Ailing Nokia's shares nosedive

More bad news from the mobile phone giant as it warns profits will be far worse than expected

Nokia shares crashed 15 per cent yesterday as the Finnish mobile phone company admitted its profits will be hit by competition from Asian rivals such as China's ZTE. Its chief executive Stephen Elop warned Nokia was feeling the most pressure in fast-growing regions such as India, the Middle East and Africa and China.

The fallen mobile phone giant said operating margins in the first quarter were "approximately negative 3 per cent", far worse than previous guidance of "around break-even", and it expects a similar slide in the next quarter.

It is yet another blow to Nokia, which has already been struggling in the premium smartphone market where Apple's iPhone and Google's Android operating system are now dominant.

Mr Elop, who memorably described Nokia as a "burning platform" a year ago soon after he took the job, admitted the performance was "disappointing" and claimed the business "continues to be in the midst of transition".

The shares have halved in a year and are down almost 90 per cent since 2007. Analysts are used to bad news from Nokia but the profit downgrade still came as a shock.

"It's a disaster," said Thomas Langer at WestLB, who warned sales of the new Windows-based Lumia phones were failing to offset a fall in the older Symbian model.

"Nokia continues to be a rollercoaster ride for investor sentiment as product cycles bedazzle but ultimately disappoint," Lee Simpson, an analyst at Jefferies, said. "For some hard-heads, the long-term trend to brand irrelevance is embarrassingly plain in some countries. Just what is Nokia if not an ailing low-margin box maker?"

Mr Elop has been battling to win over investors and consumers with the Lumia smartphones which have been developed with Microsoft.

In a further embarrassment, Nokia admitted yesterday it has found a software bug in its new flagship Lumia 900 model, which means the phone can sometimes lose its data connection.

Nokia offered $100 credit for anyone who has bought it in the US and said it hoped to fix the problem by next week.

"They really did not need it... but I like the way they are dealing with it," said Carolina Milanesi, a telecoms analyst at Gartner Research, referring to the compensation offer.

Nokia has been the leading handset maker since 1998, but its market share has fallen sharply, from 40 per cent in 2008 to below 30 per cent last year. Jefferies estimates its share could now be as low as 22 per cent.

Mr Elop has already announced as many as 14,000 job cuts in an attempt to turn around the ailing company.

The Finnish software entrepreneur Risto Siilasmaa takes over as chairman of Nokia next month. Its vice chairman Dame Marjorie Scardino, the Pearson chief executive, has been on the board since 2001.