Nokia's New $99 Phone Could Mean Trouble For Microsoft

NEW YORK ( TheStreet) - Nokia ( NOK) has just announced a tiny new phone that could be a very big deal for them and disrupting to their competitors. It might turn also evolve into a formidable bargaining chip against Microsoft ( MSFT) and Windows Phones.

The new phone is called the Asha 501 and it's part of their low-cost line of handsets designed to appeal to users in what is commonly known as "emerging markets." That usually means phones with very few features that sell at a very low price point. They chose to announced the handset in India - one of the world's largest emerging markets.

From what we can tell, this phone may be inexpensive for users to purchase but looks to be anything but cheap or ordinary.

Until now, Asha phones ran on Nokia's ancient Series 40 operating system. It's the lightweight software platform they introduced 14 years ago and has been installed in more than 1.5 billion Nokia handsets. The phone is fine for voice calls and SMS messaging but don't expect most modern-day smartphone conveniences.

Nonetheless, the new touchscreen Asha 501 is different, and enticing. It uses what Nokia is calling its Asha Software Platform - basically some Series 40 with a large dose of innovation from a software platform called Smarterphone from a Norwegian company they purchased in 2011.

The bottom line here is this new phone blurs the line between very basic feature phones and very expensive smartphones. It also gives Nokia the basis for some leverage when it comes to its dependency on Microsoft and their Windows Phones.

The Asha 501 isn't the ultimate new Nokia phone. Far from it. It has a tiny, 3-inch touchscreen. It weighs 3.5 ounces. Only a 3.2 megapixel rear camera without a flash. It has Wi-fi but only runs on 2G cellular networks. The large capacity battery can provide 17 hours of talk time and last up to 48 days in the standby mode. Best of all, the 501 is designed to sell for less than $100 without a contract.

But, from the looks of things, the new user touch interface is something special. Easy to master and simple to use. Nothing is more than a swipe away. Facebook ( FB), Twitter, FourSquare, Bejeweled and many others come pre-installed. Thousands of older Series applets should be easy to port over to the new system. There's also a redesigned Web browser. And, the Asha 501 offers a number of very colorful outer shell options.

The new design also gives Nokia a way to compete with the dozens of inexpensive Google ( GOOG) Android and Blackberry ( BBRY) models available in these emerging markets.

As this new platform matures, and Nokia adds it to larger, more capable hardware (3G connectivity is promised for future Asha models), they'll have another weapon to use in their dealings with Microsoft. They could be especially useful if Nokia ever decided to downplay the Windows Phone OS and go their own way.

Even though Nokia says the new phone won;t be coming to North American markets, we've asked them for a chance to try an Asha 501. We look forward to the chance to see what the new Asha Software Platform is all about.

--Written by Gary Krakow in New York.

>To submit a news tip, send an email to: tips@thestreet.com.
Gary Krakow is TheStreet's senior technology correspondent.

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