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Why Apple Has Nokia Running Scared

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Projections say all-powerful iPhone will dominate market by 2011.

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Nokia (NOK) -- the world's leading cellphone manufacturer -- is in peril. According to analysts at Generator Research, the company could wind up a distant second to a competitor's wildly popular, hysterically coveted touchscreen phone, which appeared just 4 years ago.

Care to guess which competitor that might be?

Right -- it's Apple (AAPL).

Generator Research posits that Nokia's already downward-trending market share -- 40% in 2008 -- could drop to 20% by 2013. Apple, by contrast, is well positioned to go from a roughly 8% market share to 33% overall, effectively surpassing Nokia as the top-selling cellphone brand worldwide.


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Judging by the figures, the turning point might occur sometime in 2011 -- that is, if Apple is able to ship 77 million iPhones to its rabid fan base.

Of course, a number of things have to happen in order for this changing of the guard to take place, and none of them are certain. Apple has to continue to fire on all cylinders and develop the features consumers are demanding.

Getting out from under AT&T's (T) thumb would be a great start. New add-ons to the iPhone 3GS -- like a better camera, voice dialing, and an electronic compass -- certainly helped it gain more exposure, but Apple needs to continue unveiling newer and better features to gain ground.

This is especially true of features Apple's competitors have been offering for years. (Remember how long it took them to implement copy and paste?)

Nokia's massive market share is largely due to its dominance in developing countries, where its low-cost units are the best its customers can afford. Although this gives it a leg up against the competition, Nokia is far behind on the innovation front -- and a noticeable drop in market share has been the result.

Given that it took the brand a year and a half to produce its own touchscreen phone after the iPhone's debut, Nokia is in serious trouble.

And smartphone production isn't the only area in which Nokia needs improvement. Its Ovi Store -- its answer to Apple's App Store -- has a long uphill climb to reach its counterpart's usability. In a recent mixed review of Nokia's new N97 phone, Gizmodo lambasted the mobile interface to the Ovi Store, referring to it as the "worst mobile app store on the planet."

Although Generator's projection is hypothetical, their numbers have some merit. Put plainly: Apple's succeeded in those areas Nokia where has failed, leaving it a clear path to victory. Unless Nokia has some bright ideas up its sleeve, the company will have to get used to being known as number 2.

If Nokia expects to stay in first place, it's definitely going to have to do better than the N-Gage.

Join Hoofy & Boo for a look at the genius behind the Apple juggernaut:

No positions in stocks mentioned.
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