Nokia has warned its phone business would post losses in the first two quarters of this year as it struggles to revamp its product line to compete with Apple and Samsung, sending its shares 19% lower.
Earlier today, the struggling firm said it had found a software bug in the new Lumia 900 smartphone, its big hope to take on Apple's iPhone, and was effectively giving the model away until it is fixed.
Nokia shares fell as low as €3.10, their lowest level since 1997.
The stock had already crashed more than 50% since Nokia announced in February 2011 it was dropping its own Symbian operating software and switching to the largely untried Windows Phone system developed by Microsoft.
Nokia said its phone business, which is launching a raft of new products running Windows Phone to make up for the decline of the Symbian lines, would make an operating loss of around 3% of sales in the first quarter, having earlier forecast around breakeven.
It predicted a similar or larger loss in the second quarter, below all 29 analysts' forecasts gathered by Reuters.
On average, analysts had expected a profit margin of 0.4% for the first quarter, and 2.1% for the second.
Nokia said competition was particularly tight in the emerging markets of India, the Middle East, Africa and China, which have been an area of strength for the company, even as it suffered in more developed markets.
Though still the world's biggest volume maker of cellphones, Nokia lost the top spot in the lucrative smartphone market last year to Apple and phones running Google's Android system, in part due to its weak performance in the United States, where its smartphones have less than 1% of the market.
It sold a total 12 million smartphones in the first quarter, with gross margins slipping to 16% from 20% in the previous quarter due to the fast decline in the Symbian portfolio. It still has a mountain to climb to match the 37 million iPhones that Apple shifted in the fourth quarter.
The group has already announced 30,000 job cuts since Chief Executive Stephen Elop took the helm in late 2010.
"It does take time to turn around the product portfolio and so forth, but what you see is us very aggressively going after that," Elop told analysts.
Nokia said it sold over 2 million units of all its Lumia smartphone models in the quarter to end March, up from over 1 million in the overlapping November-to-January period, but analysts said they had expected a faster uptick in sales.
Nokia said it would focus increasingly on Lumia phones, a task made a little harder by the data connection bug in the Lumia 900, its first 4G phone, which it markets with the strapline "an amazingly fast way to connect".
Nokia said a software update to fix the problem, a "memory management issue" related to phone software, not to hardware or the Windows operating system, would be available around April 16.
It is offering anyone who has bought a Lumia 900, or who buys one by April 21, a $100 credit on their AT&T bill.
The operator sells the phone for $99.99 with a two-year contract.
The Lumia 900 is currently only available in the United States, where it was launched on April 8, and is key to Nokia's comeback there.
It is the third Nokia phone to run the Windows system and is due for a wider global launch this quarter. The model won several awards at the Consumer Electronics Show in Las Vegas in January.
Nokia created the smartphone industry in the late 1990s with its Communicator models and was the undisputed leader until Apple's iPhone entered the ring in 2007 and Google's Android system was released in late 2008.
