July 16 (Bloomberg) -- Nokia Oyj, the biggest maker of mobile phones, may report the slowest growth in quarterly revenue in almost four years as weakening economies and increased competition hurt handset sales.

Second-quarter revenue probably rose 1.8 percent to 12.8 billion euros ($20.5 billion) from a year earlier, according to the average estimate of 33 analysts in a Bloomberg survey. That would be the slowest pace since the third quarter of 2004. Net income may drop 56 percent from a year earlier, when profit was helped by a gain from the creation of Nokia Siemens Networks.

Nokia's stock slumped 41 percent this year on concern a slowdown in Europe and the U.S. and higher inflation in emerging markets will erode demand. The Espoo, Finland-based company missed earnings estimates in April and cut its forecast for industrywide handset sales as the dollar's drop reduced euro- denominated revenue. Nokia also faces competition from Apple Inc.'s iPhone 3G, a faster Web-surfing handset introduced July 11, and Research In Motion Ltd.'s BlackBerry.

``In the second quarter, you should be concerned about sales,'' said Wing-Yen Choi, an analyst at Theodoor Gilissen Bankiers in Amsterdam. ``Nokia will get a small hit from less expenditure by consumers.'' Choi recommends buying the stock and said sales in emerging markets are ``still going well.''

Nokia's 39 percent market share in the first quarter was still almost triple that of Samsung Electronics Co., the industry's second-largest manufacturer, according to Gartner Inc., a research firm in Stamford, Connecticut. Motorola Inc., overtaken by Samsung last year, saw its share slip to 10.2 percent in the quarter from 18.4 percent a year earlier.

Profit Drop

Net income probably fell to 1.26 billion euros, or 34 cents a share, according to the survey. The company earned 2.83 billion euros, or 72 cents, a year earlier. Nokia booked a non-cash gain of 1.88 billion euros in the 2007 quarter from the formation of Nokia Siemens Networks, a joint venture with Siemens AG, and a charge of 905 million euros for job cuts at the unit.

Chief Executive Officer Olli-Pekka Kallasvuo this month completed the purchase of Navteq Corp., the largest maker of maps used in navigation devices, for $8.1 billion as part of a push into content. The company is selling satellite navigation and maps over the E66 and E71 models introduced this month.

Second-quarter earnings per share adjusted for one-time items and changes in accounting at Nokia Siemens Networks were estimated at 36 cents, according to the survey. The company earned 35 cents a year earlier on a comparable basis, according to Credit Suisse Group AG estimates. Nokia hasn't provided a comparison figure for earnings on that basis.

Nokia is scheduled to report earnings tomorrow at about 1 p.m. Helsinki time. Spokeswoman Arja Suominen declined to comment on the earnings beforehand.

Stock Slump

The 41 percent drop in Nokia's stock has cut the company's market value to 60 billion euros. That compares with a 31 percent decline in the 22-company Dow Jones Europe Stoxx Technology Index. In 2007, the stock had its best year since 1999, gaining 71 percent.

First-quarter handset unit sales fell 16 percent in western Europe as higher living costs crimped consumer spending, according to Gartner. On July 14, Gartner lowered its full-year forecast for global phone sales, citing higher living costs in emerging markets. Following its May prediction of 10 percent to 15 percent growth in unit sales for the year, Gartner retreated to a February forecast of 10 percent to 11 percent.

Smartphone Battle

Nokia faces intensified competition in the market for so- called smartphones, which allow faster wireless Internet access and e-mails. The company's market share fell to 45.2 percent in the first quarter from 46.7 percent a year earlier. Research In Motion's share increased to 13.4 percent from 8.3 percent. Apple, which began selling the original iPhone in June 2007, had a 5.3 percent share in the first quarter, up from zero a year earlier.

This month, Credit Suisse analyst Gulbinder Garcha cut his recommendation on Nokia to ``neutral'' from ``outperform'' saying the company won't be able to keep its market share in advanced phones at close to 50 percent. Nokia last year derived more than 36 percent of the gross profit at its devices unit from smartphones, according to Garcha.

The Finnish company, which shipped no major new devices in the second quarter, plans to increase its range of new products in the second half, including touch-screen models. Nokia trails Apple and LG Electronics Co. in such devices, while Apple's new and faster version of the iPhone went on sale July 11.

``They missed the boat in clamshell phones, they missed the boat in ultra-thin models,'' said Nicolas von Stackelberg, an analyst at Sal. Oppenheim Jr. & Cie in Frankfurt with ``neutral'' rating on the stock. ``They are behind in this one as well.''

Networks Unit

Nokia's second-quarter shipments probably rose 19 percent, while its average selling price slipped to 76.2 euros from 90 euros a year earlier and from 79 euros in the first three months of the year, according to a separate survey by Bloomberg News. The company's market share probably rose to 39.9 percent.

The dollar's decline is cutting Nokia's revenue. The U.S. currency fell 16 percent against the euro in the 12 months ending June 30. About half the company's sales are in dollars or currencies that track it.

Nokia beat analyst estimates three times in the last four quarters. Of analysts covering Nokia in the past year, 33 rate it ``buy,'' 10 say it should be sold and eight have a ``hold'' recommendation, according to data compiled by Bloomberg.

Sales at Nokia Siemens Networks are seen at 3.6 billion euros. In April, Nokia reduced its outlook for the global networks industry, saying it will be flat in euro terms in 2008. Nokia Siemens aims to achieve cost savings of about 2 billion euros by the end of this year by cutting 15 percent of its initial workforce.

To contact the reporter on this story: Juho Erkheikki in Helsinki at jerkheikki@bloomberg.net

Last Updated: July 15, 2008 18:04 EDT