Even though Nokia maintained its overall lead with 56.4% of the worldwide market for smartphones, ABI Research is predicting that the Symbian-based share of smartphones will decline in coming years.Nokia sold 40 million Series 60- and Series 80-based smartphones in 2006, up from 28.5 million in 2005. That's a 44.5% increase in sales. New devices like the value-priced E61/62 helped lift Nokia far and away from its closest competitor, Motorola, which claimed only 8.5% of the smartphone market on sales of 6.03 million units (mostly Q's and the Chinese market MING).

Despite Nokia's success, however, rival operating systems are threatening Symbian's worldwide dominance in the enterprise.

With average selling prices dropping steadily, ABI's research discovered the growing need for handset OEMs to save on software bill of materials. With lower-cost operating systems like Linux vying for the mobile market, Symbian recently moved to lower its license fees. Even though Symbian captured 73% of the worldwide smartphone market, ABI is forecasting that competition from Linux, as well as Windows Mobile 6.0 and BlackBerry OS will weaken its presence to 46% by 2012.

Physical design as well as the look and feel of the user interface are the key differentiating factors for smartphones. The form factor, operating system and size all need to be combined in an appealing way to capture sales.

Nokia and its Symbian partners have their work cut out for themselves if they want to retain their current market share levels. One major hindrance to Nokia is its noticeable lack of any presence in the U.S. market. Perhaps if Nokia wins this week's bidding on Palm, it will be a step in the right direction.