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Nokia hints at U.S. flagship phone even as sales lag

The North American market continues to be a tough nut to crack, and despite a high-profile presence at AT&T, volumes continue to decline.

The Lumia 920 was AT&T's flagship phone.
Josh Miller/CNET

Nokia is still struggling in the U.S., but there's hope that another flagship phone is on its way.

CEO Stephen Elop said on a conference call Thursday that this current quarter will mark a season of new product introductions. Most importantly, he hinted at a phone carrying "hero," or flagship, status with a leading U.S. carrier.

The product is likely to be the rumored variant of the Lumia 920 for Verizon Wireless. The phone is important because it gets Nokia into the nation's largest wireless carrier in a much bigger way, carrying with it the opportunity to spark higher sales here.

"I think this move will help volume pick up, as I would expect Verizon to put a fair bit behind the new device at a time when Motorola's future is uncertain and HTC is struggling with brand presence," said Carolina Milanesi, an analyst at Gartner.

Nokia can certainly use all the help it can get here. While the company reported first-quarter results that were slightly better than expected, a deeper look into its numbers for North America shows performance that can be categorized only as anemic.

While revenue from North America (Nokia doesn't break out U.S. numbers) rose slightly, the volume of shipments dropped dramatically, haven fallen by a third from a year ago, when Nokia hadn't yet launched the flagship Lumia 900 with AT&T and Microsoft. In the first quarter, it generated 101 million euros ($132.1 million) and shipped 400,000 units.

The numbers underscore the continued difficulty Nokia has had in breaking back into the U.S. market, and raise questions about how effective exclusivity deals are, with AT&T providing only a small lift to sales during the holiday period. AT&T has already moved on to position the HTC First -- the Facebook phone -- as its new flagship device.

While the U.S. market is an important one for any smartphone manufacturer, it remains one of the weaker areas. The company is likely hoping to stem the bleeding in China, where it traditionally has had a good presence and the market is even more vast. Microsoft is hoping its Windows Phone partners make more inroads in emerging markets like China, which is one reason why it isn't making its own phone.

And Nokia may continue to struggle in North America, but its Lumia sales are starting to pick up some traction. It shipped 5.6 million Lumia smartphones and expects to raise that figure in the second quarter, suggesting a bit of momentum returning to the company. It has some feeling optimistic though still cautious about the company.

"While the incremental Lumia improvement is noteworthy, it's still not enough to distinguish Nokia as a smartphone market vendor on solid ground," said Oppenheimer & Co. analyst Ittai Kidron.