By Tarmo Virki
HELSINKI (Reuters) - Troubled cellphone maker Nokia unveiled two new affordable touch-screen cellphone models on Tuesday to defend its mass market position while it struggles to compete in high-end smartphones.
Basic cellphones have generated most of Nokia's sales, holding up much better than smartphones, where it has rapidly lost share to rivals like Samsung and Apple.
With a profit margin of over 20 percent, these phones are still the company's bread and butter even though consumers are increasingly switching over to smartphones.
"Although they don't get as much attention as its smartphones, mobile phones play a key part in Nokia's future. Mobile phones account for the majority of Nokia's revenue today and they are also vital for building loyalty with potential smartphone users in the future," said Ovum analyst Nick Dillon.
Nokia said on Tuesday it expects the Nokia Asha 308 and the Nokia Asha 309 to retail for about $99, excluding taxes and subsidies, with deliveries to start in the fourth quarter of 2012.
Analysts have said offering phones around or under $100 is crucial for the company if it wants to compete with cheaper smartphones using Google's Android software.
Nokia still sells almost 1 million basic phones a day but it has reported operating losses of 3 billion euros ($3.9 billion) in the last 18 months, all while closing sites and cutting tens of thousands of jobs.
Analysts say the new phones will buy it time but that its new Windows smartphones must succeed to secure its turnaround.
"The new Asha devices are essential to defend Nokia from a raft of low-cost Android alternatives," CCS Insight analyst Geoff Blaber said.
"The continued strength of the mobile phone business is testament to Nokia's scale and distribution advantages. Defending that business is critical if Nokia's smartphone business is to weather the storm."
The new phones use Nokia's low-end Series 40 software platform and hence most analysts do not count them as smartphones, even though Nokia itself sells them as smart devices in emerging markets.
"The smartphone-feature phone distinction is largely irrelevant in emerging markets. The Asha devices provide all the features most users need, including apps, web browsing and Facebook access," said Blaber.
Nokia has to use its low-end software for the new $100 phones as Windows Phone requirements for hardware are too high for such cheap phones. Nokia's cheapest Windows Phone retails for around $200.
Shares in Nokia were up 1.8 percent at 2.14 euros, outperforming 0.5 percent rise in STOXX 600 European technology index.
Separately on Tuesday, Nokia said it would cut 725 jobs at its South Korean factory as part of its global cost savings programme unveiled in June.
(Editing by Muralikumar Anantharaman, Mike Nesbit and Philippa Fletcher)