By Scott Moritz

With clouds of economic gloom darkening the tech horizon, mobile phone sales – a former bright spot in the gadget world – look to be slowing.

Tech buyers went away early this fall, and as recession fears intensified, orders have continued to dry up.

There have been a number of ominous signs. First Cisco (CSCO) slashed its outlook and froze hiring. Then Wall Street analysts slashed Google’s (GOOG) search ad sales estimates, predicting the first ever drop off in the company’s growth rate.

Now, market analysts at Gartner have peered ahead into future and declared cell phone sales will likely slow from 2008 levels by 1% to 4%. This would be the first year-over-year slowdown since 2001.

“It is too early to say how long the economic climate will impact the devices market, but we expect market conditions to remain challenging through at least the first half of 2009,” Gartner analyst Carolina Milanesi said in a statement Tuesday.

A low single digit drop in sales certainly isn’t a steep fall and hardly a surprise in light of recent downward adjustments from wireless phone giants Nokia (NOK) and Samsung. But no growth in 2009 would be a major milepost given how newer markets like Brazil, Russia and Asia have been providing plenty of worldwide demand. And in mature markets like Europe and the U.S., smartphone sales are surging, fueled by touchscreens like Apple’s iPhone and Research in Motion’s new BlackBerry Storm.

Gartner now predicts mobile phone sales will hit a growth rate of 8% this year, down from the 15% level in 2007.

By Scott Moritz

Qualcomm (QCOM) joined tech’s growing crowd of downward revisionists as the slumping global economy forced the company to slash its financial targets.

While the San Diego wireless chipmaker turned in a strong fiscal fourth quarter Thursday, Qualcomm like several tech giants – including Cisco (CSCO), Intel (INTC) and Apple (AAPL) – have lowered financial projections as business took a nose dive this fall.

Qualcomm posted adjusted earnings of $1.06 billion or 63 cents a share, a 17% increase over the 54 cent pro forma profit in the year ago period and 3 cents above analysts estimates, according to Thomson First Call.

Sales for the company’s fourth quarter ended in September were $3.3 billion, up $1 billion or 45 % over the same period a year ago. Analysts had anticipated revenue of $2.86 billion.

Similar to Cisco, which saw strong pre-October results yet dire post-October conditions, Qualcomm pulled down its forecast for the current quarter.

“As a result of the credit crisis and the economic uncertainty, our guidance reflects slower end-market device growth for 2009 than previously anticipated,” said CEO Paul Jacobs in a statement.

Looking ahead, Qualcomm cut its December quarter adjusted earnings forecast to a range around 48 cents or 8% below year-ago levels. Sales are now expected to drop 4% on a year-over-year basis to $2.4 billion roughly flat sequentially. Analysts had been looking for earnings of 61 cents on revenue of $2.9 billion.

Qualcomm shares dropped 3% in after-hours trading after closing at $33.05 Thursday.

Qualcomm, which makes components for cell phones and licenses wireless technology, says December-quarter chip shipments will drop to 62.5 million from the 79 million level a year ago. And the company predicts the average selling price for mobile phones will fall to $205 from $211 last year.

By Yi-Wyn Yen

SAN FRANCISCO – Intel CEO Paul Otellini, who runs the world’s largest semiconductor business, gave a sobering view of the economy to the Web 2.0 Summit crowd Thursday.

If you think the recession is bad now, says the Intel (INTC) chief, a year from now will be worse.  “This is the deepest one I’ve seen in my lifetime. All the smart people that I talk to tell us the U.S. is in for a two-to-three quarter recession,” Otellini said. “Unemployment peaks lag GDP. We’ll see much larger unemployment a year from now.”

In its weekly report, the Labor Department said new claims for unemployment dropped slightly to a seasonally adjusted 481,000 for the week ending Nov. 1. But every day more job cuts are announced. In the past week alone, big tech companies like Cisco (CSCO), Electronic Arts (ERTS), Motorola (MOT), and Xerox (XRX) have announced layoffs or hiring freezes.

Otellini said he was grateful to take a break from the doom and gloom to attend the Web 2.0 conference. The Intel exec provided a 20-minute demo of forthcoming Intel products and answered questions from Web 2.0 host John Battelle.

“I like coming here,” Otellini said. “It’s a respite from watching the stock market crash every day.

Otellini stressed that tech companies need to stay focused on a post-recession strategy. “We have to not think about today’s market turbulence but what can happen as we get through this and what kind of products we can develop around the web as we break out of this cycle,” he said.

Intel is betting on high-powered mobile chips. An Intel employee showed a person taking a picture of a Chinese restaurant with a mobile gadget and then using the web to translate the Chinese characters into English. He also demonstrated how Web 2.0 applications can be used on the go. He scanned a Lego-like toy called K’nex and on the screen, a YouTube video popped up of a person constructing a K’nex model.

