Nokia takes aim at iPod

AMSTERDAM: Nokia unveiled new premium phones on Wednesday that included one with an MP3 music player that it said will outsell Apple's iPod and a camera phone that it forecast will surpass Canon, the world's top digital camera maker.

The world's top mobile phone maker expects its new luxury "Nseries" handsets, which feature built-in hard drives and high-quality camera lenses, to boost sales by differentiating it and increasing its industry-leading margins.

Chief Executive Jorma Ollila said Nokia would sell 25 million smartphones -- handsets that offer limited PC-type functions like e-mail, more than double the 12 million it sold in 2004.

He also said at a company event in Amsterdam that the company expected to ship 100 million camera phones in 2005, and that Nokia would sell 40 million phones with MP3 digital music players this year, compared with 10 million in 2004.

By comparison, Apple said it sold 5.3 million iPods in the first three months of 2005 while Canon was the top seller of digital cameras in 2004, with 17 percent of the global market of 74 million units, according to research firm IDC.

Nokia unveiled its N91 multimedia phone, which will have a 4-gigabyte hard drive that can store thousands of music files. The phone, which will also run on high-speed 3G and wireless LAN networks, is due out by the end of the year.

Nokia said its other new phones, the N90 and the N70, will have two-megapixel cameras with high quality Carl Zeiss lenses. The N90 will be in shops in the second quarter at a price of around 600 euros ($784), while the N70, also a 3G phone, will hit the shelves in the third quarter. Apple's original iPod retails for about 319 euros in Europe while Canon's cameras start at less than half the cost of the N90.

"Who would have thought that Nokia would be the biggest MP3 and digital camera maker?" said Anssi Vanjoki, the head of Nokia's multimedia devices.

The company launched the new N-series sub-brand to make the new phone line-up stand out as luxuries specifically designed for high quality photos, video and music.

"Nokia is (already) a symbol of mobility. We're introducing a completely new brand. (to make) a distinction to define a completely new category, which is multimedia," Vanjoki said.

The new brand will help Nokia's camera and music phones distinguish itself from rivals, said Charles Dunstone, chief executive of Carphone Warehouse, in a video showed at the event. Samsung has already unveiled camera phones with higher resolution than Nokia's as well as a hard disk-based music phone, while Sony Ericsson will launch a Walkman phone after the summer holidays.

As phone subsidies from operators come under pressure due to cost cuts and aggressive price competition by virtual mobile operators, the new sub-brand may also convince consumers that they can pay more for their mobile phones, because they are buying a phone as well as a full-fledged music player and camera, Vanjoki said.

"Now there's no need to take a separate camera with you to make pictures," he said as he pointed to the Zeiss lenses also used in high-quality standalone cameras.

MUSIC SERVICE NOT READY

The hard disk-based music phone would have been launched sooner but Nokia is still working with Microsoft and its online partner OD2 to develop a music download service for mobile devices, Vanjoki told Reuters in an interview.

"But it will be this year. We're not going to miss Christmas," he said.

Nokia is also confident there will be an open standard for digital music protection, which it intends to use in its phones. Nokia does not want to use a proprietary format from Microsoft, despite an ongoing argument between the mobile phone industry and a handful of patent holders of key anti-piracy technology, he said.

"I think there will be more discussions, but it's starting to look better," Vanjoki said, referring to a more modest royalty payments proposal that was tabled by the patent holders two weeks ago.

Last week, Nokia pared back its expectations for sales of third-generation phones, which Vanjoki attributed more to the high price of video and other data services rather than the design of the phones. "It's expensive," Vanjoki said.

His multimedia division, which turned to profit in the first quarter, has recently transferred its first two models to the Nokia Mobile Phones division, which deals with volume production of mainstream devices, and this will happen more often in the future, Vanjoki said.

It also means that Nokia's Multimedia unit will stay on the cutting edge of technology and innovation, which will bring more risk, he said. "Not everything works," he warned.