PARIS (Reuters) - Nokia plans to cut one in five jobs at its global cellphone business as it loses market share to rivals Apple and Samsung and burns through cash, raising new fears over its future.
In a second profit warning in nine weeks, Nokia said on Thursday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition.
Once the world's dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsumg and Google. It is also losing market share in cheaper, more basic phones.
Chief Executive Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft Corp software. But Lumia sales have so far been slow, disappointing investors.
"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," said Ben Wood, head of research at CCS Insight.
Nokia, whose cash position is increasingly scrutinized by investors, also said restructuring-related cash outflows would be around 650 million euros in the remaining three quarters of 2012 and around 600 million in 2013.
Shares in Finland-based Nokia were down 10.5 percent to 1.99 euros, below the psychologically important 2 euros mark last, not seen since 1996. The stock has crashed more than 70 percent since it announced the switch to Microsoft's software in February 2011.
Analysts have said that even with the dramatic fall in the share price, the worsening outlook made it hard to judge how much lower the shares could go.
"I won't comment on the stock price anymore, since it's been seen over and over, that there is no definitive bottom," said Evli analyst Mikko Ervasti.
"People are worried over Lumia sales. I think expectations for the third quarter will be cut," said Nordea analyst Sami Sarkamies.
The job cuts, which include the closure of Nokia's only plant in Finland, bring total planned cuts at the group since Elop took over as chief executive in 2010 to more than 40,000.
The move will result in additional restructuring charges of around 1 billion euros ($1.3 billion) by the end of 2013.
The company said it expects its operating margin in the second quarter to be below the negative 3 percent level reported in the first quarter. It previously forecast it would be similar to or below that level.
Nokia also said it would sell luxury phone business Vertu to venture firm EQT and revamp its management team.
(Editing by Erica Billingham)