Nokia predicts flat sales in 2001 but a pick-up in 2002
Despite the fall, the Finnish company's second-quarter pre-tax profit of 1.17bn euros ($1.02bn) was still better than forecasts, which had been lowered by the battering the sector has taken.
Investors, relieved that the news was not worse, helped its shares briefly rise more than 10% before falling back.
The mobile phone firm predicted that sales growth would be flat to 5% in the third quarter, but did not give an indication of the outlook for the fourth quarter of the year.
Nokia's results come as computer giant IBM and Europe's largest software company both offered the tech sector a glimmer of hope by reporting increases in second-quarter profits.
"The result was quite neutral. The third-quarter outlook was a bit lower than what I expected, but I don't think that it will have a dramatic effect on market estimates for the rest of the year," said Michael Schroder of Opstock.
Results 'predictable'
The figures were in line with the shock profit warning issued on 12 June but better than the expected 1.09bn euros predicted by a Reuters poll of analysts.
The profit fall came despite sales during the period rising 5% to 7.3bn euros but the firm predicted that sales growth could return to as much as 35% in 2002.
The company also warned that its internet communications unit would not meet profits targets.
"The news was surprisingly predictable and close to estimates. They gave very little guidance to supplement what was already said with their profit warning. But read between the lines, and Nokia seems to be admitting it did not manage to extend its market share in Q2, unlike Motorola," said Mika Paloranta of Nordea Securities.
"This is absolutely a relief rally in the share, for there were some fears in the market of the company slashing its growth targets for the rest of the year," said Michael Schroder.