As per consumer perception, Apple Inc.’s (AAPL) iPhone and Research In Motion’s (RIMM) BlackBerry are ruling the smartphone market. So this is a cause of concern for Nokia (NOK), as the company is slightly lagging in the smartphone segment.

Although Nokia management claims that it holds the substantial share of the smartphone market, we believe that consumers’ choices are tilted toward iPhones and BlackBerrys. On the one hand, most tech enthusiast wants to own the iPhone, while on the other hand BlackBerry is ruling the corporate segment. So Nokia’s N97, with its enhanced features and competitive pricing, is basically trying to catch up with this competition.

Technology research firm Gartner projected that the smartphone category grew by 27% in the second quarter, although there is a 6.1% decline in the overall mobile phone market. So large players in this segment including Samsung and Sony Ericsson (SNE)-(ERIC) are trying to grab a majority share of this growing market, while Nokia is trying to retain its high market share and gain new customers.

Nokia especially is trying to strengthen its position in the smartphone market by releasing a new product with a Linux operating system. This apart, the company is planning to launch a slimmer version of the N97 smartphone. This shows the company’s intention to enhance its smartphone capability in order to draw more customer attention.

On the other hand, there have been complaints about the Apple iPhone and iPods catching fire, which raises a question as to the quality of these popular products. So Apple has to think about improving the quality, while Nokia needs to introduce a product that can attract customers with its features and usability. The war between these tech giants is expected to continue, and we believe this will ultimately lead to better product innovation.

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