Nokia sees mobile market shrink

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The world’s biggest mobile phone maker, Nokia, has seen its market share shrink as second quarter sales were down 5% on 2003 to 6.6bn euros ($8.18bn; £4.4bn).

The Finnish firm said it estimated its market share in the May to June period was 31%, down from 32% in the first quarter of the year and 39% a year ago.

Pre-tax profit was up 9.5% year-on-year at 1.04bn euros, but Nokia said profits would be under pressure later in 2004.

Nokia shares were down 14% to 9.75 euros, a level not seen since 1998.

Jan Ihrfelt of Swedebank said: “The report contains weak guidance for the third quarter. That is primarily what is hitting the share.”

Nokia has been cutting prices in order to remain competitive.

Now the firm has warned profit margins would remain under pressure until its product portfolio was stronger.

“During the second quarter, we employed pricing selectively with certain products to stabilise our mobile device market share,” said Jorma Ollila, chairman and CEO.

“This pricing strategy along with our market mix also impacted sales and operating margins in the second quarter.”

The news came on the same day as rival Sony Ericsson posted a 34% rise in second quarter profits.

Nokia’s share of the global mobile phone handset market fell sharply in the first three months of the year.

According to market research group Gartner it slumped to 28.9% from 34.6% in the same period in 2003.