Nokia shares fall as firm warns of weak start to 2011

Nokia's new chief Stephen Elop said it was time for the company to change faster

Nokia, the largest maker of mobile phones, has warned of a weak start to 2011 after seeing a fall in profits in the last three months of 2010.

Operating profits in the fourth quarter fell 26% to 1bn euros (£860m) on the same period last year, with sales up 6% to 12.6bn euros.

The margin Nokia made on handset sales fell, while market share was also down.

Chief executive Stephen Elop said Nokia "faces some significant challenges in our competitiveness and our execution".

While the phone market has recovered since a slump in 2009, analysts say Nokia has been slow to react to the growing smartphone competition from products such as Apple's iPhone 4 and Samsung's Galaxy S.

Nokia said its share of the smartphone market fell to 31% in the fourth quarter, from 38% in the previous quarter.

Changing industry

Mr Elop, who took over as chief executive last year, said in a statement that the fourth-quarter performance was "solid".

But he added: "The industry changed, and now it's time for Nokia to change faster."

The company said that operating margins at its phone division would drop to 7-10% over the next few months, down from 11.3% in the last quarter and below analysts' forecasts. Margins in the fourth quarter of 2009 were 15.4%.

Nokia shares fell 6.5% as analysts warned that Mr Elop, due to outline a new strategy in February, faced a tough challenge to raise competitiveness.

Geoff Blaber, analyst at CCS Insight, said: "These results point to the daunting task ahead of [Mr] Elop in 2011. Disappointing total volume, including smartphones, emphasises that these are dark days for Nokia."