According to Avi Greengart, a wireless analyst at Current Analysis, Nokia has been hinting at this device for months. He watched a video about a Nokia touchscreen phone at a December conference.

"Nokia is quick to tell you it is already well versed in using touchscreens and creating touchscreen devices," Greengart said. "In fact, its Internet tablet even has a full Internet browser with Flash support."

Java Built In

The Tube will have Java built in as a standard, which would give it at least one competitive advantage over Apple's current iPhone, according to Tom Libretto, vice president of Forum Nokia. Libretto also told the conference that the Tube will be able to upload photos to the Web, which would mean built-in Wi-Fi or HSDPA connectivity . The tube may also include support for the DVB-H mobile-TV standard for Europe and mobile video.

Nokia has a strong brand presence in Europe, particularly in high-end multimedia. Greengart suggested Nokia is trying to freeze the market with a promise of an iPhone-like device soon. While that promise may not make much of an impact in the U.S., he said, it carries tremendous credibility in the European market.

Nokia did not disclose exactly when the Tube might be ready for distribution. However, Greengart said Nokia has consistently promised to deliver a touchscreen mobile phone before the end of 2008. Meanwhile, Apple is readying the next version of its iPhone, a 3G device that could allow Apple to gain more market share in the U.S. and Europe.

Innovation Remains King

Apple has its strengths, as does Nokia. For example, the iPhone has a two-megapixel camera that takes clear shots but does not have a flash, Gartenberg said. Nokia has devices that offer a five-megapixel camera with Carl Zeiss optics and relatively low shutter lags, auto focus and a flash.

Then again, the experience of using an iPhone versus a Nokia N95 is quite different because the iPhone has a large, high-resolution touch screen. "The iPhone literally feels different than scrolling around things on Nokia's browser using five-way navigation control buttons," Gartenberg said. "But both present you the entire page the way it would look if was on an even larger screen."

The key for both companies is innovation. If Nokia, for example, merely takes the 12-button experience and moves it to a touchscreen, then the paradigm doesn't change much. Users want a different experience, Greengart insisted.

"The real challenge and the real benefit of using the touchscreen is that it gives you the ability to create a differentiated experience," Greengart said. "We are starting to see some stuff come out of Nokia's labs that is quite exciting in the realm of using touchscreens, accelerometers and sensors."