Its shares tumbled nearly 20 percent to their lowest in some 13 years.

Nokia, once the undisputed leading force in the mobile phone market, has seen its position threatened in recent years, particularly losing ground in the smartphone sector to Apple’s iPhone and Google’s Android devices.

The company, still the number one handset maker by volume, is switching to Microsoft’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 HTC.

“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, adding 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 six percent to nine percent.

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?”

“It seems like it’s especially their emerging markets exposure in China where they are hit by competition in the low end of the market,” said Sydbank analyst Morten Imsgard.

“Short term, there’s a lot of turmoil in the company.”

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. Analysts, however, are worried the company could lose so much market share in the meantime that a comeback could be difficult.

“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.

“Investors should be more than concerned about the dividend possibility.”

The 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.