Nokia Oyj, the world's top cellphone maker, took a major writedown at its struggling networks unit on Thursday and revealed a fall in smartphone sales, sending its shares down 11 percent.
The company booked a 908 million euros ($1.4 billion) hit from its Nokia Siemens Networks (NSN) joint venture, citing challenging market conditions and dragging the group to a reported loss per share of 0.15 euros.
Analysts had expected of a 0.09 euros per share profit, according to a Reuters poll of 37 analysts.
Nokia, battling with rivals such as Apple Inc and Research In Motion Ltd (RIM), also said its smartphones market share fell to 35 percent in July through September from 41 percent the previous quarter.
The scale of the smartphone (market) share loss must give the markets pause for thought over the coming days. Dropping six points in three months is pretty stunning, said MKM Partners analyst Tero Kuittinen.
Nokia's Chief Financial Officer Rick Simonson told Reuters the trend should reverse in the fourth quarter as the group rolls out new high-end models like the N97 mini and updates its hit-model N97 and Linux-software based N900.
We are going to see improvements there as we are going to see new, fresh models replace older models, Simonson said.
Shares in Nokia slumped 10.7 percent to 9.20 euros by 1453 GMT (10:53 a.m. EDT).
Nokia's smartphones pack more features than Apple's iPhone or RIM's Blackberry, but lack the design and brand-allure of its North American rivals.
Smartphones are about wow-factor. There's different wow for different people. The N900 is probably that for many people, Simonson said.
COSTS IN FOCUS
Its telecom gear venture with Siemens AG fell to an underlying July-September operating loss of 53 million euros from a profit of 177 million a year ago as it struggled against competition from Ericsson and Huawei.
Siemens had warned at end-September it might have to write down its 50 percent stake in Nokia Siemens.
It is clear that NSN has lost market share. The top priority for NSN is restoring growth to the company's top line and reversing the market share dynamic, Nokia CEO Olli-Pekka Kallasvuo told analysts on a conference call.
Nokia reported a group level net loss of 913 million euros compared with a 1.06 billion profit the previous year. Third-quarter sales fell 20 percent to 9.81 billion.
Profit margins are under pressure ... Nokia needs to do some serious cost cutting to adjust to weaker demand, said Christian Blaabjerg, chief equity strategist at Saxo Bank.
Nokia is in the midst of cutting annual costs by 700 million euros at its handset unit, which performed slightly better than expected in the third quarter as consumer demand for mobile devices started to improve in many markets.
We have actually seen a bit of pickup in consumer demand and looking forward we expect this to continue, said Simonson.
CCS Insight analyst Geoff Blaber said: Consumer demand may be showing early signs of improvement but these results show sustained pressure on smartphone margins. Apple's iPhone is defying gravity in the high tier.
Industry sales of more advanced models, so-called smartphones, rose 15 percent from the previous quarter, Nokia said, but falling smartphone prices are hurting top vendors.
Nokia is launching plenty of new high-end smartphone models such as the N900 and N97 mini. But as yet there is no iPhone killer to drive a major revival in its smartphone volumes, said Neil Mawston at Strategy Analytics.
HTC, the world's No. 4 smartphone brand, reported worse than expected results last week, underscoring intensifying competition and declining prices.
RIM, the second-largest smartphone maker after Nokia, said on September 24 its profit dropped 3.5 percent in the August quarter and its outlook fell short of forecasts.
(Additional reporting by Brett Young and Eva Lamppu in Helsinki, Blaise Robinson in Paris; Editing by Elaine Hardcastle and David Holmes) ($1=.6710 Euro)