Mobile phone maker Nokia reported a drop in sales and core earnings today due to fierce competition and a weak handset range, and warned profitability would suffer for the rest of 2004, sending its shares sharply lower.
Nokia stock sank 13 per cent to €9.88 by 11:22 a.m., having hit 9.61 - levels last seen in November 1998 - and dragged the DJ Stoxx European technology sector index over five per cent lower.
Nokia has endured a barrage of criticism and a slide in its share price since it stunned investors three months ago by admitting it could not exploit a surge in demand due to a patchy line-up of cell phones.
It has responded by cutting prices, saying profit margins would remain under pressure until its product portfolio is stronger. Rival Sony Ericsson earlier reported a higher-than-expected profit due to the robust demand.
The once-vaunted profitability of its mobile phone business also took a beating, its operating margin plummeting to 19.1 per cent in the quarter from 27 per cent a year ago.
Nokia stock is now down 26 per cent in 2004, underperforming the index by over 15 per cent. It has shed a hefty 42 per cent since its April warning.
"The guidance is really bad. I suspect Nokia will have to cut prices again in the third quarter to get back market share. Overall, industry volumes are looking good but it is coming at the cost of profitability for Nokia," Nomura analyst Mr Richard Windsor said.