Those powerful mobile chips are coming in the next couple years. Next year Otellini says Intel will introduce a new smartphone processor that has the capacity of the original Centrino laptop chip. And by 2011, Intel will offer mobile power that runs as fast as desktop PCs. Otellini acknowledged that to unlock the value of these faster mobile devices requires “a first-class broadband infrastructure around the world.”

The Intel chief says he’s encouraged by growth in China. During a recent trip, Otellini said he met with government officials who told him that China’s GDP would grow 8% to 9% in 2009. “They’re putting in programs that will shift savings and encourage domestic consumption,” he said. “They”ll start buying a lot of tech stuff and putting cash back into the system.”

By Scott Moritz

Free. That’s Vodafone’s (VOD) recently-unveiled price for the hotly-anticipated touchscreen BlackBerry Storm from Research in Motion (RIM) in the United Kingdom.

In a sign of just how desperate phone companies are to lock customers in to lengthy contracts, Verizon’s (VZ) wireless partner is willing to subsidize the Storm – which sells for about $500 without a calling plan – in order to lure subscribers in England.

Though a final decision has yet to be made, Verizon is considering the same strategy for the Storm’s U.S. debut next month, according to an industry source familiar with the discussions. Another person close to the company says it’s unlikely the Storm will be free.

Verizon declined to comment on its pricing plan for the Storm.

The fact that Verizon is even considering a free phone highlights the competitive pressure created when AT&T (T) started selling a heavily-subsidized Apple (AAPL) iPhone for $199.

Most industry analysts expect the Storm, which has received favorable reviews, to be priced at or below the iPhone.

While Verizon would like to use its exclusive Storm deal to gain an edge in the smartphone market, selling it for free “would be breaking new ground for Verizon,” said Roger Entner, an analyst with Nielsen IAG’s . “It’s likely that they will put it at $150 and maybe $99 if they want to ship massive volumes during the holiday.” At either price, the Storm would be heavily discounted.

Verizon has come up short on blockbuster phones over the past year and a half as the iPhone has become the icon of the smartphone market. AT&T has been a driving force in the U.S. wireless market thanks to the iPhone, which pulls in an average $95 per month. But that drive has also come at a steep price to Ma Bell, which forks over $375 upfront for every iPhone sold. That cost the company $900 million in the third quarter.

For RIM, the Storm represents its biggest step yet into the consumer market as it tries to derail the success of the iPhone. One major challenge is to get devotees of BlackBerry’s physical keyboard to embrace the clickable touchscreen keypad on the Storm. The iPhone’s onscreen keyboard has presented some difficulties for many typists.

So far, Verizon hasn’t had much success with its touchscreen devices. But the Storm, if it’s a hit, could finally establish Verizon as a player in the red-hot touchscreen market. What’s more, it could not only entice new customers, but also convert old lower-paying customers to more expensive contracts. Each Storm subscriber will have to sign up for a BlackBerry e-mail and calling plan, which currently starts at $80 a month.

By Scott Moritz

Motorola on Thursday said its plan to break up into two companies is on hold, leading the head of its mobile phone business to outline a new plan for reviving the company’s ailing handset business.

Part of the restructuring plan includes the loss of 3,000 jobs, most from the mobile phone division, a company representative confirmed.

Motorola (MOT), which reported third quarter earnings that beat profit estimates but missed sales targets, said the split up called for by activist investor Carl Icahn will not happen in the third quarter next year as planned. Icahn wasn’t immediately available for comment.

Motorola was down 5% Thursday and has seen its stock fall 72% in the past year as the lack of a successor to its once-hot Razr phone wiped out its sales volume and profits amid a declining economy.

Sanjay Jha, who took over as head of the handset business in August, blamed the economy, the credit freeze and “changes underway” in the mobile phone unit for the breakup delay. Analysts have been critical of the costly breakup plan, seeing it as a distraction that failed to address the underlying problems at the world’s third-largest phone maker.

On a conference call with analysts after earnings were announced, Jha said the company would cut the total number of phones models it produces next year and focus less on its own mobile operating system in favor of systems developed by other companies, including Google’s (GOOG) Android and Microsoft’s (MSFT) Windows Mobile.

Some analysts who have been critical of the company welcomed the new plan.

“Sanjay nailed it,” said Ed Snyder, an analyst with Charter Equity Research. “It was a perfect description of the big problems facing the handset business and an intelligent plan for fixing them. Unfortunately it will be painful.”

By Scott Moritz

With touchscreen phones all the rage, and U.S. telcos following AT&T’s (T) lead of cutting the price of Apple’s (AAPL) iPhone, it would seem Nokia (NOK) will be left out of the smartphone party this year.

The Finnish phone giant won’t have its closely-watched 5800 phone – Nokia’s music-loaded take on the iPhone – available here until sometime in the first half of next year, according to people familiar with the phone. Nokia wasn’t immediately available for comment.

