Nokia to try the PC industry by launching its first Netbook

Nokia, perhaps the world's top mobile phone maker, announced on Monday that it would begin manufacturing laptops to enter an intensely competitive but fast-growing market. Nokia will launch its first line of laptops starting with a netbook that would run a Windows operating system.

Nokia already announced earlier this year that it was considering trying the laptop industry, which in opposite direction to Apple that joined the phone industry in 2007 with the release of iPhone, will cross the border between two converging industries.

Nokia’s profit margins have been dropping over the last quarters as demands for handsets slumped. Analysts are worried that Nokia’s gamble in the PC industry, where margins are usually razor-thin, could further hurt Nokia's profits.

"We are fully aware what has the margin level been in the PC world. We have gone into this with our eyes wide open," said Kai Oistamo, the head of Nokia's phone unit.

"There's really an opportunity to bring fresh perspective to the PC world," he added, confirming that Nokia would somehow introduce extended battery life as well as continuous connectivity.

Nokia has already produced PCs before, however it divested the unit in 1991 when it began to focus more on the mobile phone industry.

Nevertheless, Nokia's first netbook, the Nokia Booklet 3G, will use Microsoft's Windows operating system and Intel's Atom processor to provide up to 12 hours of battery life while weighing only 1.25 kilograms. Netbooks are low-cost laptops optimized for Internet surfing and performing basic functions. Asustek pioneered it with their brand of Eee PCs in 2007, and it has since been manufactured by other brands such as Dell and HP.

"The question is: How will Nokia differentiate? This is already a crowded market. If they manage to differentiate it's going to give them competitive advantage," said Carolina Milanesi, a Gartner analyst.

CUTTHROAT SEGMENT

IDC, a research firm, anticipates netbook shipments this year to raise more than 127 percent from 2008 to more than 26 million units, outperforming the global PC market that is expected to stay flat and a phone market which is decreasing some 10 percent.

"Nokia will be hoping that its brand and knowledge of cellular channels will play to its strengths as it addresses this crowded, cut-throat segment," suggests Ben Wood, director of research at CCS Insight.
"At present we see Nokia's foray into the netbook market as a niche exercise in the context of its broader business."

Some analysts where surprised by Nokia's choice of Windows software as they had expected the company to use Linux in its first laptop.

Analyst Neil Mawston from Strategy Analytics believed the technology choices were a respectable win for the U.S. companies.
"We believe ARM and Symbian are among the main losers from the Nokia Booklet announcement," he confirmed.

Shares in ARM were 0.2 percent poorer at 1400 GMT, underperforming vaguely firmer DJ Stoxx European technology shares index. Shares in Nokia were 1.6 percent stronger at 8.91 euros, whereas Microsoft was 0.6 percent firmer.

Nokia announced that it would unveil detailed specifications, pricing and market availability of its new product on Sept 2.
Sources close to Nokia also confirmed that the new netbook would use the forthcoming Windows 7 operating system. Microsoft declares a stripped-down version of Windows 7 will be introduced to netbooks together with its general release on October 22.

There are also rumors in Taiwan suggesting that Compal, the world's 2nd contract laptop PC manufacturer, has already pitched netbook models to Nokia, however there has been no official confirmation from either side.

Nokia immediately dismissed the rumors and further declined to comment on the manufacturer it uses.

Majority of the world's top electronics brands normally do their own design work however, they outsource the manufacturing process to contract manufacturers such as Compal and Quanta.