By Tarmo Virki, European Technology Correspondent
HELSINKI (Reuters) - Nokia's long-awaited Windows phones may be too little, too late in the smartphone war and investment in the shares will increasingly be driven by takeover speculation.
Its first Windows model, the Lumia 800, won some positive reviews but little interest from consumers, with only 2 percent of Europeans in the market for a smartphone saying they would pick it, according to a survey by Exane BNP Paribas.
"This is not a game changer," a senior European telecom executive told Reuters of the Lumia, which uses Microsoft software.
Nokia's shares have fallen over 20 percent since the October 26 launch of the new phone, after investors decided it was unlikely to make a significant dent in a market still dominated by Apple and Google.
Smartphones using Microsoft software have just a 2 percent market share, compared with Google Android at around 50 percent and Apple at 15-20 percent.
"There isn't much room left for a third ecosystem. The smartphone market is consolidating fast," said Bernstein analyst Pierre Ferragu who rates Nokia a "sell."
Smartphones are built on mobile computing platforms, and the most modern combine web browsers, navigation systems, cameras and portable music systems. A so-called "feature" phone -- a market Nokia dominates -- has far fewer of these applications.
Microsoft itself has started to hedge its bets, making its software increasingly available for rivals to Windows Phone.
Even Nokia's old Symbian software, which it decided to dump in favor of Microsoft, still outsells Windows Phones by 10 to 1. And as Nokia keeps shifting to Windows, sales of Symbian have a lot of room to disappoint over coming quarters.
Another risk for Nokia investors is the possibility it will slash its dividend early next year.
Estimates from Thomson Reuters Starmine, which give more weight to analysts with a better forecasting track record, show dividends are expected to fall 60 percent from a year ago to just 16 euro cents for 2011, with the payout seen at 17 cents for 2012.
Forecasts from Starmine also indicate earnings per share in 2012 and 2013 are set to disappoint. Its EPS estimates for both years stand 12 percent below consensus forecasts.
Some analysts are keeping the faith, however, believing the new assault on the smartphone market may be enough to give Nokia a place at the table. If they are wrong, the attractions of the handset maker's strong cash position and some prized patent assets could yield a takeover bonus.
The shares, recently trading at around 3.65 euros, also look cheap to some. Many analysts cite an improvement in Nokia's product portfolio, which looked out of date when Stephen Elop took over as the chief executive in September 2010.
"With current, and upcoming models, Nokia can win back market share in both -- in feature phones and in smartphones," said Swedbank analyst Jari Honko, who has a "buy" recommendation on the stock. "Today's share price does not take into account any recovery in the Nokia market position."
And while some argue there is no room for a third alternative to Google and Apple, some developers and operators do see room for more competitors in this market.
The 2012 Windows 8 upgrade could attract a wider audience by giving making the way smartphones, tablets and PCs work more similar.
For investors, the biggest positive surprise could be an acquisition offer. After Nokia signed a deal with Microsoft, rumors of full takeover by Microsoft or at least buyout of smartphone unit have made rounds on a weekly basis.
Last week the stock jumped 4 percent when Danske Bank suggested Microsoft could buy Nokia's smartphone unit.
But even if investors don't get a rich buyout - online gambling company Unibet is putting odds on Microsoft buying Nokia in 2012 at just 15:1 - analysts say the company's relatively-solid finances should at least offer some security.
Nokia had 1.36 euros per share of cash at the end of the last quarter. It also has a strong patent portfolio - on its own worth more than a euro per share - and owns top digital mapping firm Navteq and half of No 2 mobile network gear maker Nokia Siemens Networks.
(Reporting By Tarmo Virki; Editing by Jodie Ginsberg and Chris Wickham)