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Flashy Nokia Smartphones Target Big Spenders

Green technology
Nokia's N79 (left) and N85 phones. Source: Reuters

Nokia unveiled two new high-end phone models, the N79 and the N85, as the world's top mobile phone maker battles against increasing competition from the likes of Apple and Samsung.

The news lifted shares in Nokia more than 2 percent on Tuesday as it reassured investors the company was on track to refresh its offering for the key Christmas sales period.

"Nokia sailed through first half of the year with little changes in its phone portfolio," said Pohjola analyst Hannu Rauhala. "Now the portfolio renewal has started and this should boost profitability."

The N79 and N85 models will go on sale in October. Both new phones, upgrades of Nokia's (NYSE: NOK) older models, will have 5 megapixel cameras and pre-loaded games.

The segment is key for Nokia and other manufacturers: Newer and more expensive models usually have higher profit margins than older and cheaper phones. The N85 will retail for $659, excluding operator subsidies and taxes, and the N79 will go on sale for $513.

Nokia, which controls 40 percent of the global mobile phone market, has an even higher market share among the most expensive phones, helped by the success of its flagship N95 model.

"All manufacturers are trying to sustain or extend their high-tier device portfolios because of the higher margins they offer," said Ben Wood, research director at CCS Insight.

"Furthermore, in saturated markets -- in Western Europe and North America -- replacement sales depend on offering consumers something compelling over and above voice and text," Wood said.

Since last year Nokia's leading position has been under attack from sleek touch screen models from LG Electronics, Samsung and Apple (NASDAQ: AAPL).

Nokia is set to come out with its first touchscreen phone, codenamed "Tube," this year.

The company has also embarked on a strategy of open sourcing the core Symbian operating system on which its phones are based. The move seeks to better position it against higher-end devices made by vendors like Apple, Microsoft and Research in Motion, and may serve as a defense against Google's upcoming Android mobile phones -- also an open source project.

The first Android device is expected from U.S. carrier T-Mobile, and is set for launch later this year.