Nokia, the world's leading mobile phone maker, stunned stock markets this afternoon by warning that handset sales in the first quarter of the year would be lower than forecast.
Blaming weaker mobile phone and multimedia sales, Nokia said its earnings per share would come in at 17 cent for the period, at the very bottom of the previously forecast 17-19 cent, compared with 20 cent a year earlier.
Sales were now expected to drop by 2% compared with the first quarter in 2003 to €6.6 billion, in stark contrast to earlier guidance of an increase of between 3-7%.
'Obviously, we are not satisfied with our sales development during the first quarter,' Nokia CEO Jorma Ollila said in a statement. 'The overall Nokia sales were negatively impacted because we were not able to fully exploit the usual seasonal market pick-up in March, and the Mobile Phones product mix was weighted towards the low end,' he said.
European equity markets, where technology stocks had been given a boost recently by upbeat noises from Nokia's Swedish rival in the networks market, Ericsson, reacted with shock. In Helsinki, Nokia's shares plunged by 15%, dragging telecommunications stocks around the world with them.
The profit warning concerned only Nokia's core mobile phone division, while networks had seen sales increase at an better-than-expected 16% to €1.4 billion in the first quarter compared to the same period last year, the group said.
Growth in global mobile phone volumes was 25% in the first quarter, while Nokia's handset sales clocked up just 19%.
Nokia has clearly failed in its strategy of targeting the lower end of the market at a time when Europeans were trading in their mobile phones for higher-end handsets featuring colour screen and image messaging capabilities, analysts said.
