After beating expectations for several quarters in a row, Nokia has stumbled. Shares in the Finnish handset maker fell by 13 per cent after it released first quarter numbers. The results themselves were not to blame. Yes, headline earnings per share came in more than a 10th below expectations, but stripping out exceptionals (which look genuinely one-off), earnings per share of €0.38 were in line with forecasts. In the handset division, margins looked solid, market share remained pretty stable at 39 per cent and volumes were in line. Cash flow was weak, but Nokia has a good track record on cash conversion and should be permitted the occasional poor quarter.

The source of the scare was Nokia’s guidance. Previously it had forecast “value growth” in the global handset market in 2008. Given that it expected 10 per cent volume growth and “some decline” in average selling prices, this translated into expected industry sales growth in the low-single digits. Now, though Nokia still expects volumes to grow by a 10th in 2008, it forecasts industry sales will decline in euro terms. Factoring in Nokia’s continued expectation of market share gains, estimates of the company’s handset sales growth may fall from up to 10 per cent to below 5 per cent. Given first-quarter sales rose 13 per cent year on year, that is a big slowdown.