And even when it arrives, Nokia has lacked a big U.S. phone partner that would provide the subsidy necessary to put it under the $200 range. At full price, it will have a hard time making a big splash.

“You could look at it as having a 100% upside,” says Nielson IAG analyst Roger Entner, referring to Nokia’s measly share of the U.S. market. Make that a potential upside of 95.5% since Nokia’s slice of the U.S. market has now fallen a percentage point from year-ago levels to 4.5%.

These numbers were part of Nokia’s overall solid third-quarter performance reported Thursday. Nokia posted an adjusted profit of 44 cents a share, down from the 55 cents it netted last year, but in line with analysts estimates. Sales fell 5% to $16.4 billion from $17.3 billion in the year-ago quarter and below the $17.2 billion street estimate.

After hitting a new four-year low, Nokia shares rebounded a bit Thursday up 4% as investors took some confidence from the fact that it met estimates.

As Nokia predicted, its worldwide market share fell to 38% in the third quarter from 40% in the prior period. The decline, according to Nokia, reflects the company’s unwillingness to cut phone prices amid a heated price war in some regions.

Nokia has managed to grab and hold onto the No.1 phone supplier position by honing its skills at making low- and medium-priced phones for a global audience. This focus on the mainstream has caused Nokia to be consistently late to fashion trends like flip phones, ultrathin designs and now touchscreens.

After a strong start in the smartphone wars with over half the global market in 2007, Nokia has dropped to a 35% slice in the third quarter from 48% of the market in the second quarter, according to Morgan Stanley analyst Jim Dawson. The alarming sequential drop is a reflection of how strong rivals like Apple and Research in Motion (RIMM) have grown. The smartphone market will get a new challenger later this month with the arrival of Google’s (GOOG) Android-powered G1 phone at T-Mobile.

But while 2008 is not going to be a big year here for Nokia, the trends – aside from the slumping global economy – are promising overall.

Each player comes from with a different specialty to the smartphone market, says Entner. Apple and Google aim for a strong Internet experience and RIM’s BlackBerry Storm hopes to capitalizes on its successful e-mail background with a touchscreen design. “Nokia comes from a mobile phone approach,” says Entner.

“Nokia sees the phone as an integrated device.” says Entner. In the past three years, Nokia has acquired mobile e-mail shop Intellisync, GPS mapper Navteq and digital media delivery system Loudeye in an effort to control the delivery of services like e-mail, navigation, photography, music, videos, games and the Internet. 

Of course, all this will matter more in the U.S. when Nokia can deliver the device.

By Scott Moritz

Three of tech investors’ favorite horses - Google (GOOG), Research in Motion (RIMM) and Apple (AAPL) - which led the stampede out of the Nasdaq Monday, came rushing back a bit Tuesday.

Panic sellers who sent the Nasdaq down 9%, its steepest one-day drop since the Internet bubble burst in 2000, were replaced by bargain hunters Tuesday. In mid-day trading Google shares were up 8% and RIM’s stock bounced 10%. Apple was up 5%, while the Nasdaq as a whole rose 3%.

Apple was one of the biggest losers Monday, falling18% after two analysts downgraded the stock on fears that Mac sales were going the way of the rest of the PC market. FORTUNE’s Philip Elmer-Dewitt, however, pointed out that some of the gloomy predictions were based on a survey of business IT buyers, not quite Apple’s core market.

Other analysts came to Apple’s defense Tuesday. Goldman Sachs’ David Bailey reiterated his buy rating  saying the stock was oversold.

“We think yesterday’s 18% decline more than captures the concerns over Mac growth in a weakening spending environment, making Apple shares attractive at current levels,” Bailey wrote.

Monday’s broad selloff, and in particular the Nasdaq’s plunge, kicked into high gear after lawmakers failed to pass a Wall Street bailout bill. Amid fears that the current credit crunch could push the economy into a deep recession, not even the tech sector’s lack of debt and strong cash position were enough to keep panicky investors from bailing.

Tuesday’s rebound offered some solace, but as Monday’s collapse showed, tech is along for Wall Street’s ride, like it or not.

By Scott Moritz

Apple (AAPL) got hit with a pair of downgrades Monday as analysts see a weaker consumer taking a big bite out of the computer-maker’s growth rate.

RBC and Morgan Stanley analysts slapped Apple with neutral ratings, down from buy, on concerns that the slumping economy will put a chill on sales of Mac notebooks and desktop computers.

Citing a IQ/Changewave survey, RBC noted that 40% of consumers questioned said they “plan on spending less on electronics in the next 90 days,” RBC analyst Mike Abramsky wrote in the note. This is the weakest outlook ever measured in these surveys, Abramsky wrote.

Apple shares fell 16% in morning trading Monday in the wake of the reports, as investors get a sobering view of how popular consumer devices can lose momentum in a faltering economy.

