Nokia warns of weak start to 2011 as profit slips

Nokia warns of weak start to 2011 as profit slips

Helsinki: Nokia, the world’s top cellphone maker by volume, reported a third profit fall in a row and warned of a weak start to 2011 as it struggled to recover lost ground in the smartphone business.

Nokia shares dropped 6% after it said first quarter operating profit margin at its phone unit would drop to 7-10% in the period January to March, missing analyst forecasts of 10.2%.

“The share reaction will follow the guidance, which was extremely careful, negative," said Swedbank analyst Jari Honko.

The phone market has recovered from a slump in 2009 when the global economic slowdown dampened demand for the latest gadgets. Demand this year has surged for new smartphones like Apple’s iPhone 4 and Samsung’s Galaxy S.

But Nokia, the world’s top handset maker by volume and sales, has lacked a hit smartphone since the N95, which it launched in 2006 before Apple stormed onto the market.

Nokia said its share of the smartphone market fell to 31% in the fourth quarter from 38% in the previous quarter.

Chinese manufacturers are also eating into Nokia’s dominance in low-price emerging markets.

Nokia’s underlying earnings per share fell to 0.22 euros, roughly in line with an average analyst forecast of 0.19 euros in a Reuters poll, when excluding 2.5 euro cent boost from lower-than-usual taxes.

Stephen Elop, who took over as Nokia’s chief executive last year, warned the company faces some significant challenges in its competitiveness and execution.

Nokia said Elop would unveil his plan to revamp the strategy of the struggling phone maker on 11 February.