("UPDATE: Nokia's US Re-entry Marred By Software Glitch," published at 12:10 p.m. EDT, incorrectly stated Nokia's operating margin outlook in the third paragraph. The error also appeared in an earlier version of the story published at 11:55 a.m. A corrected version follows.) --Nokia's latest smartphone could lose high-speed data connection --Nokia has fix for glitch but is offering a credit in the meantime --Glitch is a setback for a company trying to re-enter U.S. market By Greg Bensinger Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Nokia Corp.'s (NOK1V.HE, NOK) Lumia 900 smartphone was supposed to help usher in a new era for the once-dominant Finnish mobile phone giant, but a software glitch could derail Nokia's splashy re-entry into the U.S. Nokia said late Tuesday that its marquee smartphone could at times lose its high-speed data connection and that the company would effectively give away the device for a short period. The embarrassing setback comes just three days after Nokia began selling the $99.99 handset at AT&T Inc. (T) stores in what the two companies called a major launch. The news was a prelude to Nokia lowering financial expectations Wednesday for the first half of 2012. Specifically, the company said it expected the operating margin for its mobile handset unit to be about negative 3% in this year's first quarter, because of increased competition in emerging markets, where there is a proliferation of inexpensive handsets. Investors fled Nokia, sending its shares to a 15-year low. As sales of its smartphones have slipped under the weight of competition from Apple Inc.'s (AAPL) iPhone, Nokia had high hopes the Lumia and its Microsoft Corp. (MSFT) Windows software could draw first-time smartphone customers who are still clinging to their old flip phones. In the U.S., where Nokia once reigned with its palm-sized feature phones, the company's smartphones now command less than 1% of the market. Nokia said it created a software fix for the glitch and will release it to users April 16, though customers can also swap their devices at an AT&T store for an updated one. While the device will still sell for $99.99 with a two-year contract, Nokia is offering a $100 credit to all buyers before April 22, regardless of whether they are affected by the problem. "We wanted to make this issue as painless as possible for our customers," said Keith Nowak, a Nokia spokesman. An example of that, Nowak said, is the $100 credit will appear automatically on the customer's AT&T bill, rather than as a mail-in rebate or a debit card. Nowak said the company discovered the glitch during on-going internal testing. The glitch was particularly embarrassing because part of Nokia's marketing campaign for Lumia was that the "smartphone beta test" was over, and that existing smartphone owners should trade in their "beta" Androids and iPhones for a real smartphone. In technology, a beta test suggests a limited release of a product in order to find its shortcomings before a more widespread final release. It wasn't known how much the credit would cost Nokia. AT&T also declined to comment. Chris Weber, Nokia's U.S. president, said last month that he expected the device would be a big seller, particularly among customers who had been intimidated by Apple's iOS and Google Inc.'s (GOOG) software. For AT&T, the Lumia 900 was meant to drum up interest in the carrier's growing high-speed mobile broadband network, known as 4G LTE. Nokia and Microsoft teamed up last year to create smartphones running the Windows software for release world-wide. The lower-end Nokia Lumia 710 was released in January. -By Greg Bensinger, Dow Jones Newswires; 212-416-4676; greg.bensinger@dowjones.com
