NOKIA Oyj, the world's biggest maker of mobile phones, has posted a first-quarter profit that trailed estimates on costs for pensions and closing a plant, and forecast the handset market's value will shrink in euro terms this year.

Nokia shares dropped as much as 7.5 percent in Helsinki trading yesterday. Net income rose to 1.22 billion euros (US$1.95 billion) from 979 million euros a year earlier, Espoo, Finland-based Nokia said in a statement yesterday.

The average profit estimate of 14 analysts surveyed by Bloomberg News was 1.38 billion euros.

CEO Olli-Pekka Kallasvuo increased Nokia's market share to 40 percent last year by selling handsets for less than US$50 and pricier models with satellite navigation at the expense of rivals, including Motorola Inc. Nokia's stock fell 24 percent in Helsinki in the first three months of the year, the biggest drop since the second quarter of 2004, on concern sales growth in developed markets such as Europe will slow.

"Nokia expects the mobile device market to decline in value in Euro terms in 2008, compared to 2007," Nokia said. It cited "the negative impact of the recently weakened United States dollar, the general economic slowdown in the US, and possibly going forward some economic slowdown in Europe."

Before yesterday, Nokia stock had dropped 21 percent this year, valuing the company at 79.6 billion euros, compared with a 20-percent slide in the Dow Jones Europe Stoxx Technology Index. Last year was the best for the stock since 1999, with a 71-percent gain.

Earnings per shares rose to 32 euro cents from 25 euro cents a year earlier. Revenue increased 28 percent to 12.66 billion euros, trailing the 12.75 billion euros analysts had predicted.

Nokia booked a net 152 million euros in charges from pension liability transfers, 81 million euros from closing its plant in Bochum, Germany, and 100 million euros for cutting jobs at Nokia Siemens Networks.

Lower costs

Earnings per share, excluding one-time items, gained to 38 euro cents from 26 euro cents a year earlier, beating the 37 euro cents tipped by analysts.

Nokia will close its Bochum factory by the end of June and transfer most of the production to its new plant in Romania, where costs are lower. Nokia agreed on a 200-million-euro package with unions this month to help the 2,300 German workers facing unemployment. The company also has manufacturing facilities in Finland, Hungary, Asia and Latin America.

The Finnish company's global market share in the first quarter rose to 39 percent from 36 percent a year earlier, trailing the 40 percent predicted by analysts. Nokia forecast its market share in the second quarter will rise sequentially.

Nokia shipped 115.5 million devices in the quarter, up 27 percent from a year earlier.