Nokia losing market share as price war bites

By Tarmo Virki and Sakari Suoninen

HELSINKI (Reuters) - Nokia Oyj (NOK1V.HE: Quote, Profile, Research), the world's biggest cellphone maker, said it expects to lose market share in the third quarter as it fights to maintain profit margins, sending its shares as much as 14 percent lower.

Nokia warned its third-quarter market share would fall from the 40 percent notched up in the second three months of the year, compared with a steady market share it forecast earlier.

It said it expected the mobile device market in 2008 to be hit by weak consumer confidence in many markets and also cited tough competition in developing markets, its stronghold.

"Most alarming for me is that they're saying they're seeing more pressure in the low end of the market," said analyst Neil Mawston at Strategy Analytics.

"That really defines their profits, volumes; they get a lot of their economies of scale out of it. They really dominate that area," he said.

Analysts said Nokia and some other top vendors were likely to be losing ground to small vendors who are cutting prices in the hope of winning increased orders in the competitive business.

Nokia said it would ramp up one mid-range model more slowly than planned, with analysts saying the comments were likely related to the 5320 music phone.

Due to the confluence of negative factors, Nokia said margins at its core Devices & Services unit would fall below 20 percent in the third quarter.  Continued...