The growing credit crisis has helped deflate consumer confidence and force delays in purchases of items like new computers and flat-screen TVs. The problem for Apple, writes Kathryn Huberty in a downgrade of Apple to neutral Monday, is that not only is PC sales growth slowing but the one area shrinking less is the under-$1,000 price range where Apple is absent.

Add the slowdown in PC sales to the higher costs of iPhone production, and Huberty says there will be a dramatic drop in Apple’s profit growth. Huberty cut her Apple earnings growth projection for the year to 6%, well below the 9% analysts’ consensus average.

Apple is not recession proof, RBC’s Abramsky writes.

Not surprisingly, investors have taken flight from stocks in some of the stronger players as the market jitters spread across nearly all sectors. Apple shares are down 35% and smartphone rival Research in Motion (RIMM) is down 47% in the past month.

RIM’s disappointing outlook Thursday confirmed that the once hot smartphone segment is cooling just as the larger mobile phone market grinds into slow gear, not just in the U.S., but globally as Nokia (NOK) recently pointed out.

By Scott Moritz

NEW YORK – A brief hands-on experience with the Google (GOOG) G1 phone gives the impression that after a slew of touchscreen duds from other telcos, Apple’s (AAPL) iPhone finally has a worthy rival.

The highly-anticipated HTC phone for T-Mobile (DT) was unveiled in New York Tuesday, and kiosks with technical experts were set up so media people could run the first Android-powered phone through some tricks. T-Mobile will start selling the phone Oct. 22 for $179 with a two-year contract.

The G1 has a large touchscreen, nearly the same size as the iPhone. But unlike the iPhone, there is a physical keyboard under the slide-open screen. People familiar with the iPhone will find the G1 a little lighter and thicker. The G1, for you ultra-thin fans, is about 3/4 of an inch thick, downright portly compared to the svelte half-inch iPhone.

Navigating the screen is fairly easy and there are several ways to move around. The touchscreen has a swipe capability that allows you to flick up and down or side to side. There is also a small trackball-type button at the bottom of the phone for scrolling.

The 3G network coverage at the show – only 16 cities currently have T-Mobile’s 3G networks – was fast. Google’s homepage loaded in five seconds and Google search results also popped up in five seconds. Sites like CNNMoney and Fortune took about 17 seconds to load. That is a fairly standard 3G speed.

Calls worked, and the sound was clear, for those considering the device as a phone primarily.

It is clear, however, that with Google’s support, Android and HTC have made a solid Internet device that combines web access with technology like GPS and software like Google Maps. Applications like Compass Mode, as Fortune’s Philip Elmer-Dewitt explains, gives you a 360-degree street view, a trick that has been limited to PCs until now.

The phone has so-called push e-mail through its Gmail service. As Fortune reported Monday, T-Mobile was considering a low-tier price plan that would give G1 users free e-mail without a data plan. T-Mobile technology chief Cole Brodman says the company looked at a few different pricing plans, but decided that the e-mail only data plan “doesn’t do the device justice.”

The G1 will have two monthly price options, $25 for data plan limited to 400 text messages or $35 for unlimited data. That’s compares with AT&T’s $30 and $45 data plans for the iPhone.

HTC’s touchscreen has some familiar features, like a shifting orientation if the user tips the phone on its side. It also has a zoom-in function that is done with plus and minus buttons on the screen rather than the two finger pinch or separate approach on the iPhone.

The G1 allows dragging and dropping of pictures and text, a feature the iPhone still lacks. The music player was easy to use and there is a direct link to Amazon’s music store.

Overall, and first impressions being what they are,  the G1 stands well above disappointing touchscreens like Verizon’s (VZ) LG Voyager or Sprint’s (S) Samsung Instinct. And until Research in Motion (RIMM) delivers its touchscreen Storm BlackBerry, T-Mobile’s G1 is the toughest competition yet to the iconic iPhone.

By Scott Moritz

Android lands at T-Mobile Tuesday, and as part of the effort to deliver the Google phone to the mobile market, T-Mobile is considering including free e-mail access.

The new Android-powered phone will have Google’s (GOOG) Gmail service built in, and T-Mobile executives are considering offering access to Gmail free, without the need for a data plan, says one person close to the discussions.

The HTC-manufactured T-Mobile phone will be the first of the hotly-anticipated Android-operated handsets, and one of several new challengers to Apple’s (AAPL) iPhone. The Android project was created by Google to cultivate an open application platform to operate next-generation mobile phones.  T-Mobile  – a unit of Deutshe Telekom (DT) - is expected to unveil the phone during a press conference at 10:30 ET Tuesday, and offer it for sale later this fall.

Analysts see the Google phone as the beginning of an important lead in mobile Internet advertising through ads appearing on Android powered phones. Sandeep Aggarwal, an analyst with Collins Stewart, estimates that the phone will generate $5 billion in incremental revenue for Google by 2011.

