Nokia intends to take a bite out of Apple

LONDON - Could a phone dubbed "Tube" take the shine off Apple's iPhone?

Nokia (nyse: NOK) is remaining tight-lipped over its planned "iPhone killer," refusing to reveal either its release date or the name. But Forbes.com has learned that the 3G multimedia phone is slated for release in the second half of 2008--so it may not be long before Apple (nasdaq: AAPL) meets the first serious contender for the smart phone crown.

A Finland-based source close to Nokia told Forbes.com that the company's new touch-screen handset will feature all of the trademarks associated with its next-generation series of phones: wireless Web browsing, global positioning system, Java application support and 3G data transmission speeds. But it's the touch-screen interface that's a clear nod to Apple's iPhone. And done right, it will give Nokia users more flexibility for grabbing photos, music and other media online.

Shares in Nokia have been trading lower this week, down to $33.16 in midday trading. Apple slipped less than half a percent on Wednesday during midday trading, to $152.10.

Nokia--as well as other handset makers, including Research in Motion (nasdaq: RIMM ) and Motorola (nyse: MOT)--have made no secret of the fact that they are working on touch-screen devices. A variety of other handset makers, including LG, Samsung, Pal, HTC and Sony (nyse: SNE - news - people )Ericsson (nasdaq: ERIC) offer some kind of touch-screen.

But the trade press started buzzing late Monday following a presentation made by Tom Libretto, a Nokia vice president, at the Evans Data Developer Relations Conference held in Redwood City, Calif. Libretto has been quoted as referring to "Tube" as "our first touch device." Libretto heads Nokia's mobile developers program.

Toppling Apple's iPhone will be no mean feat, despite Nokia's leading position in the global handset market. "We tend to believe Apple will be a significant niche player in the mobile handset space over the long term," said Tavis C. McCourt, analyst with Morgan Keegan. "We have factored in iPhone becoming a $10 billion-plus annual revenue business over the next five years."

Apple isn't sitting still. Although Apple, too, has declined to reveal when it plans to launch the 3G version of the iPhone, industry watchers are suggesting that the new device may be released by June.

Libretto says Nokia is more than ready for the competition. Apple can trumpet its sales of 4 million units since its launch last year, he suggested. According to reports, Libretto quipped: "We've done that since we've had dinner on Friday."

(Lionel Laurent, Forbes.com)