smartphone for $100, posing a rival to the iPhone and BlackBerry as Nokia focuses on the U.S. market

By Olga Kharif and Jack Ewing

Is Nokia ready to change its fortunes in the U.S. market? The Finnish company has grown into the world's largest mobile-phone maker by conquering country after country. But in the U.S., Nokia has steadily lost ground in recent years, watching its market share shrivel to single digits.

Nokia hopes to reverse that trend. On Mar. 30, AT&T (T), the largest wireless carrier in the U.S., plans to announce it will soon carry Nokia's e71x, the thinnest smartphone available in the U.S. The phone is similar to traditional BlackBerry devices in looks, but is a sleeker 0.39 inches thick. It has a Qwerty keyboard, allowing for Web browsing and corporate e-mail access via regular wireless networks and Wi-Fi hotspots at cafés and airports. The device also has a built-in Global Positioning System, a music player, a video camera, and a memory card slot. The Nokia e71x is expected to hit the U.S. market in May and should cost $100 after rebate with a two-year contract.

"We believe this is a great opportunity for Nokia," says Hugo Hernandez, Nokia's head of E-series marketing for North America. "We are bringing in a device with the right [features] and the right price point."

Chasing BlackBerry and iPhone

This is the first time Nokia has offered a smartphone with a Qwerty keyboard through a major U.S. carrier. Wireless carriers including AT&T, T-Mobile USA (DT), and Verizon Wireless have carried a handful of Nokia's cheap and mid-tier devices. But to get Nokia's highest-end phones, U.S. customers had to buy them directly from the company, via its Nokia.com Web site or Nokia retail stores. That meant consumers would have to pay as much as $500 or $600, because the phones wouldn't get the usual subsidy from wireless carriers, rendering them largely unaffordable.

With an eye-catching, feature-rich phone for $100, Nokia could start to compete head to head in the fast-growing U.S. market for smartphones. Nokia may finally have a device to take on Research In Motion (RIMM), Samsung, and Apple (AAPL), whose iPhone starts at twice the e71x's price. "It could be the No. 3 [best-selling] smartphone at AT&T, [following the iPhone and BlackBerry]," says Matt Thornton, an analyst with Avian Securities.

Of course, one phone can only make so much difference. Nokia has long harbored some ambivalence about the American market because of the heavy control that wireless carriers exert in the country and because wireless technology in the U.S. has not been as advanced as in Europe. Some experts believe Nokia let its U.S. market share slide in part because it could reap higher returns in other markets, though Nokia executives say they haven't deliberately neglected the U.S.

Investing more in the U.S. market

To gain back market share and prove it's serious about the U.S. market this time, Nokia needs to follow up the e71x with comparably promising phones. In particular, the company needs to develop more phones with the CDMA wireless technology used by Verizon Wireless and Sprint (S). "It'll be difficult [to increase their market share] due to their [near] lack of CDMA presence," says Hughes De La Vergne, a principal analyst at Gartner (IT).