Should T-Mobile decide to offer free Gmail access, it would be seen as a big counter move to Research in Motion’s (RIMM) BlackBerry e-mail service, which costs $15 a month extra. And if telcos embrace Google’s ad-supported free e-mail, it could help drive Google’s ultimate aim to spread its successful desktop advertising business to mobile phones.

The move to provide free Gmail has risks, however.

T-Mobile could undercut its own data revenue stream from BlackBerry subscribers if users trade in their Curves and Pearls for the Android phone. But T-Mobile, the No.4 wireless shop, needs an attention-getting strategy like free e-mail to help set itself apart from bigger players like AT&T (T), Verizon (VZ) and Sprint (S).  

Google referred calls for comment to T-Mobile and a T-Mobile representative could not provide an immediate comment.

As for the HTC Android phone itself, one user who got an early trial described the slide out keyboard as a little awkward for some typing tasks. The browsing quality however was “better than BlackBerry and close to the iPhone.”

By Scott Moritz

Big tech is putting its cash to work to appease investors.

Microsoft and Hewlett Packard say they will throw weary shareholders a cash treat. Microsoft created a new five-year $40 billion share buyback plan and an 18% dividend boost. And HP has set aside $8 billion for share repurchases. The top PC maker had $3 billion of buyback money still in its budget under an $8 billion program it started in November.

The buybacks are aimed at restoring investor interest in companies that have had very little to show in terms of growth amid a sluggish tech spending environment. Using some of the mountains of cash also helps discourage activist investors from forcing the companies to make a similar move on somewhat different terms. 

The move comes less than a week after Microsoft shares hit a two-year low on a broad credit-crisis selloff on Wall Street. The No.1 software shop says it has recently completed a previous $40 billion stock repurchase plan and by Microsoft’s tally, the company has now spent $115 billion on stock buybacks and dividends in the past five years.

Microsoft will pay a dividend of 13 cents a quarter, or 52 cents a share. That is up 2 cents from the prior dividend of 11 cents a quarter, and up 8 cents annually from the 44-cent level.

Microsoft’s board has also authorized up to $6 billion in debt financing including a new $2 billion participation in the commercial paper market.

“The company’s strong credit quality coupled with investors’ current appetite for high quality paper provides a unique opportunity for the company to establish its first-ever commercial paper program and enhance its capital structure,” Microsoft treasurer George Zinn said in a press release.

The company says it may use the financings to help fund operations and buy back stock.

Shares of Microsoft rose 5% and HP was up 2% in premarket trading Monday.

By Yi-Wyn Yen and Michal Lev-Ram

The Google-powered cell phone is coming soon, and it will retail for $199, according to the Wall Street Journal.

The price of the new Google (GOOG) smart phone would put the device head-to-head with Apple’s $199 iPhone (AAPL). The Google phone, which features a touchscreen and is made by Taiwanese manufacturer HTC, faces some stiff competition. The iPhone 3G has generated significant interest among consumers for redefining touch-screen technology, popularizing mobile applications and significantly improving Web navigation on cell phones.

T-Mobile (DT), the first carrier that will run Google’s Android mobile software, will show off the new phone to analysts and reporters on Tuesday in Manhattan. It is expected to hit stores later this fall.

Representatives from Google, HTC and T-Mobile would not comment on the Journal’s report.

Google unveiled features of the Android operating system on an unidentified black HTC handset at a developers conference in London on Wednesday.

The HTC phone is just the first of many Google-powered phones, according to the search giant. For Google to reach its ultimate goal – driving mobile Internet use and, in turn, ads – it will need to get multiple devices in the hands of mainstream consumers. The price will also need to be right, given that companies like Palm and Samsung already offer entry-level smartphones for $100.

By Michal Lev-Ram

SAN FRANCISCO – CEOs from Sprint, T-Mobile and Verizon Wireless extolled the virtues of open networks -  as long as those networks don’t get too open – Wednesday at the CTIA wireless conference in San Francisco.

The executives took the stage to discuss “openness” -  letting consumers use any mobile device or application over any cellular network. Wireless carriers have traditionally served as gatekeepers to their networks, deciding which applications and even which websites their subscribers  can access.

But that’s all changing. Well, sort of.

T-Mobile (DT) CEO Robert Dotson  told the audience that while the so-called “walled garden” is a thing of the past, carriers need to retain some control to ensure “security and privacy” and provide a reliable experience for consumers.

“There needs to be some stewardship and control,” said Dotson, who argued that a mobile operator can’t guarantee services like voicemail and multimedia messaging will work smoothly when consumers use a phone that’s not optimized for their network.

Sprint (S) CEO Dan Hesse said that in March his company began allowing full Internet browsing, meaning that Sprint subscribers can now look up any website on their mobile browser, even those that aren’t “optimized” for mobile use.

