Nokia's Subdued Outlook Sends Shares Tumbling

Nokia (NOK) shares are headed sharply lower this morning - and dragging other handset makers along for the ride - after the company provided some sobering comments on the outlook for the mobile phone business for 2008.

Nokia still sees 10% growth in handset units this year, from the roughly 1.14 billion sold in 2007. However, the company said it expects the mobile device market to decline in value in Euro terms in 2008 compared to 2007. That’s new: Nokia previously had expected market expansion. Nokia said the more pessimistic view “reflects the negative impact of the recently weakened U.S. dollar, the general economic slowdown in the U.S., and possibly going forward some economic slowdown in Europe.”

Nokia said it continues to expect declining prices in 2008, “reflecting the increasing impact of the emerging market and competitive factors in general.”

The company also said it expects the market for mobile and and fixed infrastructure and related services to be flat this year; previously they had expected very slight growth. “The change from the previous estimate…reflects the negative impact of the recently weakened U.S. dollar,” the company said.

Nokia reported Q1 sales of 12.66 billion Euros, up 28% year over year; profits were 0.32 Euros a share, up 28% from 0.25 a year earlier. Ex special items, profits were 0.38 Euros, up 46%. Operating margin in the quarter was 14.7%, down from 15.9% in Q4, but up from 13.6% a year ago.

The company sold 115.5 million handsets in the quarter, up 27% year over year but down 13% sequentially. Nokia estimated that its market share was 39% in the quarter, down from 40% in Q4, although up from 36% a year ago. Average selling prices in the quarter dropped to 79 Euros, from 83 Euros in Q4 and 89 Euros a year ago.

In early trading, Nokia shares have plunged $4.19, or 12.4%, to $29.50. Ericsson (ERIC) is down 66 cents, or 3.2%, to $20. Motorola (MOT) is down 22 cents, or 2.4%, to $8.98.