HELSINKI - TOP handset maker Nokia said on Friday the world's mobile phone market would fall in the fourth quarter and next year as an economic slowdown crimps consumer demand around the world.

It forecast 1.24 billion phones would be sold worldwide this year, down from a previous estimate of 1.26 billion, and said handset market volumes and the overall telecommunications equipment market was expected to fall next year.

'The warning dovetails well with Qualcomm and Intel - rapid recent deterioration of consumer electronics demand,' said analyst Tero Kuittinen at Global Crown Capital.

The worst financial crisis in 80 years has weakened economies around the world and official data on Friday showed the economy of the 15-nation euro zone shrank for the second quarter in a row.

'In the last few weeks, the global economic slowdown, combined with unprecedented currency volatility, has resulted in a sharp pull back in global consumer spending,' Nokia said in a statement.

The strengthening US dollar and yen are pushing up component prices for handset manufacturers, while weakening currencies in emerging markets are hurting the purchasing power of consumers in Nokia's key markets.

'Developed markets will fare worse and developing markets will fare better,' Nokia Chief Financial Officer Rick Simonson told an investor call.

Nokia said the increasingly limited availability of credit was also hurting, something analysts agreed with.

'We have been hearing about operators and distributors reducing their handset stock to an absolute minimum due to a credit shortage for the past few weeks,' said analyst Neil Mawston of Strategy Analytics.

Nokia shares fell more than 7 per cent to 9.56 euros on Thursday, their lowest since August 2004, but later recovered and closed down 3.7 per cent at 9.95 euros in Helsinki. In New York, Nokia's ADRs closed 11.02 per cent lower at US$12.59.

Mr Kulbinder Garcha, an analyst with CSFB, said companies heavily exposed to the North American and Western European markets - such as Motorola and Sony Ericsson - faced tough times.

'The one segment of the market that will grow in 2009 is smartphones, so in the industry, Apple, HTC and RIM will outpace the others,' Mr Garcha said.

Black Christmas
Nokia now expects fourth-quarter industry volumes to be around 330 million mobile devices, down from a year ago.

'As the dominant handset vendor, Nokia's warning bodes poorly for the entire handset industry and the supply chain as a whole,' analyst Mark Sue from RBC Capital Markets, said in a research note.

Nokia's forecasts sent wireless stocks lower in Europe and North America, with Alcatel-Lucent falling 3.4 per cent, Motorola down 10.9 per cent, RIM losing 8.5 per cent and Apple off 6.4 per cent.

Nokia expected its market share in the fourth quarter to be around 38 per cent or slightly higher, but sales and profitability for key devices and services would be hurt.

Reaching a 20 per cent operating profit margin at the unit was not on the horizon and it would take decisive action to reduce its cost base significantly.

'You absolutely have to be brutal about prioritising what you are going to continue to invest (at) the right pace and that means you have to cut some things off the bottom that would be nice to do, but they aren't necessary to do. We are absolutely going through that process,' said Mr Simonson.

Nokia's network gear making venture, Nokia Siemens Networks, said earlier this week it would cut 1,820 jobs, most in Finland and Germany. Nokia said earlier this month it would cut some 600 jobs in marketing and research. -- REUTERS