Nokia sees weaker markets in fourth quarter

By Tarmo Virki

HELSINKI (Reuters) - Sales of mobile phones will shrink faster than expected as consumers are cutting spending, the world's top cell phone maker Nokia (NOK1V.HE) said on Thursday in its second warning in three weeks.

"The slowdown is apparent in varying degrees across all markets, but the most recent incremental impact in the emerging markets has been more pronounced than in other markets," Nokia said in a statement.

Nokia said handset market volumes would fall by at least 5 percent next year, something many analysts were already expecting, but saw its market share rising, helping to lift its stock 3.5 percent to 10.97 euros by 8:44 a.m. EST.

Analysts expect Nokia to benefit compared to its smaller rivals in the downturn.

"Despite the challenging environment Nokia remains best positioned ... thanks to their economies of scale and channel strategy," said Gartner analyst Carolina Milanesi.

Nokia cut its forecast a day after the world's fifth and sixth largest handset makers, LG Electronics (066570.KS) and Research in Motion (RIM.TO), warned on sales and profit growth.

Motorola (MOT.N) and Sony Ericsson (6758.T)(ERICb.ST) are already struggling to make a profit.

Nokia said it expects also to win back market share in smartphones, where it has lost ground to RIM and Apple (AAPL.O).

TOUGHEST YEAR FOR INDUSTRY

In addition to ailing consumer demand, operator and retail distributors will go through a period of destocking, resulting in lower sales volumes of manufacturers than purchase volumes by consumers in the first half of 2009, Nokia said.

"2009 will be challenging for our industry, however we have a strong, enviable base to build on and I believe we will continue to strengthen our position on many fronts," Nokia Chief Executive Olli-Pekka Kallasvuo said in a statement.

"Building on our operational flexibility, Nokia is acting to reduce costs appropriately in the current slowing environment," he said.

The cell phone market has grown at well over 10 percent for years, and having dipped only in 2001, it will face a new challenge next year.

"Next year will be the most challenging year the mobile industry has ever faced," said Ben Wood, research director at CCS Insight.

Nokia also lowered its forecast for the broader 2009 telecoms equipment market, saying it would fall in euro terms 5 percent or more.

The news sent shares in the world's largest mobile telecom equipment maker Ericsson (ERICb.ST) 3 percent lower. (Reporting by Tarmo Virki and Sakari Suoninen; Editing by Hans Peters and Rupert Winchester)