Nokia warns of weaker Q1 sales, earnings

Nokia, the world's largest mobile phone maker, warned on Tuesday of weaker sales and earnings in the first quarter due to poor...

Nokia the world's largest mobile phone maker, warned on Tuesday of weaker sales and earnings in the first quarter due to poor demand for networks equipment and consumer reluctance to splash out on flashy colour-screen phones amid tight economic conditions.

Nokia shares, already reflecting the gloomy sector outlook, fell 7% to €10.68 compared with a 4.5% fall for the DJ Stoxx European technology index. Nokia is down some 30% this year. Rival Ericsson dropped 13% to 4.20 Swedish crowns.

Nokia warned it expected January-March sales to decline slightly year on year from €7.01bn a year ago. In January, the Finnish-based technology bellwether warned sales would be slightly weaker than growth of flat to 9%.

Nokia makes more than one in three mobile phones sold worldwide each year and has a global market share more than double that of its nearest rival Motorola.

The company said the downgrade was largely due to weaker than expected sales of networks, with this division expected to post a loss in the first quarter, and costs related to the roll-out of high-speed 3G networks.

The mid-quarter earnings update comes hours before the wireless tech bellwether makes its presentation at CeBIT, the world's largest annual electronics fair in Hanover and a traditional launching pad for new products.

Given extremely poor visibility, with markets hurt further by the threat of war in Iraq, Nokia - as expected - gave no outlook beyond the first quarter.

To counter the effects of weaker demand for its products and poor general conditions Nokia has cut staff, closed some plants and reined back spending, particularly on research and development in its struggling networks division.

Rivals, such as Ericsson and Motorola, have taken similar measures although job cuts have been more severe.

Nokia, which last year cut its sales outlook six times and reported an annual fall in revenues for the first time in more than a decade, also trimmed its forecast of pro forma earnings per share in the quarter to €0.15-€0.17 from a previous target of €0.15-€0.19.

Last year it had an EPS of 0.19 in January-March.

Nokia and its peers are suffering from the slowdown of the global economy, with key markets like the United States and Germany in poor shape, and with consumers reluctant to swap their old phones for new and more sophisticated ones.

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