Nokia 7205 Intrigue Looks Like an Actually Decent Flip Phone

It's been a whirlwind year for Pantech Wireless. The Atlanta-based subsidiary of South Korean cellphone maker Pantech Group has released six phones in the last 12 months, including four in the last quarter. AT&T is promoting two of the handsets in TV spots as ideal holiday gifts. Patrick Beattie, Pantech Wireless' vice president of marketing and sales, says the company has never been busier.

While wireless giants like Nokia (nyse: NOK - news - people ) and Samsung slash their forecasts, Pantech Wireless, also known as PWI, is counting on its portfolio of slim, reasonably priced cellphones and its close ties with AT&T (nyse: T - news - people ) to help it grow in 2009.

Beattie says PWI's focus on stylish phones that mostly sell for $80 or less should boost its prospects in the current downturn. "We think our value is really resonating with customers in the U.S.," he adds.

Parent Pantech has a long and storied history in wireless. Following its founding in 1991, it says it created the world's first CDMA phone in 1994 and the first fingerprint-recognition phone in 2004. In its home market of South Korea, Pantech is the No. 3 cellphone maker, after Samsung and LG. In 2007, Pantech Group had revenues of $1.7 billion and sold 7.5 million Pantech-branded phones. It operates eight regional subsidiaries worldwide, in Beijing; Mumbai, India; Dubai, United Arab Emirates; St. Petersburg, Russia; and Sao Paulo, Brazil, among other cities.

PWI has sold products in the U.S. since the 1990s, but didn't target the market seriously until 2006, Beattie says.

Industry observers say PWI is taking the right steps, but remains a small player. Ramon Llamas, a senior research analyst at IDC, says Pantech ranks around No. 25 globally in handset sales, on par with Japan's Casio Hitachi. (IDC's figures, however, don't include the contract manufacturing work Pantech does for other brands.)

At the end of third-quarter 2008, PWI had just under 1% of the U.S. cellphone market, according to IDC. Beattie declined to give market share numbers, but said both PWI's and Pantech's sales figures had improved over the past two years.

To break out in the U.S., PWI must work closely with operators, says IDC's Llamas. "Distribution is the name of the game. It's great to be part of AT&T, but they should try to get in with more national carriers," he says. He is enthusiastic about PWI's Matrix and Slate phones, which have full Qwerty keyboards, noting that Americans are quickly snapping up messaging phones.

The Finnish phone maker's new N97 device could compete with low-cost laptops.

Handset maker unveils flashy touchscreen phone with full Qwerty keyboard and raft of Web services.

The device maker is expected to announce a major new product Tuesday.

At Nokia, the clock is ticking.

The Finnish mobile communications giant is poised to make a major announcement Tuesday at its Nokia (nyse: NOK - news - people ) World conference, a point underscored by a large countdown timer on the company's Web site.

Time is running out for Nokia in other ways. Though the company still reigns as the world's largest cellphone maker, some analysts say it has fallen behind Apple (nasdaq: AAPL - news - people ), Google (nasdaq: GOOG - news - people ) and Research In Motion (nasdaq: RIMM - news - people ) in terms of mind share. Nokia is clearly using its two-day conference to generate some buzz.

Speculation is rampant online with most guessing that the announcement will be a high-end phone that combines a touchscreen with a Qwerty keyboard. Such a device would be a first for Nokia, which just began shipping its first touchscreen phone, the 5800 XpressMusic. A special link on the Nokia World Web page that teases upcoming news about the "Nseries in 2009" offers subtle confirmation.

Other guesses making the rounds include a netbook or laptop, a motion-sensing device that can be controlled by gestures and an N-series device running S60, the latest version of the Symbian operating system.

Given the company's new emphasis on software, the announcement could also concern Internet services, possibly something related to mobile social networking.

In a research note released today, UBS (nyse: UBS - news - people ) analyst Maynard Um backed the idea of a small notebook or tablet PC. Citing unnamed sources, Um outlined a device that would sell for more than Nokia's $408 N810 tablet and include a touchpad, Linux-based operating system and wireless technology that supports mobile wallet and ticket services.

Finnish handset-maker Nokia exited Japan on Thursday, jettisoning a tiny slice of a dwindling market as it admitted defeat in the face of the global financial crisis.

"In the current economic climate we have been forced to sharpen our business focus," a Nokia (nyse: NOK - news - people ) representative told Forbes.com. The handset maker will stop selling phones and end marketing activities in Japan, a decision which is likely to cost about 50 jobs. About 350 employees, mainly researchers, will stay on. The company will also continue selling its ultra-high-end range of "Vertu" phones in Japan: these luxury handcrafted phones are tailor-made for recession-proof buyers, at around $5,000-$10,000 a pop.

The news did not come as a surprise -- Nokia's market share in Japan was barely 1.0%. Japan is a very mature market, dominated by local manufacturers and network operators like NTT DoCoMo (nyse: DCM - news - people ). Consumers also have little desire to upgrade and replace their phones. With the country in recession, Nokia was unlikely to want to plow more money into a sinking ship.

