Nokia Investors Brace for Frostbite

Updated from 9:35 a.m. EST

The recession has come calling on wireless, ending a ferocious growth streak with what looks to be the first-ever negative fourth quarter.

Tech investors, already battered by the collapse of Nortel (NT Quote) and disappointing earnings from Intel (INTC Quote), are bracing for more depressing news from mobile-phone giant Nokia (NOK Quote) prior to the market opening Thursday.

All hope that the No. 1 phone maker could sidestep the falling economy seems to have vanished in recent weeks. Motorola's (MOT Quote) paltry sales of 19 million phones in the fourth quarter -- a quarter below already weak third quarter levels -- offered a hint of a coming cool-down. Adding to the gloom last week, Sony Ericsson swung to a fourth-quarter loss on a 23% drop in sales from a year ago.

"With two of the top five handset vendors having reported shipments, our early read is that the handset market showed no growth in the fourth quarter, we believe, for the first time in history," JP Morgan analyst Ehud Gelblum wrote in a research note last week. Gelblum says industry sales probably fell 8% last quarter. Usually the fourth-quarter holiday season fuels between 15% to 20% year-over-year growth.

The slump in consumer spending and the shift toward smartphones leave Nokia exposed on two fronts. Last week, AmTech analyst Mark McKechnie highlighted these vulnerabilities and downgraded Nokia to sell.

"Given Nokia's longer term issues in smartphones, we would recommend investors use the most recent rally as a selling opportunity pending visibility of industry recovery or smartphone progress," McKechnie wrote.