Mobile phone maker Nokia Oyj abandoned hope of meeting key targets just weeks after setting them, raising questions over whether its new boss can deliver on the turnaround he promised in February.

Its shares tumbled 18 percent to their lowest in 13 years, wiping some 3.8 billion euros ($5.5 billion) off its market value as investors worried the company, once the leading force in its industry, was losing so much market share it may never regain its footing.

Nokia has been losing ground in the smartphone market to Apple Inc's iPhone and Google Inc's Android devices, and at the lower end, to more nimble Asian rivals.

The company is switching to Microsoft Corp's software from its own Symbian platform as part of an overhaul of its phone business set out three months ago by new Chief Executive Stephen Elop.

But it continues to suffer from mounting competition and warned on Tuesday it expects net sales from its devices and services business in the second quarter to be "substantially below" its previous forecast, set in April, of between 6.1 billion euros ($8.7 billion) and 6.6 billion.

Elop, brought in last year to help revive Finland's flagship technology company, blamed both weak sales and price cuts, noting competition was particularly tough in Europe.

"Android is gaining strength. Apple is Apple, of course," he told analysts on a conference call. He also said management issues had also hurt business in China, where Nokia faces challenges from the likes of ZTE Corp.

"Given the unexpected change in our outlook for the second quarter, Nokia believes it is no longer appropriate to provide annual targets for 2011," the company said, though it would still provide quarterly updates.

Nokia forecast its non-IFRS operating margin for devices and services to be around break-even in the second quarter, rather than previously expected range of 6 percent to 9 percent.

STARTING TO LOOK DANGEROUS

The new outlook implies a loss is likely for third quarter, analysts said. They also said the warning showed Nokia's market position worsening much faster than expected, with lower-priced Asian rivals grabbing a bigger chunk of markets such as China.

"What does strike us as quite surprising is the level to which the markets have dropped, we're talking about break even now, which is quite a slide," said Lee Simpson, an analyst at Jefferies & Co.

"I think this level of shareholder destruction is now starting to look dangerous. What can these guys do to reverse this?"

Nokia shares closed at 4.75 euros, having briefly fallen as low as 4.716 euros, their lowest in more than 13 years and compared with a peak around 65 euros set in 2000.

"Given the internal turmoil that will be generated by this news, it is increasingly difficult to see that Nokia can leapfrog one handset generation and be on par with the competition in early 2012," said WestLB analyst Thomas Langer.

In February, Elop had compared Nokia with a burning platform in a widely leaked memo when he unveiled a shift in strategy in smartphones by choosing Microsoft's unproven software over its own.

Elop said he had greater confidence in shipping the first Windows-based Nokia phones in the fourth quarter. Some analysts and investors, however, are worried a comeback could be difficult.

"The market share has kept sliding and that's never a good sign," said Hakim Kriout, portfolio manager at Grigsby & Associates in New York, who dumped Nokia shares earlier this year. "They were in a leadership position for a long time and once you lose that position, chances are you'll never regain it."

However, Kriout also said Nokia's business may not be as bad as the latest sell-off suggests. "Traders are looking for a bottom. If you look at the shares now, and if you think it goes back to 8, then that's a pretty good return. It's really about when we're going to see things stabilize."

Tuesday's warning comes a month after Nokia said it would cut 7,000 jobs and outsource its Symbian software development unit to cut costs.

Elop is the first non-Finn to run the company, which evolved from a rubber boots-to-TVs conglomerate into a global mobile phone maker in the 1990s.