Shares Plummet As Nokia Warns Of Losses

Nokia has warned its phone business will post losses in the first two quarters of the year due to fierce competition, sending shares in the ailing mobile phone maker plunging.

The Finnish firm predicted it would lose approximately 3% on sales in its devices-and-services division in the first quarter, and perhaps more in the second quarter, as it struggles to revamp its product line to compete with products from Apple and Samsung.

Nokia cited "competitive industry dynamic" which negatively affected mobile phone and tablet computer sales, particularly in India, the Middle East and Africa and China, and a squeeze on its gross margins, for its gloomy trading outlook.

Shares fell 14% on the back of the announcement, but many analysts said the news was not unexpected.

"This comes as little surprise - Nokia is still in transition and with Symbian volumes having fallen away more dramatically than expected and Windows Phone still ramping, the first two quarters of 2012 were always going to be challenging," Ben Wood from CCS Insight said.

"Nokia's challenges have been exacerbated by rampant competition - notably from Apple and Samsung who are extracting a disproportionate amount of margin from the industry at present."

The company also said it will have to keep offering call credit on its new smartphone - the Lumia 900 which it hopes will challenge Apple's market leading iPhone - until it fixes a bug which causes it to occasionally lose connection.

"Our disappointing financial results and outlook for the second quarter 2012 illustrates that our devices and services business continues to be in the midst of transition," chief executive Stephen Elop said, adding that the company is "quickly taking action".

Nokia plans to continue to increase its focus on accelerating Lumia sales, as well as on lowering the company's cost structure, increasing its product offering and " taking tactical pricing actions in the near term".

"We are continuing to increase the clock speed of the company," Mr Elop said. "The change is tangible, and we are proud of the way Nokia employees are quickly responding to the needs of consumers and partners."