LONDON (Dow Jones) - Shares of Nokia Corp. fell as much as 10% Thursday after the world's largest maker of mobile phones reported a smaller-than-expected 25% increase in first-quarter profit and forecast the mobile-phone market to shrink in euro terms this year.
Nokia's (NOK) net profit in the three months ended March 31 improved to 1.22 billion euros, or 0.32 euro a share, from 979 million euros, or 0.25 euro a share, earned in the year-ago first quarter. The profit missed consensus forecasts calling for earnings of 1.38 billion euros, according to a survey of 29 analysts conducted by FactSet.
Excluding one-time costs for pensions and the closure of a plant, the latest quarter's earnings came in at 0.38 euro a share. Sales rose 28% to 12.7 billion euros, in line with expectations.
Nokia's shares were last down 10% in early afternoon trading in Helsinki.
The shares have lost a quarter of their value in the last three months on concerns that slowing economic growth in the United States and Europe will hit consumer spending and affect Nokia's results.
Nokia said it expects the mobile-device market to decline in value in euro terms in 2008, reflecting "continued weakness in the U.S. dollar against the euro, the general economic downturn in the U.S. and possibly going forward some slowdown in Europe."
It reiterated, however, that the global market for mobile phones will rise 10% in unit terms this year.
Sony Ericsson (SNE)(ERICY), the joint venture that ranks as the world's No.4 maker of mobile phones, warned last month that slower growth in its European markets would hit first-quarter sales.
Until Sony Ericsson's warning, the credit meltdown gripping the financial markets had yet to have a visible impact on demand for mobile phones. The top four industry players all said they'd seen no sign of a slowdown when they reported fourth-quarter results early this year.
Slippage in average selling price, market share
In an interview with business TV channel CNBC, Nokia Chief Executive Olli-Pekka Kallasvuo said it was far too early to call a marked slowdown in Europe.
He noted, however, that the weakness of the dollar has had an impact on the average selling price of Nokia's phones, which fell to 79 euros in the first quarter, down from 83 euros in the fourth quarter and trailing analysts' expectations.
Nokia's average sales price has declined over the past two years, reflecting intensifying competition as well as a shift to lower-margin products and sales into emerging markets. But the company has recently managed to widen its operating margin in the mobile-device business -- evidence that it has found a sweet spot between volume growth and profitability.
Indeed, operating margin at the division widened to 21.2% from 16% in the year-earlier first quarter.
Nokia shipped 115.5 million phones in the quarter, up 27% year-on-year, giving it a market share of 39% compared with 36% a year ago and 40% in the fourth quarter. Analysts had widely expected Nokia to maintain its market share of 40%.
Kallasvuo said on CNBC that he sees a real opportunity for Nokia to gain share in the second quarter.
Analysts at Citigroup recently expressed concern about a lack of major products in the second quarter. The company has said it won't launch a touch-screen riposte to Apple Inc. (AAPL) and its high-end iPhone until the second half of the year, and it's yet to give a firm date.
Kallasvuo on Thursday brushed off suggestions that Nokia needs to do more to fight back the foray of iPhone onto its home turf, calling it a "niche product."
SMARTMONEY