Verizon (VZ) CEO Lowell McAdam also plugged his company’s commitment to openness by pulling out of his pocket two non-Verizon devices (a $69 phone from prepaid service provider AirVoice and a wireless router for the insurance industry) that are currently running on the company’s network. Verizon recently opened its network to outside handsets that meet its minimum testing standards.

Despite vowing their allegiance to openness, all three CEOs echoed claims that truly opening up their networks wouldn’t be all that beneficial to consumers.

McAdam, for example, argued that separating phones from service plans would mean people will have to pay more for cell phones that are now heavily subsidized by carriers in exchange for two-year service contracts.

What’s more, said McAdam, people are accustomed to being able to walk into their carrier’s stores when they have problems with their device. With a more open system, the carrier wouldn’t be involved with the sale of all devices running on their networks, and thus wouldn’t be too keen on helping customers resolve hardware or software issues created by other companies.

“When an application crashes on a Dell laptop you don’t call your cable provider,” said McAdam.

By Michal Lev-Ram

As cameras, MP3 players and text messaging become must-haves on cell phones, one startup is bucking the trend by going back to the basics.

Peek, a New York-based company, will soon launch a mobile device that has only one function – e-mail. In other words, the bare-bones gadget doesn’t take pictures, come with flashy graphics or even make calls. Given that you’ll still have to carry a cell phone, who would want to buy it? The so-called “soccer mom” demographic, says Amol Sarva, Peek’s founder and a former Virgin Mobile (VM) executive.

Sarva believe that middle-aged women with kids want to be able to access their e-mail while out and about, but don’t necessarily want all of the other fancy features packed into most smartphones. That’s why the device his company developed doesn’t do anything but e-mail. That’s also why it has soft, rubber keys specially designed for women’s fingernails. (Whether potential buyers will be attracted or turned off by such gender targeting is another matter.)

“The overwhelming temptation is always to add value by adding more features and functions into a device,” says Michael Gartenberg, VP of mobile strategy at research firm Jupiter Media. “But this philosophy of ‘less is more’ could be the correct approach for a more mainstream demographic.”

An estimated 14% of cell phone users access e-mail on their mobile device, according to research firm ComScore M:Metrics. But most of them are corporate employees who already have BlackBerries or other smartphones. Peek is hoping to attract a less tech-savvy crowd – the kind of people who don’t know their IMAP (a way of transferring e-mail from a server to a device) from their POP (another way to do the same thing).

Of course, to reach a more mainstream demographic, the price has to be right. The Peek (which comes in cherry, aqua and grey) will cost $100, with a flat monthly fee of $20. Sarva says the device runs on T-Mobile’s nationwide network, though customers won’t need to deal with the carrier. Even better, they won’t need to sign a contract. Peek will be sold in Target stores nationwide starting in mid-September, and customers will pay for the monthly service by credit card, either online or via the device, directly to Peek.

To start sending and receiving messages on the device, all they’ll need to do is enter their e-mail address and password (you can get up to three accounts on one device, including Gmail, Yahoo mail and AOL).

But will the Peek be a hit? Maybe, though it could be a hard sell for several reasons. Besides the challenge of finding an effective way to get the word out to its non-techie target demographic, Peek could face competition from ever-cheaper smartphones.

Devices like a Motorola’s (MOT) Q or Palm’s (PALM) Centro are now available for under $150, and they do a lot more than send e-mail. But Peek believes its target market doesn’t care about smartphones’ bells and whistles and don’t want to be tied to service contracts.

Pushing further into Microsoft’s (MSFT) territory, Cisco (CSCO) announced Wednesday that it has signed a $215 million deal for business e-mail shop PostPath.

The move bolsters Cisco’s strategy to expand into the office software market by adding e-mail and calendar services to its existing roster of so-called enterprise networking features. PostPath, based in Mountain View, Calif., develops Linux-based software that gives corporate customers an alternative to Microsoft’s Exchange system. PostPath says its e-mail servers are compatible with a nearly all business systems, including Apple (AAPL) and its iPhone. 

Cisco, in announcing better-than-expected quarterly profits but a lower growth forecast, said earlier this month that it planned to make acquisitions in adjacent markets outside its core business selling Internet equipment.

With Google going door-to-door trying to sell its business software to Microsoft clients, this latest move by Cisco into e-mail isn’t necessarily a great comfort to the Redmond, Wash. giant. Given Cisco’s dominance in corporate IT gear, there is potential for Cisco to offer an alternative to Microsoft Exchange.

Cisco plans to add PostPath’s applications to its Web-based services, also known as “cloud computing.” Software providers have for years been looking for ways to let business users access their desktop computing tool wherever they happen to be. This way employees could collaborate on tasks using features like instant messaging, video conferencing or document-sharing services.

