Nov. 14 (Bloomberg) -- Nokia Oyj, the world's largest maker of mobile phones, said industrywide handset sales will be lower this year than previously anticipated, forcing the company to deepen cost cuts as consumers hesitate to buy new models.

Global shipments will be about 1.24 billion this year, down from a previous prediction of 1.26 billion phones, and will shrink next year, Nokia said in a statement today. The Espoo, Finland-based company still aims to keep or ``slightly'' increase its market share this quarter from the preceding three months.

Nokia retreated to the lowest in four years in Helsinki trading after saying the global economic slowdown and currency volatility caused a ``sharp'' slide in consumer spending, which may lead to the first industry contraction since 2001. The revision marks the second time in 10 weeks Nokia has revised targets. Nokia said Sept. 5 its third-quarter market share would drop after competitors slashed prices and a handset was delayed.

``Consumers, because of the rising jobless rates and difficulty obtaining credit, are closing their wallets,'' said Wing-Yen Choi, an analyst at Theodoor Gilissen Bankiers who recommends buying Nokia's stock. ``The result is that the car industry is foundering, televisions aren't sold anymore, personal computers are slowing -- and now also handsets.''

Nokia, which was trading about 4.3 percent higher in Helsinki before the announcement, fell 3.7 percent to 9.95 euros. That's the lowest close since September 2004.

Cost Measures

Nokia's market share is bigger than the combined totals of its three closest competitors because it supplies models ranging from cheap entry-level phones to high-end devices with Internet access, navigation and media players. Before today, Nokia's stock had lost 61 percent this year, compared with a 15 percent slide for Samsung Electronics Co., the world's second-biggest handset maker, and a 25 percent plunge for Motorola Inc., the No. 3.

Nokia said it will take ``decisive action to significantly reduce'' costs, in addition to already announced measures. The company will cut back on the use of external contractors, consultants and professional services to reduce costs, and continue to cut operating expenses in 2009.

On Nov. 4, Nokia said it may cut as many as about 600 jobs in marketing and research to improve efficiency. It employed 123,000 people on Sept. 30

``You have to be absolutely brutal about prioritizing what you're continuing to do, and what would be nice to do but not necessary,'' Chief Financial Officer Rick Simonson said on a call. ``Smaller initiatives may have to wait or get cut.''

The Finnish company said it will provide more details on the measures at its analyst meeting Dec. 4 in New York.

`Getting Tougher'

Nokia said the credit crunch has limited the purchasing power of some trade customers. Simonson said the slowdown has been most pronounced in developed markets such as Western Europe, while emerging economies are faring better.

``It's obviously getting tougher out there, and one would have thought that Nokia with its broad reach is more resilient to the downturn,'' said Phil Kendall, an analyst at researcher Strategy Analytics Inc. in Milton Keynes, England.

Nokia said about 330 million units will be shipped globally this quarter, less than it had previously anticipated.

``During the holiday season, consumers will buy smaller gifts, spend less money,'' said Choi at Theodoor Gilissen. ``You're not going to buy the most expensive handset model.''

The decline in handset sales will also affect network investment next year, Nokia said. The Nokia Siemens Networks venture with Germany's Siemens AG estimates the wireless and fixed-line infrastructure and related services market will decline in euro terms in 2009 from 2008.

Technology Meltdown

Intel Corp. stoked concern that the financial crisis is stifling global technology spending when it slashed its fourth- quarter sales forecast by about $1 billion two days ago. Intel, whose chips run more than three-quarters of the world's computers, cited ``significantly weaker'' demand across its entire product line when cutting its estimate.

``As Intel also made clear, the market for consumer products is undergoing a strong slowdown whether in cell phones, PC or LCD screens,'' said Raffaella Sommariva, a fund manager at AZ Fund Management SA in Luxembourg, which oversees the equivalent of $16.5 billion.

To contact the reporter responsible for this story: Benedikt Kammel in Stockholm at bkammel@bloomberg.net

Last Updated: November 14, 2008 11:44 EST