A former leader in the mobile phone sector, Finland’s Nokia encountered problems after the 2007 launch of smartphones, particularly Apple’s iPhone, as well as devices running on Google's Android operating system. In February 2011, Nokia formed a strategic partnership with Microsoft, with Nokia smartphones replacing Nokia’s traditional Symbian operating system with a mobile system from Microsoft. Microsoft bought Nokia's handset business for 5.44 billion euros in September 2013.
Struggling Nokia aims high with low-end phone
Bargain-basement handset touted as cash spinner in battle to catch upmarket rivals
As Nokia battles to catch Apple and Samsung Electronics in the market for smartphones costing US$500 or more, it's counting on a bare-bones handset that sells for just US$20 to give it an edge.
Priced 97 per cent below the latest iPhone, the Nokia 105 features preloaded games, a colour screen, a radio, a speaking clock and a torch.
The phone, Nokia's cheapest, has been available for a few weeks in India and Indonesia and will soon start selling in Europe.
Even with its bargain-basement price, the 105 is critical to Nokia's entire handset business. Nokia reported on April 18 that it sold about 11 million fewer mobile phones in the first quarter than analysts had projected, with sales of basic phones plunging 21 per cent to 55.8 million units.
A failure to revive the low-end business would leave Nokia without an important source of cash as it seeks to develop challengers to the iPhone and Samsung handsets that run Android.
Falling sales of simpler phones were "definitely worrisome", said Mika Heikkinen, a fund manager at FIM Asset Management in Helsinki."They have to get this under control."
Nokia chief executive Stephen Elop points to the 105 as a signal that the low-end business can recover after a difficult quarter.
While demand for the iPhone and Android devices have made smartphones the fastest-growing part of the market, basic handsets still make up more than half of units sold. That means hundreds of millions of phones each quarter - a market Nokia dominated until Asian manufacturers such as ZTE, Huawei Technologies and Samsung started challenging it more aggressively.
The Finnish manufacturer says the 105 will be profitable, without providing details.
Of the 336 million handsets Nokia sold last year, only about 10 per cent were smartphones. Basic models accounted for 31 per cent of Nokia's revenue, versus 18 per cent for smartphones. Network equipment made up most of the balance.
Nokia had more than half of the mobile handset market before Apple introduced the iPhone in 2007. Nokia's shares have fallen more than 80 per cent since then, while Samsung has risen 154 per cent and Apple has quadrupled. After five consecutive annual losses, Nokia is down 14 per cent this year.
The firm is counting on cheaper phones like the 105 to build trust in the company's brand in growth markets such as India and China.
"The low-end, high-volume part of the mobile-phone market is a huge opportunity for Nokia in developing countries," said IDC analyst Francisco Jeronimo.