Nokia Back in the Game With N-Gage

Nokia's (NOK) looking like a real gamer with the latest version of its N-Gage phone.

After the company's first game-console phone was greeted last year with howls of laughter, the No. 1 handset maker could have easily written off the effort and moved on. But Nokia on Wednesday unveiled a much-improved design ahead of schedule -- at about half the price of the original.

To be sure, the success or failure of the new N-Gage will hardly register in the company's finances. But analysts say the tale illustrates Nokia's ability to respond quickly to the fickle tastes of a dynamic market.

"I don't think anyone is going to buy the stock because of this product, but it reinforces what we said about Nokia and its fantastic track record of developing new products," says Harris Nesbitt Gerard analyst John Bucher, who has a buy rating on the stock. Harris Nesbitt has no underwriting ties to Nokia.

That quality looks especially important in the wake of last week's earnings warning. Investors will be looking for more signs of Nokia's nimbleness Friday morning, when the company releases its first-quarter earnings report.

Nokia shares, which have dropped 21% since the shortfall warning, were down 10 cents to $16.54 in midday trading Wednesday.

Last week, the company warned of a sales shortfall as wireless phone shoppers found Nokia a step or two out of fashion. As it turns out, what cell-phone users were demanding was the folding photo phone being churned out in quantity by outfits like Samsung and Motorola ( MOT). Nokia didn't have any of these so-called midprice color-screen models.

The stale product lineup cost the phone giant 2 percentage points of world handset market share.

Nokia says it will introduce a total of 40 new models this year, and analysts expect a stronger showing among the popular color screen camera phone category.

If the N-Gage improvements are any indication, the new lineup could help Nokia recover its lost momentum.

Analysts say the original N-Gage was a dud from the get-go. Some estimate only a fraction of the 400,000 units Nokia shipped to the U.S. were actually sold.

It didn't help that simple functions like swapping game cartridges involved opening the unit and removing the battery. Answering those criticisms, the new version has an external media card slot. And while the original carried a hefty $300-plus price tag, the new version is expected to sell for half that.

"This shows that Nokia is willing to take chances in a global market, not just sitting around while others plow new ground," says InStat analyst Neil Strother. "It shows they are willing to make mistakes, listen to critics and make improvements."

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