Microsoft’s quest to extend its desktop software dominance to the Web was a driver behind its failed bid for Yahoo earlier this year.

By Michal Lev-Ram

Known for stylish and inexpensive furniture with names like Ektorp and Malm, Swedish retailer IKEA is entering the mobile phone market.

The furniture chain is the latest in a long line of companies that have attempted to turn themselves into mobile virtual network operators, or MVNOs, that resell wireless services. IKEA’s Family Mobile offering will launch in the United Kingdom this Friday, where it will run on the German-owned T-Mobile (DT) network.

Family Mobile will be available to IKEA’s loyalty card holders, and will operate as a pay-as-you-go service. In the United States, several non-phone companies have failed in similar endeavors.  In 2006, ESPN shut down its phone service after being in business less than a year. But in the U.K. – home of Virgin Mobile, one of the original MVNOs – the concept has been gaining popularity.

IKEA could not be immediately reached for comment, and it’s not clear if the company plans to bring its phone service to other countries.

But Jason Baker, IKEA U.K. customer relationship marketing manager, said in a statement that the Family Mobile plan will help customers take control of their mobile phone costs in a climate “where every penny counts.”

By Scott Moritz

Clearing the way to merger approval, XM and Sirius agreed to pay a $19 million fine for violating radio transmission rules.

The move is aimed to end a 2006 inquiry by the Federal Communications Commission into radios that broadcast some signals in adjacent FM radio waves. The FCC stepped in when satellite radio transmissions interfered with conventional radio channels.

The two companies agreed to pay the fine - XM will pay $17 million and Sirius will hand over $2 million – and correct their radio and broadcast transmission problems.

The settlement is expected to pave the way for a 3-2 FCC approval. As the review entered its 18th month, it became clear that the agency was split along political party lines. The swing vote on the deal is Commissioner Deborah Tate, a Republican appointee, who is reportedly close to filing her vote in favor of the deal.

The two FCC Democrats, Jonathan Adelstein and Michael Copps, oppose the combination. Copps Monday gave an unconditional no vote on the deal and on Wednesday, Adelstein voted no after he made no progress getting the companies to agree to conditions like a six-year service price freeze and mandatory public access to a quarter of the combined companies’ airwaves.

Sirius and XM filed for a merger review with regulators in February 2007.  Just over a year later, the Justice Department approved the deal, saying that conventional radio and MP3 players like Apple’s (AAPL) iPods were sufficient competition to keep Sirius from setting high prices.

The FCC was a more difficult hurdle, in part because the agency wrote the original satellite radio charter, which specified that the two radio wave licenses should be in separate hands to foster competition.

In an effort to ease the concerns that the satellite duo would use its monopoly status to gouge consumers, the companies proposed new price plans like 50-channel and 100-channel a la carte  offerings that would cost $13 and $15 a month, prices that would stay static for three years. XM and Sirius currently charge $12.95 a month.

The companies also promised to set aside 4%, or 12 channels, for outside access like public service and minority programming.

But as the merger approval process dragged on for nearly a year and a half, the two companies saw growth cool and losses mount. And as new car sales fell, the satellite radio sector suffered as well. Investors worried about the perpetual need for new financing and the prospects of recapitalization pushed the stocks down. XM shares are down 23% from the pre-merger announcement level and Sirius has dropped 37% in the same period.

Looking ahead, if the companies manage to bring their operations together and find new sources of cash, the new entity will likely take aim at lowering high-priced programming deals like the five-year $500 million contract with Howard Stern, which expires in 2010.

By Johan Anderberg

What happens when emerging markets don’t bail you out of a flattening mature market? Ask LM Ericsson, the world’s largest telecommunications equipment maker. Shares in the Swedish tech giant sank more than 10% Tuesday after the company announced that net profits fell 70% from the same quarter last year.

Ericsson’s net income of SEK 1.9 billion ($319 million) for the second quarter was slightly better than expected. Net sales were up two percent to $8.1 billion, but shares fell on lower gross margins and low expectations for the year to come. The company reiterated its murky outlook for 2008: Customers in higher-margin markets such as the United States and Europe aren’t likely to order wireless network upgrades in a weakening global economy. And the company’s growing business in developing countries in Asia and Latin America is unlikely to offset slowing sales.

Last week’s break-even report from handset maker Sony Ericsson didn’t exactly reassure investors either. Ericsson CEO Carl-Henric Svanberg, in a conference call Tuesday morning, said this year will be a “challenging” one for its Sony Corp. (SNE) joint venture.

Tuesday’s drop in Ericsson (ERIC) shares did not erase all of its 20% gain last week after Nokia reported better-than-expected results, offering a glimmer of hope about the telecom market ahead.

There was some good news in Ericsson’s earnings report. Analysts were upbeat about the company’s improved cash flow and ongoing cost-cutting. Ericsson is cutting expenses by $672 million this year, including 4,000 jobs worldwide (and not including an additional 2,000 layoffs Sony Ericsson announced last week.

