SHARES IN Nokia tumbled as much as 19 per cent after the struggling Finnish handset maker warned that profits in its phone division would be worse than expected in the first and second quarters.

It said tough competition had affected net sales in emerging markets and had also led to gross margin declines in its smartphone business, marking another setback for the group which is attempting to muscle in on that lucrative market.

The news was the second blow of the day for Nokia following news of a software bug in its new flagship Lumia 900 model, which was launched on Sunday. The phone represents the company’s big hope of breaking into the US market.

The double helping of bad news left Nokia shares, which have more than halved in the past year, 14.5 per cent lower at €3.27 – their lowest since 1997 – and led to speculation that Stephen Elop, chief executive, or other senior managers might resign if problems continue.

The warning heightened the sense of crisis surrounding Nokia as it struggles to compete with Apple’s iPhone, devices using Google’s Android operating system and low-end Chinese manufacturers.

Nokia said that first quarter margins would be negative 3 per cent – worse than the between minus 2 and plus 2 forecast at the end of last year.

However, it said it was “quickly taking action” to address the problem, focusing on increasing sales of its Lumia handsets and lowering its cost structure.

Mr Elop said: “Our disappointing devices and services first-quarter 2012 financial results and outlook for the second quarter 2012 illustrates that business continues to be in the midst of transition.” – Copyright The Financial Times Limited 2012