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SEPTEMBER 24, 2003
By Olga Kharif A Wrong Call on Nokia? [Page 2 of 2] CAMERA AND RADIO. Nokia could also see a sales spike as the largest U.S. wireless services provider, Verizon Wireless, introduces two of Nokia models in the fourth quarter, says Pekka Vartiainen, senior vice-president for Nokia Mobile Phones, Americas. And Bell Mobility, the wireless services unit of Bell Canada, should start selling at least one Nokia handset in early October, he says. While demand is climbing for lower-priced phones, Nokia is convinced that it can attract customers for all 28 models it has released so far this year. Seven more are expected before yearend, and nearly all of them are in the middle to high end of the market, says Vartiainen. One example is the Nokia 6225 camera phone, released on Sept. 12, which sports a color screen and integrated FM radio. Carriers will pay around $200 for the unit, vs. around $100 for Nokia phones with fewer options, estimates RBC Capital Markets analyst T. Michael Walkley. And Oct. 7 will mark the debut of the much-anticipated N-Gage portable gaming console that also functions as a cell phone -- Nokia's first foray into the gaming-hardware market. Each device should cost carriers about $299, with the line contributing $7 million in sales this year, estimates Erik Zamkoff of Independent Research Group, a New York-based equities-research firm that's a subsidiary of TheStreet.com. NEXT-GENERATION BOOST. Next year, Nokia should start seeing some volume from so-called next-generation wireless phones, which allow for advanced data services such as video streaming. A slew of these models is expected to be launched in the first half of 2004, says Vartiainen, as the market grows at a triple-digit rate. And each handset should be priced at more than double today's average of $150. Nokia might also benefit from less competition in China, the world's largest mobile-phone market. According to recent press reports, Beijing is considering capping its phone manufacturers' domestic output because the market is suffering from too much inventory. Such a cap could put the weakest of the local manufacturers out of business -- and give Nokia a boost. For now, though, overproduction in China remains a threat. And in many regions, such as the fast-growing Latin American market, low-price models constitute the overwhelming bulk of Nokia's sales. That has been the case for years, however, and it has been one phone maker able to keep its average selling prices relatively steady. RESURGENT RIVALS? Rivals Motorola and SonyEricsson (the electronics giants' joint venture) will be stepping up the competition as well. The latter, which has been losing market share for the past two years, is releasing new models that analysts like. And Motorola has teamed up with software giant Microsoft (MSFT ) to produce smartphones -- hybrid cell phone-personal digital assistants -- a tiny market that Nokia dominates and which Strother estimates will grow from the 11.6 million units shipped this year to 25 million in 2004. Finally, Nokia has to prove that some of the newest wireless-network technologies its infrastructure business sells work well, says Richard Windsor, an analyst with investment bank Nomura in London. Nokia has struggled with technical glitches in the past, but "those [problems] have been solved," responds a Nokia spokesperson in an e-mail. So too, perhaps, will the problems that have been holding investors back.
 Kharif covers technology for BusinessWeek Online in Portland, Ore. Edited by Beth Belton
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