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n900Has Nokia (NYSE:NOK) finally come up with a smart phone that can take on the Apple (NASDAQ:AAPL) iPhone?

Thursday morning, the company launched a new model called the N900 which is based on the company’s Linux-based Maemo 5 operating system. Not everyone is going to be convinced, but Davenport & Co. analyst F. Drake Johnstone is. Late Thursday afternoon, he raised his rating on Nokia to Buy from Hold, setting a price target of $18.

He says the N900 gives the company “good potential to complete effectively in the smart phone market against Apple, Research in Motion (RIMM) and new handsets powered by Google’s (NASDAQ:GOOG) Android operating system.” Certainly, it has impressive specs: touch screen, slide-out keyboard, 5 MP camera, GPS, Mozilla browser, up to 48 GB of storage. The N900 can run up to 12 applications at once; it runs Adobe (NASDAQ:ADBE) Flash, which the iPhone doesn’t. Johnstone concedes that Apple has the edge in the near-term, in particular given 65,000 choices in the App Store. But he thinks that over the 12-18 months, “Nokia could generate significant consumer and corporate demand” for Maemo-based phones, “which should motivate software developers to create new software applications for these devices.”

Johnstone sees 2010 GAAP EPS of $1.22 a share, above the Street at $1.06, based on his view that “greater demand for Nokia’s new high-end smart phones should help to stabilize the average sellsing price of Nokia’s handsets.”

In Thursday’s trading, NOK rose 50 cents, or 3.8%, to $13.63.

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Source: Has Nokia Developed an iPhone Contender?