Nokia posted a worse-than-expected decline in 2008 Q4 sales and net profit yesterday. It also cut its dividend and offered a gloomy outlook for 2009. The company will concentrate on its touchscreen smartphones in an attempt to rival Apple's successful Apple iPhone.

See also: Apple iPhone review

Nonetheless, the market reacted badly to Nokia's results; by mid-afternoon, Nokia shares were down close to 9 percent in Helsinki.

The Finnish phone maker posted a net profit of €576 million (£540m; US$747m) for last three months of 2008 - down 69 percent year-on-year. Sales dropped 19 percent to €12.7 billion.

Nokia N97 smartphone

The macroeconomic environment is a challenge, "and will remain so in 2009", said Nokia CEO Olli-Pekka Kallasvuo, reports Total Telecom.

Nokia expects device volumes to fall by 10 percent this year - double its predicted decline in December.

See also: Nokia N97 - latest iPhone killer launched

The decline comes on the back of "weaker consumer confidence, unprecedented currency volatility and credit tightness," said Kallasvuo.

Nokia's device market share was 37 percent in Q4 - down from 40 percent Q4 2007 and 38 percent in Q3 2008.

Nokia reported a decline in its share of the smartphone market to 32 percent - while Apple pushed forward with its touchscreen iPhone.

"Our smartphone volumes were down," said Kallasvuo. "But our smartphone portfolio is heading in the right direction," referring to the just unveiled N97 (above) and 5800 (below).

"Smartphones are not high-end only," pointed out Kallasvuo.

"We are expanding the definition of smartphones," and combining the devices with services, said Nokia chief financial officer Rick Simonson.

Nokia 5800 XpressMusic

Nokia will focus on five core service areas: music, maps, media, messaging and games.

Comes With Music "has gotten a good start in the UK," claimed Kallasvuo. It has performed beyond expectations, he said, with more than half a million units sold in the last 30 days of the fourth quarter.