By Dan McDonough, Jr. Wireless NewsFactor January 11, 2002 Rumor has it that Nokia (NYSE: NOK) is cowering. The world's largest mobile phone maker is shocked, say published reports, by how successful rival Ericsson's (Nasdaq: ERICY) recent launch of its tiny T68 has been. Part of the allure of Ericsson's new handset is in its color screen. Now, some analysts are convinced that Nokia is planning its own color-screen handset -- an update of its 8310 model. The 8310 is a GSM (global system for mobile communications) phone that works on networks in Europe and Asia. It also handles data services using WAP (wireless application protocol) over GPRS (general packet radio service) networks. And, if the rumors are correct, a color-screen version could give Ericsson's T68 a run for its money. Simple Pleasures Though Yankee Group analyst Sarah Kim has not yet heard of any Nokia color-screen plans in the works, she is not sure why the company would make a serious investment in such a product. "At most, you're looking at two or so years for this product," Kim told Wireless NewsFactor. She said the type of people who would be interested in a color-screen GPRS phone would be the first to drop the handset for new 3G (third generation) handsets and services once they become available. The T68's popularity came unexpectedly. When Wireless NewsFactor published a list of wireless gift suggestions in December, the T68 was touted by one analyst as the top item on his list. The T68 also was voted one of the "100 best things in life" by GQ magazine in the United Kingdom. "But it's very expensive," Kim noted. In fact, the price tag is more than US$500. Waiting for Next-Generation Nokia has set serious goals to maintain and grow its already dominant market share. If Ericsson gains significant attention from the T68, it could throw a monkey wrench into Nokia's plans. So, Nokia's main objective for a color-screen 2.5G phone likely would be to steal Ericsson's thunder. If Nokia can offer a color-screen model at a lower price, it will be able to compete with Ericsson, despite coming late to the game. But color itself is not novel. Besides the three-color display Motorola toyed with for a couple of its phones, Kim noted that the Sanyo 5150 from Sprint and the Samsung SPH 1300 Palm phone offer color and already are available in the United States. The T68 and Nokia's 8310 models are GSM phones that are available only outside the United States. Nokia's biggest challenge -- if it comes through with a 2.5G color phone in the next year -- will be explaining to consumers why they shouldn't just wait for 3G.