At the same time, Ericsson is investing more in research and development in the hopes of boosting revenues through patent licensing. “We’re walking a thin line,” Svanberg said. “We plan for a flattish networks market ahead, but also try not to compromise with R&D.”

Svanberg also tried to focus analysts’ attention to Ericsson’s growing market share in mobile networks. “We’re expanding our footprint,” he said, boasting that Ericsson now has 40 percent of both the GSM and 3G markets. “It will be good for us in the long run.”

And despite the slowdown in mature markets, Ericsson is still betting heavily on growth in developing countries. The company continues to roll out networks in India, China, Latin America and all other places where growth is strong. Svanberg said Tuesday that India will become the company’s largest market in the next quarter.

The problem is, Ericsson doesn’t make much money in the emerging markets – yet. More than 42 percent of revenues come from Asia Pacific and Latin America, but most of these projects are turnkey and not nearly as profitable as the upgrading of existing networks. And prices are falling. “The competition is fierce. Everyone wants to be a part of the market,” Svanberg said.

By Scott Moritz

Delivering its second-quarter earnings Thursday, Nokia (NOK) offered a glimmer of optimism in an otherwise gloomy outlook for the tech market by raising its growth forecast ever so slightly.

Fueled by roaring sales in the rapidly developing so-called BRIC regions – Brazil, Russia, India and China – Nokia adjusted its worldwide mobile phone sales target to 10% or more growth this year from a more squishy “approximately 10%” level.

Nokia posted a 61 percent drop in second-quarter profit from a year ago to $1.75 billion due to 2007 gains on a joint venture. The adjusted second quarter profit was 58 cents per share, up from 43 cents a year ago and above the 56 cents analysts were expecting. Sales were $20.7 billion, up from $16.9 billion in the year-ago quarter and better than the $20 billion Wall Street expected.

The company sold 122 million phones in the second quarter for an average price of $117 each. Analysts had expected about Nokia to sell about 120 million phones at a $120 a piece.

The stock market cheered Nokia’s second quarter results, sending the stock up 7%, as anxiety eased briefly over the waning growth in wireless. Analysts gave the company high marks for delivering solid numbers despite carrying a stale product line up and broadening economic slowdown. If growth continues in theBRIC regions and some of Nokia’s new phones take off, the thinking is that Nokia will come out shining in a year where the rest of tech has been a wreck.

The Finnish phone giant, which holds about 40% of the total wireless phone market, has been able to avoid the economic fallout from the bust of the mortgage boom in Europe largely by pedaling lower-priced phones in hot new wireless markets.

On a conference call with analysts Thursday, Nokia executives pointed to countries like India, where the company had its “best period ever” as new phone buyers were signing up at a rate of seven million a month. The surge in India helped offset a slight cooling in China, where sales fell 16% from the first quarter level.

The executives also said they saw strong competition in the smartphone market in the second quarter. Nokia was caught flatfooted as it had few new phones to compete with Apple’s (AAPL) iPhone or the international expansion of Research in Motion’s (RIMM) BlackBerry. But looking ahead, Nokia says it expects to launch ten new smartphones in the coming months to help revive its high-end lineup. And despite seeing no improvement in Europe and only a one percentage point gain to 5% market share in the United States, Nokia was upbeat about its prospects for the remainder of 2008.

“We have good confidence as we look out here to the end of the year,” CFO Rick Simonson said on the call.

It also doesn’t hurt that Nokia has watched Motorola (MOT), once its top competitor,  hit the rocks.

By Scott Moritz

Motorola, the flailing No. 3 mobile phone maker, is dropping like a lead handset in industry rankings.

Skipping the No.4 slot, Motorola (MOT) is set to land at the back of the pack at No. 5, according to second quarter shipment numbers. Motorola shipped between an estimated 22 million and 23 million phones in the second quarter, say industry sources cited in a DigiTimes story Thursday. Those numbers compare with projections for 28.1 million phones shipped by LG and 24 million units from Sony Ericsson. Nokia (NOK) and Samsung are No. 1 and No. 2.

The stunning freefall in sales is happening at a faster clip than many observers expected. In March, Fortune.com reported that if Motorola’s weak sales trends continued, the Schaumburg, Ill.-based tech titan could fall to fourth place by year end.

Without any compelling new phones to followup on the Razr’s success, Motorola has been in free fall the past two years. The once-profitable handset unit, and formerly Motorola’s strongest business, lost half its marketshare since 2006 and plunged into the red. Earlier this year, Motorola announced plans to cut its losses and spin off its phone business. Even a recent headhunting mission to find a new CEO turned somewhat laughable when the targeted Hewlett-Packard executive announced that he was quite happy in his current job.

Motorola is expected to report second quarter results on July 31.