STOCKHOLM (Bloomberg) - Nokia Oyj, the world's biggest maker of mobile phones, cut its outlook for sales and margins, hurt by competition in high-end phones from Apple Inc.'s iPhone and devices based on Google Inc.'s Android software.

Second-quarter handset revenue and margins will be "at the lower end of or slightly below" its earlier forecast range of nine to 12 percent, the Espoo, Finland-based company said in a statement yesterday, also citing a weaker euro. Nokia cut its outlook for 2010 for the second time this year.

"This does not help in restoring investor confidence and credibility of the management," Sami Sarkamies, an analyst at Nordea Bank, wrote in a note to clients. "Chosen strategy and more importantly its implementation will be questioned."

Nokia CEO Olli-Pekka Kallasvuo has struggled to deliver on a touchscreen model that meets user expectations raised by the iPhone. The N8, Nokia's newest touchscreen smartphone, is scheduled to be released in the third quarter. The device has been too slow in the making and may still disappoint, analysts have said.

Nokia fell 9 percent to 7.22 euros in Helsinki, its lowest level since March 9, 2009. The stock drop puts the market value of Nokia, once an iconic technology name, at about 27 billion euros ($33.3 billion), below the $34.4 billion of rival Research In Motion Ltd. and Apple's $240 billion.

"Somehow they've lost the sense of understanding of where the market is going," said Bengt Nordstrom, an analyst at Northstream AB in Stockholm. "There was a time when Nokia dictated for the industry how a mobile phone should look and function. Now, they have strong competition from other players, particularly from Apple."

CEO Mr. Kallasvuo did not speak on the company's conference call yesterday.

"We know that we are going through a painful transition in high-end devices," chief financial officer Timo Ihamuotila said on the call. The company's N series, with its most expensive touchscreens, has been "disappointing" while the ramp-up of the X series music phones was "somewhat challenging," he said.

The market share of Symbian, Nokia's main smartphone operating system, fell to 44.3 percent in the first quarter from 48.8 percent a year ago, according to market researcher Gartner. Although mostly on Nokia phones, Symbian is also used by Samsung Electronics Co. and Sony Ericsson. iPhone's share rose to 15.4 percent from 10.5 percent, while Android soared to 9.6 percent from 1.6 percent.

While the company is losing high-end, high-margin customers to the iPhone, RIM's BlackBerry, and phones running Google's Android software, it is also facing mounting competition in the low-end market from cheaper devices from Chinese and other manufacturers.

Competition at the low end is "very tough" and the third quarter "will continue to be challenging", Mr. Ihamuotila said, without giving specific guidance on the quarter.

Nokia said its full-year adjusted margin forecast for handsets would be "at the low end of or below" the previous forecast of 11 to 13 percent.

"The biggest disappointment is in the scale of the margin miss," said Stuart Jeffrey, a London-based analyst with Nomura who has a "neutral" rating on Nokia. "That's why the stock is down so much. Consensus was in the middle of the range Nokia had provided."

Sales in the devices and services division may fall below 6.7 billion euros in the second quarter as the company's product mix shifted toward less-profitable midrange and low-end phones, Nokia said.

Nokia said it expects its full-year share of industry revenue, known as "value market share" to be slightly less than in 2009.

It had forecast its value market share to grow slightly. It repeated a forecast of flat market share in units.

The company lowered its devices margins forecasts on April 22 to between 9 and 12 percent for the quarter and between 11 and 13 percent for the year, from 12 to 14 percent earlier.

Sales are also being hit by the weaker euro, the company said. The 16-nation currency has weakened 14 percent this year against the dollar.