Nokia, the world's biggest mobile phone maker, sent its shares plunging almost 14 per cent today when it offset strong results in emerging markets with a forecast of declining sales and falling prices.

The warning saw shares in the Finnish manufacturer tumble €2.84 or 13.55 per cent to €18.12 in Helsinki trading.

The company blamed its gloomy outlook on the economic recession in the US and the weak dollar, warning Europe is also facing a slowdown.

However, it said the slump in the US and Europe was offset by strong growth in large emerging markets, such as India and China.

“Nokia expects the mobile device market to decline in value in Euro terms in 2008, compared to 2007,” the company said. “The change from our previous estimate of value growth for this market primarily reflects the negative impact of the recently weakened US dollar, the general economic slowdown in the US, and possibly going forward some economic slowdown in Europe.”

Fears of a slowdown in handset sales have seen Nokia’s shares slide 21 per cent this year, valuing the company at €79.6 billion. Today’s tumbling stock took a further €5.42 billion from its market cap with the gloomy outlook bringing down technology and consumer product shares across Europe.

There is no denying that a tighter grasp on purse strings in the chilly economic climate has taken its toll on Nokia’s figures.

US sales plunged 45.8 per cent compared to the first quarter last year while sales in Europe increased just 7 per cent.

By comparison first quarter handset sales in Latin America soared 68 per cent compared to last year, with sales in the Asia Pacific region up 44 per cent. China saw a 34 per cent hike in sales while in the Middle East and Africa sales were up 29 per cent.

India and China are now Nokia’s largest markets. Sales outside Europe and the US now account for 75 per cent of the total, and helped boost Nokia’s global handset sales by 27 compared to the first quarter last year. The company predicts overall industry volumes of 295 million mobile phones, up 17 per cent year on year.

Overall Nokia sold 115.5 million handsets in the first quarter, boosting its global market share to 39 per cent from 36 per cent a year earlier, but trailing analysts’ predictions of 40 per cent.

Chief executive Olli-Pekka Kallasvuo said that the increase in market share was down to demand for cheap phones in emerging markets and more expensive handsets with satellite navigation such as the N95. However, he predicted sales in developed markets to decline this year and average selling prices to continue falling.

Despite the predicted slowdown, Nokia said it still expects the global market for mobile phones to rise 10 per cent this year up from 1.14bn sold last year.

Nokia's market share still tops the combined share of its three closest rivals, Motorola, Samsung Electronics and Sony Ericsson Mobile Communications, according to research from Strategy Analytics.

Revenue increased 28 per cent to €12.66 billion, below the predicted €12.75 billion. Earnings per shares rose to 32 cents from 25 cents a year earlier.

It is not the first warning of a slowdown in the handset market but with Nokia phones accounting for two out of every five mobiles sold worldwide its dreary forecast shook the technology world.

Shares in rival Ericsson, the Swedish group, which makes handsets in partnership with Japan’s Sony, fell 1.5 per cent to SKr11.91, while Franco-US group Alcatel-Lucent lost 1 per cent to €3.77.

Last month Sony Ericsson said first quarter earnings and revenue would fall because of a mixture of slower handset sales, higher research costs and a parts shortage.

Motorola announced at the end of March it plans to float its struggling handset business. Analysts blame the fact it failed to bring out a handset to match the success of the Razr.

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