Nokia was expected to report a loss for this quarter and next as it cuts prices to try to prevent more customers defecting to rivals' smartphones, a Reuters poll found.
Analysts also forecast a meager profit in the normally buoyant fourth quarter, as the once-undisputed leader in mobile phones loses the initiative to smartphones like Apple's iPhone and devices based on Google's Android software.
At the low end of the phone market, Nokia has been losing share rapidly to cheaper Asian rivals, and it said last week it would miss sales and profit targets, blaming tough competition in China and Europe.
Analysts now expect the company to report a second-quarter loss of 0.04 euro per share and a loss of 0.05 euro for the third. They have also lowered their core EPS outlook for 2012 and 2013.
We believe the new guidance ... is a strong indication that our worst-case scenario for the company, of accelerating market share and gross margin decline, is crystallizing, Bernstein analyst Pierre Ferragu said in a research note.
The announcement confirms our view that the Nokia brand is at risk of losing visibility and that the opportunity to create a third ecosystem based on Windows Phone is rapidly vanishing.
Nokia has thrown in its lot with Microsoft, with whom it will co-develop its next generation of smartphones. It hopes to gain the kind of attention Apple and Google have attracted from software developers who enrich their devices.
Nokia's market value has halved to 17 billion euros ($25 billion) since it unveiled the Microsoft move in February.
In February, Nokia also unveiled a new bonus-package directly linked to its share price for chief executive Stephen Elop, hired last September from Microsoft to turn the company's fortunes.
To me, that was a gamechanger. He gets paid as I will as a shareholder, said Renny Ponvert, chief executive of top leaders skills research firm Management CV Inc.
Nokia has historically paid out high dividends compared with many technology companies who often prefer to invest the money in further growth. On average, analysts expected Nokia to pay out more than its underlying earnings for 2011.
High dividend is a bit of the leftover from old management thinking. I do not think anybody thinks it is a yield play. It is a turnaround play, Ponvert said.
The average view of Nokia's dividend for 2011 has dropped to 0.20 euro from the 0.36 euro seen in mid-April, with two analysts now forecasting Nokia would not pay out any dividend this year or next.
(Editing by Dan Lalor)