Nokia shares plummet on profit warning

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Nokia warned that a soft dollar and consumers' reluctance to shell out for more fancy phones will hit sales and earnings in the third quarter, which sent the Finnish mobile phone maker's shares down as much as 15.5 per cent to €13.31 (£9.35).

The outlook, coming on top of disappointing second-quarter earnings at Nokia's handset unit, the world's largest, confirms that mobile phone makers are still facing slow growth due to uneven demand and consumers' unwillingness to buy expensive models as economies remain shaky.

Nokia is still banking on a fourth-quarter Christmas sales uptick for the unit, which generates four-fifths of its total sales and all of the company's profits. But it sounded a warning about its European home turf, where it has a 50 per cent market share.

"European economies are dead. There's no growth. Consumer confidence is low," Nokia's chief executive Jorma Ollila told a conference call.

"You need a bit of optimism. You need people to be willing to try out something new. You don't really see that, other than in well-developed markets like the UK", he said.

"It was a weak result and horrible guidance," said Nordea Securities analyst Jussi Uskola, who rates Nokia shares "buy". "Average (phone) selling prices plummeted. Nokia should consider where the market will concentrate in the future - on low-end models or the more expensive ones?" he said.

Nokia's result comes after US rival Motorola on Tuesday posted weaker second-quarter sales and reeled in financial forecasts in the face of tough competition in China. Networks rival Ericsson,of Sweden, will report earnings on Friday.

Nokia said it saw no turnaround in sight, with third-quarter sales at the unit likely to fall by 15-20 per cent and a slight loss expected.