"Nokia has bigger opportunities in other markets," said Carolina Milanesi, an analyst with Gartner Research, "not in a shrinking market like Japan."

Shares of Nokia were up 2.0%, to 11.34 euros ($14.63), during afternoon trading in Helsinki on Thursday. Swedbank analyst Jan Ihrfelt did not think the announcement would influence investor sentiment; he told Forbes.com that even rivals like Sony Ericsson were having difficulty making progress in Japan.

A representative of the joint venture between Sony (nyse: SNE - news - people ) and L.M. Ericsson (nasdaq: ERIC - news - people ) said there were no plans to shelve activities in Japan. But she admitted there would be a "shift" to a more research-focused business, creating a "center of excellence" for high-end handset development.

Also on Thursday, Nokia said it had begun shipping its answer to the Apple (nasdaq: AAPL - news - people ) iPhone: its touch-screen 5800 model. Although most of Europe and the United States will have to wait till 2009 before they get their hands on it, markets including Russia, India, Hong Kong and Spain will have the phone before the year is out. As Forbes.com revealed last month, Spanish network operator Telefonica (nyse: TEF - news - people ) will offer the 5800, as well as the iPhone, in Spain.

Wireless semiconductor company Qualcomm Inc. will get an upfront payment of $2.5 billion from Nokia Corp. in a settlement of a royalties dispute, a spokeswoman said Friday.

The spokeswoman, Bertha Agia, declined to elaborate on the agreement, which was struck in July and calls for Nokia to make an upfront payment and ongoing royalties.

Nokia, the world's largest handset maker, said Thursday that the upfront payment was $2.28 billion.

Messages left with both companies seeking an explanation of the discrepancy were not immediately returned Friday night.

The 15-year licensing deal gives Nokia rights to a wide portfolio of San Diego-based Qualcomm's patents. The two sides agreed to drop all legal complaints against each other in the U.S., Europe and Asia.

Investors were undeniably nervous heading into Nokia's third-quarter earnings release on Oct. 16. Against a global backdrop of volatile trading in stock markets, shares in the Finnish mobile-phone giant had lost nearly a third of their value in the past two months—outpacing a 24% decline for the S&P Europe 350 index over the same period.

Some of the blame fell on a Sept. 5 warning from Nokia (NOK) that it expected to lose market share and report lower profits (BusinessWeek.com, 9/5/08) for the quarter. But investors also worried that the ongoing global economic turmoil could pull the rug out from under Nokia's sales—a concern now facing the broader consumer electronics industry as it heads into the crucial holiday season (BusinessWeek.com, 10/16/08).

Yet when the third-quarter results finally were revealed, showing a 5% year-over-year decline in revenues and 30% drop in net income, investors were sufficiently gratified to drive up Nokia's New York-traded shares by nearly 10%. That such soft numbers provoked a relief rally indicates how pessimistic shareholders were. "The fact that guidance remained by and large unchanged gave some comfort to the market," says Richard Windsor, a London-based technology analyst with brokerage Nomura Securities.

Consumers Are Still Buying Handsets

It's not merely a matter of seeing the glass as half-full. Though revenues, at €12.24 billion ($16.48 billion) came in 3.9% shy of market expectations, earnings per share were spot on the mark, gross profit margins for handsets grew slightly, and operating margin was better than in the previous quarter. In other words, Nokia wasn't even close to a meltdown: In a tough market environment, the company managed to keep profitability on track despite a decline in volume.

More important, Nokia reassured the market that there's no wholesale collapse taking place in handset demand. Its own unit shipments in the quarter grew by 5%, even as revenues slipped, and executives repeated their prediction that the mobile-phone market as a whole will grow 10.5% this year, to 1.26 billion units. That implies 14% unit growth in the fourth quarter compared to the third—somewhat lower than historical norms, but still a huge vote of confidence in consumer spending at a time when many indicators are pointing downward. Nokia promises to maintain or grow its estimated 38% third-quarter market share in the last three months of the year.

To be sure, there are trouble spots. Sales in Europe—traditionally Nokia's stronghold, although China is now its largest single market—fell by a worrisome 5.5% vs. last year's third quarter. (Sales in the U.S. were even worse, down 16.7%, but that was due primarily to the company's exit from CDMA phones; units were flat vs. the second quarter.) "The financial crisis has affected U.S. and European markets," said Nokia Chief Executive Olli-Pekka Kallasvuo in an interview.

Cheaper Models Are Selling Better

At the same time, Kallasvuo noted, "many economies are still experiencing rapid GDP growth, even as we speak." The proof is in the numbers: Year-over-year unit sales growth in Latin America was 14.6%, while the Asia-Pacific region, excluding Greater China, grew 13.9% and the Middle East and Africa climbed 11.4%. These aren't piddling markets, either: The three regions together accounted for 56% of Nokia's total volume.