Nokia Oyj, the world’s largest maker of mobile phones, aims to win market share next year, saying reduced spending and a push in advanced handsets will help it as the industry shrinks.

The global handset market will fall 5 percent or more next year, Espoo, Finland-based Nokia forecast in a statement today. The company also aims to take market share in smartphones, where Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPhone devices have been chipping away at Nokia’s position. Smartphones are advanced devices used for e-mailing and Internet access.

An industry contraction would be the first since 2001. Nokia reduced the outlook for global handset sales this quarter, saying they won’t reach the 330 million units predicted last month after the slowdown intensified. That marks the third time in as many months Nokia has cut targets. Nokia said it will ensure its cost base matches the more “challenging” market.

“They will benefit in a downturn,” said Mauritz Redin, a fund manager at Alfred Berg in Stockholm who oversees $25 billion in the Nordic region including Nokia shares. “They are the strongest player in this market.”

Nokia rose 42 cents, or 4 percent, to 11.02 euros in Helsinki. The stock has lost 58 percent this year, heading for its worst annual performance in at least 16 years.

Cost Measures

On Nov. 14, Nokia said it anticipated the market would decline, without giving a specific forecast. The company said today it could no longer confirm its earlier prediction of having 38 percent global market share or higher this quarter.

“Nokia needs to act appropriately to reduce costs,” Nokia Chief Executive Officer Olli-Pekka Kallasvuo said. The company is set to fare better than its competitors in 2009, he said.

Nokia plans to pare operating and capital spending next year to about 700 million euros ($894 million) from about 850 million euros this year, according to slides from an investor meeting Nokia is holding today in New York.

Nokia will cut back on the use of external contractors, consultants and professional services, restrict travel and freeze hiring to reduce costs. On Nov. 4, Nokia said it may cut as many as about 600 jobs in marketing and research. Last week, it announced a plan to abandon the Japanese mass market after failing to break the dominance of local manufactures.

Chief Financial Officer Rick Simonson said the company doesn’t plan to resume buying back its own shares next year. The company said in October it had halted buybacks.

Margin Pressure

Consumers in mature and emerging markets have postponed replacement purchases of mobile phones as economic growth slowed. Nokia has also blamed currency moves for the slide in spending.

The operating margin as a percentage of sales will be in the “teens” for the devices and services unit next year, Nokia said. The Navteq digital maps unit’s margin will be “slightly” above that. Nokia had earlier targeted a margin of about 20 percent for the business that combines its handset and services units. The company declined to give forecasts beyond next year.

The operating margin at Nokia Siemens Networks, the venture with Siemens AG that makes base stations and switches, will be in the “single-digit” range, Nokia said.

Nokia estimates the market for networks and related services will fall 5 percent or more in euro terms in 2009, and reiterated its view that the market will be unchanged this year. Nokia said it’s still on course to achieve 2 billion euros in costs savings at the venture by the end of this year.

Market Slump

Researcher Gartner Inc. predicted last month that global handset unit sales will decline by a “low single-digit” percentage figure next year. Strategy Analytics said in October that fourth-quarter industry sales may rise at the slowest pace since 2002.

Gartner said today global smartphone sales will continue to rise at a slower rate after growth fell to 11.5 percent in the third quarter.

Nokia’s market share is bigger than the combined totals of its three closest competitors because it supplies models ranging from entry-level phones to high-end devices with Internet access, navigation and media players. The company is also less vulnerable to falling subsidies by phone operators as about half of its unit sales are generated from unsubsidized markets, CFO Simonson said.

The company plans to reenter the South Korean market next year, and Kai Öistämö, who runs the devices unit, said the company’s relationships with U.S. operators are improving.

“Make no mistake: we have an ambition for higher market share in 2009,” Kallasvuo said.

Nokia said its services and software unit should have at least 2 billion euros in sales by 2011. The business focuses on wireless Internet-related services for maps, music, games, messaging and media. The total market for this should amount to 40 billion euros by 2011, Nokia said.

Source:Bloomberg