"Nokia currently estimates that its non-IFRS Devices & Services operating margin in the first quarter 2012 was approximately negative 3pc, compared to the previously expected range of "around breakeven, ranging either above or below by approximately 2 percentage points," the company said.
Operating margins in the second quarter will be "similar to or below the first quarter 2012 level".
Nokia's shares dropped 16.5pc to €3.192 after the announcment.
Competition from other phonemakers, particularly in India, China, the Middle East and Africa, has hurt sales this year, and profit margins on Nokia's smartphones have fallen.
Nokia's handset business "continues to be in the midst of transition," said Stephen Elop, chief executive.
Once one of the world's leading phonemakers, Nokia has fallen behind rivals such as Apple in producing desirable touch-screen and smartphones.
The company teamed up with Microsoft a year ago to try and win back a share of the market, and its latest Lumia 900 model topped the Amazon.com smartphone sales charts on its debut in the US earlier this month.
"We are continuing to increase the clock speed of the company," Mr Elop said today.
