RealTime IT News

Competition Weighs on Nokia Profit, Market Share

The world's top cell phone maker, Nokia (NYSE: NOK), cut its profitability and market share forecasts due to tough competition, sending its shares sharply lower on Thursday.

Nokia, whose rivals include Apple, Samsung and RIM, now sees second-half underlying operating profit margin at its key phone unit at the first-half level of 11.3 percent, compared with analysts' consensus expectations of 17.4 percent in a Reuters poll.

Nokia also cut its forecast for 2009 market share at its phone business, seeing it now on a par with last year, compared with an earlier forecast for a rise.

Analysts said a sharp fall in Nokia's average sales price, and the cut in outlook implies increasingly aggressive pricing.

"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 sent No.5, Sony Ericsson, 2.6 percent lower.

Nokia's underlying earnings per share slumped to 0.15 euros from 0.37 euros, but beat the average forecast of 0.13 euros in a Reuters poll of 31 analysts.

"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 (NASDAQ: AAPL) iPhone and Research In Motion's (NASDAQ: RIMM) BlackBerry.

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.