Nokia Aims a Tablet at Apple: Exclusive

NEW YORK ( TheStreet) -- Nokia ( NOK) is out to prove again that it can be late, wrong and yet still willing to stick its neck out in areas where growth could be.

The Finnish phone giant is gearing up to enter the tablet race, looking to contend with the Apple ( AAPL) iPad and other tech giants.

Nokia is working with suppliers and design manufacturers on a touch-screen tablet to have available as early as this fall, according to Rodman Renshaw analyst Ashok Kumar, who is close to Nokia's technology partners. Nokia declined to comment.

The move, if true, would put Nokia head-to-head with tablet makers like Apple, Hewlett-Packard ( HPQ), Microsoft ( MSFT), Google ( GOOG) and Dell ( DELL), to name a few. The plunge into tablets would also mark yet another attempt by the top mobile phone maker to develop Internet devices for a market beyond cell phones.

"Nokia hasn't fielded any breakaway products in years," says Kumar. "This is a new window, and Nokia had better be at the starting gate if and when the product category takes off," Kumar added.

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Apple's sensational foray into tablets is a bold bet on an iffy category. With the iPad, Apple hopes to sell people -- who already have smartphones and laptops -- a new in-between product.

Fans argue that the fingertip-controlled, touch-screen tablet is a fundamental technology change that delivers media and applications in entirely new ways. Skeptics say that the iPad fad will fade as the mass market thinks twice about buying a $500 toy.

Nokia's tablet roots

Nokia, oddly, was a tablet pioneer in the early 2000s with its N770 handheld Internet device. The product failed to take off. Then last year, Nokia flopped in the netbook market with its Booklet 3G.

But this time around, Nokia has regrouped around a new operating system called MeeGo and a partnership with chip giant Intel ( INTC).

"Getting a strong Intel backing here could be an important advantage," says MKM Partners analyst Tero Kuittinen, who sees the Nokia tablet as part of an array of mobile computers.

Though initial Apple iPad sales were not exactly blockbuster, coming in at 300,000 on the first day, the tally was a respectable start. The proof of the tablet's categorical success will come if the common consumer, beyond Apple's core followers, gravitates to the iPad.

Nokia, which has been watching Apple and Research In Motion ( RIMM) run away with its smartphone business, can't afford to let this opportunity go by. Like the jump into netbooks with the Booklet, Nokia has shown a recent eagerness to respond to new markets. "I feel they have to do this, or risk falling behind in the category," says Kumar.

Pricing and timing are critical if Nokia has any hope for success in tablets.

Nokia needs to have a tablet ready for sale in time for the back-to-school computer buying surge and well before the holidays, says Kumar.

With Apple's iPad starting at $500, Nokia has to aim lower -- at what will likely be a moving target.

"The problem here is that the pricing of tablets is likely to drop at a furious pace over the next four quarters," says MKM's Kuittinen. "Nokia needs to get its products out fast and ramp up the production rapidly or it's going to be tough to play catch-up."

Nokia's challenge isn't just on the hardware front.

Apple's iPhone software runs the iPad, while Google's Android and Chrome operating systems will run new tablets from a host of big tech brands, and Microsoft is likely to put Windows 7 to work on its tablets. That leaves Nokia and its still-evolving MeeGo software as a distant and unknown contender.

Nokia faces long odds of finishing in the money in tablets, says Kumar.

"I'm not holding my breath on this one," Kumar said.

--Written by Scott Moritz in New York

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