I thought something different. If I recall correctly, they did already make a full touchscreen phone prototype 3 years before, but they dismissed the idea because of how clunky the UX was. So they dismissed the iPhone because of that experience, they already researched the form factor, the hardware, and deduced it was a dead-end. But I am no Nokia engineer, I have no insight on that (and that may have lead them to developing Maemo/MeeGo, but by the time it arrived the corporates already decided the fate of Nokia).