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Nokia Launches Critical N900 Phone

Decked out with features, Nokia's new handset/tablet equals the iPhone in specs. But it's the Maemo software inside that could tip Nokia's growing rivalry with Apple

When thousands of suppliers, developers, and analysts converged on Stuttgart in September to attend Nokia World, the Finnish company's annual in-house trade fair, the buzz was all about the new Booklet 3G netbook—Nokia's first foray into the hot category of pint-sized PCs. But away from the show floor, some Nokia execs had a surprising take: An even more crucial upcoming product, they said privately, was the company's new N900 handset and its computer-like operating system, called Maemo.

Nokia finally began shipping the N900 after a two-month delay. Though no larger than an Apple (AAPL) iPhone or other Internet-friendly handsets from the likes of Research In Motion (RIMM) or HTC, the N900 may well be the closest that Nokia or any company has come to packing a real computer into a pocket-size package. But the high-end gizmo—aimed primarily at tech-savvy users—and its sophisticated software may not yet be the iPhone killer that Nokia shareholders have been hoping for. "Maemo is really only a small step in the right direction," says Neil Mawston, an analyst at market researcher

The N900, priced at $750 before operator subsidies, comes with enough memory to compete with laptops of a few years back: 32 gigabytes worth, enough to hold 40 hours of high-quality video, Nokia says. But aside from its top-of-the-line specs, what really sets it apart is the Maemo 5 software. A variant of the open-source Linux operating system, Maemo 5 lets users run several programs at once, browsing the Internet wirelessly and displaying graphics and video as fast as a PC. "A computer platform allows us to drive the convergence of mobile and Internet much more radically," says Michael Halbherr, a Nokia vice-president who works on mobile mapping applications from offices in Berlin.

As Nokia tries to recapture smartphone share from Apple, the N900 seems to be a way for the Finns to test features and technology on high-end users, which will later be incorporated into mass-market products. The N900 is aimed at people who live their lives digitally and want continuous access to e-mail, Facebook, and information from the Web, Nokia execs say. "It's for technology-leader kind of people," says Ari Jaaksi, head of Maemo devices at Nokia.

Pressure is growing for Nokia to retake the initiative in smartphones. Thanks to the iPhone, Apple has now surpassed Nokia as the world's most profitable handset vendor, Strategy Analytics said in a report released Nov. 10. The research firm estimates that Apple earned $1.6 billion from handset sales in the third quarter of 2009, vs. $1.1 billion for Nokia, even though Nokia sold nearly 15 times as many phones.

IPhone Comparisons Are Premature

What's more, Nokia still has a long way to go before it will be able to produce high-volume devices that can really compete with the iPhone, says Richard Windsor, global technology specialist at brokerage Nomura Securities.