(Updates with executive’s comment in fourth paragraph.)
Oct. 22 (Bloomberg) -- Nokia Oyj, in its first product introduction since agreeing to sell its handset business to Microsoft Corp., showed a tablet and smartphones that give a glimpse of how the merged businesses will try to revive demand.
The Lumia 2520, Nokia’s first tablet, runs Microsoft’s Windows RT 8.1 software and has a 10.1-inch display. It costs $499 before taxes and carrier subsidies and will start selling this quarter, initially in the U.K., Finland and the U.S. by carriers including AT&T Inc. Nokia also showed two smartphones with six-inch screens, a category often dubbed phablets.
The products expand the Windows mobile-device lineup and signal the type of features that Microsoft will bet on in its hardware push after its first products failed to win over users. Its $7.2 billion deal for Espoo, Finland-based Nokia’s devices unit, set to be completed next quarter, are part of the company’s plan to challenge Apple Inc. and Samsung Electronics Co.’s dominance of the tablet and smartphone markets.
“We talk a lot about Lumia and Nokia and Microsoft talks about Microsoft and Windows Phone. As we market our products you get a cacophony of different brands,” Stephen Elop, head of the Nokia device unit being sold to Microsoft, said today in an interview in Abu Dhabi. “You’ll see us simplify those brands.”
Elop, who stepped down as Nokia’s chief executive officer to move to Microsoft as part of the deal, is a candidate as the software maker seeks a new CEO to lead the fight against Apple. Apple CEO Tim Cook is set to unveil new iPads at a San Francisco event today, people with knowledge of the plans have said.
The Lumia 2520, complementing two new models of Microsoft’s Surface tablet, comes in red and white in a glossy finish and blue and black in a matte finish. The six-inch Lumia 1520, Nokia’s largest smartphone, will compete with Samsung’s 5.7-inch Galaxy Note 3 and comes in yellow, white, black and glossy red. It’ll start selling this quarter for $749 before taxes and subsidies. The other new smartphone, the Lumia 1320, is $339.
“Nokia’s phablet brings it and Microsoft into a segment that has high volume and a higher average selling price that previously it hasn’t addressed,” said Richard Windsor, an independent analyst with Radio Free Mobile. “It’s a welcome addition to their lineup.”
AT&T said it will sell the Nokia tablet and the Lumia 1520 ahead of the holiday shopping season. The carrier, which dominates the U.S. market with Verizon Wireless, also offers devices such as the iPhone and the Note 3, an Android device Samsung introduced last month.
“We see no obvious stand-out feature that looks likely to persuade large numbers of people who are in the market for a Note 3 to change their minds and choose a Lumia 1520 instead,” John Delaney, an analyst at researcher IDC, said in an e-mail.
Nokia shares fell 0.8 percent to 5.25 euros at 2:38 p.m. in Helsinki. They had added 81 percent this year through yesterday, boosted by the Microsoft deal. Microsoft rose 0.1 percent to $34.99 in New York yesterday and is up 31 percent this year.
Microsoft jumped into the touch-screen tablet market, dominated by Apple’s iPad and models running Google Inc.’s Android software, in June 2012 with the announcement of its first Surface. Designed to keep its Windows software relevant as consumers shift to tablets from personal computers and laptops, the Surface instead generated such little demand that Microsoft said in July it took a $900 million inventory writedown. It introduced two new Surface models last month.
Tablets running the RT version of Microsoft’s operating system were criticized for being too basic, and the company cut the price of some such models. That may not bode well for the new Nokia tablet, which uses the same software, Windsor said.
“Nokia’s tablet is a disaster waiting to happen,” Windsor said. “It’s running Windows 8.1 RT which is likely to ensure that no one buys this device.”
In a potential boon for Windows, Nokia said the photo- sharing app Instagram will be available for its new devices. Popular among Apple and Android users, Instagram has been one of those missing from Windows as Nokia and Redmond, Washington- based Microsoft have struggled to attract developers to build programs for their devices.
Microsoft’s Surface accounted for 0.7 percent of the 44.3 million tablets sold in the second quarter, according to researcher IDC. Android controlled 62.6 percent of the tablet market and Apple had 32.5 percent, according to IDC. Android software is used in tablets manufactured by companies including Samsung and Sony Corp.
Tablet shipments will top those of PCs for the first time in the fourth quarter, IDC said last month. Some 84.1 million tablets will be shipped, compared with 83.1 million PCs, the researcher said.
Nokia agreed to sell its mobile devices to Microsoft after struggling to regain relevance in smartphones following Apple’s introduction of the iPhone in 2007. Among the products that Nokia bet on to try to keep its leadership position were early tablet-like devices called the 770, introduced in 2005, and N800, introduced in 2007, which both failed to catch on.
Microsoft’s plan to buy Nokia’s mobile-devices division also means it gains a business making more basic mobile phones, which compete with lower-end Android devices in markets including China and India. Nokia today unveiled the Asha 500, 502 and 503, which cost less than $100 yet have smartphone-like features.
Nokia, set to become a manufacturer focusing on wireless- network equipment after the sale to Microsoft is completed, is scheduled to report third-quarter earnings on Oct. 29.
--Editors: Ville Heiskanen, Kenneth Wong