Helsinki: The world's top cellphone maker, Nokia Oyj, cut its profitability and market share forecasts due to tough competition at the top end of the market, hammering its shares on Thursday.
Nokia, whose rivals include Apple, Samsung and RIM, downgraded its expectations for second-half underlying operating margin to the first-half level of 11.3 per cent, compared with analysts' consensus expectations of 17.4 per cent in a Reuters poll.
The phone maker, which reported an expected slump in second quarter profits, also cut its forecast for 2009 market share, seeing it on a par with last year compared with earlier hopes for a rise.
Shares in Nokia, little changed in six months, fell 13 per cent on the news to 9.66 euros, dragging the DJ Stoxx technology index 4 percent lower.
Nokia said it will suffer from some component constraints in the third quarter, which will cut sales of its pricier phones by several hundreds of thousands.
Analysts said a sharp fall in Nokia's average sales price, and the company's outlook implies increasingly aggressive pricing--mostly from Korean rivals Samsung and LG Electronics who are benefiting from a weak Korean won .
"Handset makers are being really, really aggressive," said Gartner analyst Carolina Milanesi. "A lot of companies cannot really afford it: Sony Ericsson, Motorola, to some extent LG."
The market No 5 Sony Ericsson reported earlier on Thursday a deep loss for April-June.
LG Electronics reports on July 22, Samsung on July 24 and Motorola is due to report on July 30.
Nokia shares are trading 12.3 times next year's expected earnings, below many of its technology sector peers as its growth prospects are seen limited, and valuing the firm at 36.4 billion euros.
After decent quarter
Nokia's second quarter underlying earnings per share more than halved to 0.15 euros from 0.37 euros, but beat the average forecast of 0.13 euros in a Reuters poll of 31 analysts.
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Sales came in at 9.9 billion euros, down 25 percent from a year ago as recession hit demand but within the forecast range.
"Amid the doom and gloom Nokia have delivered some excellent results ... Nokia's high-tier performance continues to be the biggest concern," said CCS Insight analyst Geoff Blaber.
Nokia is facing tough competition at the top-end of the market from models like Apple's iPhone and Research In Motion's (RIM) BlackBerry. It lost further market share in North America, its weakest region, in the quarter.
Nokia said the smartphone market grew 10.5 percent from a year ago in the second quarter, to 41 million phones, with strong sales of its cheap touchscreen phone, the Nokia 5800, boosting its smartphone market share to 41 percent.
The world's No 2 smartphone maker RIM reported on June 19 better-than-expected results for its March-to-May quarter, and No 4 HTC reported a better-than-expected April-June profit on July 6.
Alongside results Nokia said its telecom equipment arm Nokia Siemens Networks had won a 1.1 billion euro ($1.55 billion) order to operate the telecoms networks of Brazilian operator Oi over the next five years.
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