N-Gage start stumbles

Officially, Nokia has been "pleased" with the launch of its portable N-Gage console, declaring it has received "strong order intake from distributors and retailers."

But the Finnish cellular behemoth can't be thrilled with the first sales numbers to come out of the US. According to numbers from a channel survey done by independent financial analyst company Arcadia Research, the portable console sold fewer than 5,000 units in America during its first week on the market. By comparison, Nintendo's Game Boy Advance sold 540,000 units its first week on the US market.

However, Arcadia analyst John Taylor cautioned against interpreting the sales figures as a harbinger of doom for the N-Gage. "Nokia's long-term success or failure in this category cannot be judged by the first couple of weeks," said Taylor.

Industry analyst Billy Pidgeon of the Zelos Group was slightly less optimistic, saying, "It's a bit early to call the N-Gage launch a disaster, but it's clearly a huge disappointment for Nokia and its partners."

What was the main culprit behind the poor sales? Taylor thinks a poorly defined brand is to blame. "It's not clear who the market is," he said, "and if Nokia's not clear, the consumer's not clear."

Pidgeon pointed to several factors. "The price point is very high in comparison to the Game Boy Advance," he said. "Also, there is no killer app, no must-have exclusive game for the N-Gage. The form factor of the device is not exciting, and usability issues including the vertical screen and difficulty inserting and extracting game media create a poor first impression."

So how can Nokia get people to start buying the N-Gage? Pidgeon feels the company needs a dual strategy. To appeal to the gamer market, Nokia "should redesign the N-Gage to better compete with the GBA SP and the upcoming Sony PSP." Pidgeon also feels "the N-Gage needs desirable exclusive games that show off its multiplayer capabilities."

However, according to Pidgeon's analysis, the N-Gage's fate rests with its appeal to cell phone buyers. "The N-Gage is not terribly expensive for a mobile phone," he said. "[Nokia] will move more units if T-Mobile and other wireless service providers subsidize the cost of the phone to encourage customers to sign contracts."

Unfortunately, that hasn't happened yet. AT&T announced today that it will start selling the N-Gage on its Web site. It's bundling the device with an 80-minute monthly calling plan costing $23.98. However, AT&T still offers the phone for the full price of $299.99, offering no discount. (Select N-Gage games will also be available on the site.)

Despite the N-Gage's apparently rocky launch, both analysts think the console potentially has a future.

Said Taylor, "They didn’t take the first hand, but this is Nokia's first play. They have a lot of other cards to play." Indeed, other industry sources contacted for this story referred to rumors that Nokia is readying a new game device for 2004.