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Nokia Expecting Further Slump In Q1

Cellphone maker to report a plunge in sales and a loss of market share as it continues to struggle against competition from smartphone producers and Asian manufacturers.

HELSINKI (AP) -- Nokia Corp. is expected on Thursday to report a plunge in sales and a further loss of market share, as the world's top cellphone maker continues to struggle against fierce competition from high-end smartphone producers and Asian manufacturers.

OVERVIEW: In the fourth quarter, the company's net profit plummeted more than 25 percent despite a 6 percent rise in sales to $17.2 billion (euro12.7 billion). Market share continued its downward trend, falling to 31 percent, from 35 percent at the end of 2009.

Nokia faces stiff competition from Research in Motion's Blackberry, Apple's iPhone and Google's Android at the top end of the market, where no improvement is expected. Asian handset makers also continue their challenge with cheaper phones in emerging markets.

Nokia CEO Stephen Elop, who took over in September, has started streamlining the Finnish company with 1,800 layoffs worldwide. Announcements of new job cuts are expected before the end of April.

In a major shift of strategy, Nokia said in February it is teaming up with technology giant Microsoft Corp., which will provide Windows Phone software as the main platform for Nokia smartphones. That will further cut Nokia's own R&D operations as it relinquishes the open-source Symbian platform.

BY THE NUMBERS: Thirty-one analysts surveyed by Thomson Reuters predict that Nokia's first-quarter operating profit will fall by 40 percent and smartphone margins to drop to 8.6 percent, from more than 12 percent a year earlier.

Nokia has said it expects flat or little growth in the period, with device sales of euro6.8 billion to euro7.3 billion, compared to euro8.5 billion in 2010.

Strategy Analytics market research forecasts that Nokia will sell 105 million handsets in the quarter, down from 108 million in 2010, and that its global smartphone share will drop to 29 percent from 39 percent.

WHAT'S AHEAD: Nokia has been the world's largest handset maker since 1998, selling 432 million devices last year — more than its three closest rivals combined. In the fourth quarter, it was still the clear global leader, but for the first time shipments of Android-based smartphones -- at 32.9 million -- surpassed Nokia's Symbian platform handsets, according to Canalys research. Nokia's smartphone market share plummeted to 30 percent from 40 percent a year earlier.

ANALYST TAKE: Neil Mawston from London-based Strategy Analytics says Nokia will likely underperform. "Globally, Nokia has been on a downward trend for a while, growing below average. There will be a lot of focus on their Symbian and smartphone volumes to see how they've been bearing up against Android, in particular. Also, there's interest to see if the announcement about shifting to Microsoft as their primary platform has hit smartphone volumes."

Mawston said the Fukushima earthquake may have had "some impact" on Nokia, as the company depends on Japan for 10-20 percent of supplies.

STOCK PERFORMANCE: Nokia stock has lost more than a quarter of its value since the Feb. 11 partnership announcement with Microsoft, falling to a 13-year low of euro5.60 in March. Its share price closed down 1.3 percent down at euro5.78 ($8.27) on the Helsinki Stock Exchange.
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