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Nokia warns on profits, shares drop 10pc

Helsinki, June 16, 2010

Nokia warned on Wednesday its second-quarter sales and profits at its key phones unit would be weaker than expected as it struggles to compete against high-end rivals like Apple.

Shares in the world's top cellphone maker, which also said 2010 profits would be weaker, fell more than 11 percent to 7.02 euros, to their lowest level since March 2009 and at 1447 GMT were down 9.5 percent.

"Investors are worried about Nokia's long-term market position. Nokia loses market shares at the high-end, the mix worsens and margins go down. At the high-end, Nokia loses mainly against Apple," said Inge Heydorn, asset manager at Sentat Asset Management.

Nokia shares have dropped around 20 percent so far this year, strongly underperforming the European technology shares index, which is up 9 percent.

"Nokia has, considering the competition, one of its weakest product portfolios ever," said Swedbank analyst Jari Honko.

Nokia said profit margins at its key cellphone unit would be at the lower-end of its forecasts, or below, in the second quarter and in 2010, citing tougher competition, particularly at the high-end of the market as well as and shifts in product mix towards somewhat lower gross margin products.

The firm had previously predicted the unit's operating margin would be 9-12 percent in the second quarter and 11-13 percent for the full year.

Nokia also said it expected its share of the global cellphone markets in terms of value to fall this year, when it previously had targeted a slight increase year-on-year.

"In addition, the recent depreciation of the euro affects Nokia's cost of goods sold, operating expenses and global pricing tactics," Nokia said. - Reuters




Tags: Nokia | profit | Phones |

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