Nokia's ( NOK) shortcomings in the midprice handset market caught up with it Tuesday.

Shares in the Finnish wireless giant plunged 16% in early action after the company predicted a stark first-quarter sales shortfall. The dour forecast comes just three months after Nokia ignited a wireless sector rally by predicting surprisingly strong sales growth.

On Tuesday, though, Nokia said first-quarter sales would fall 2% from a year earlier. That's well short of the 5% rise the company had projected in January. Early Tuesday, Nokia dropped $3.30 to $17.85.

"Mobile Phones sales declined in Europe and Asia due to lower-than-expected volumes and a product mix weighted more toward the low end," Nokia said in a Tuesday press release. "Due to certain gaps in its product portfolio, mainly in the midrange, the company was not able to fully capitalize on positive market developments."

The company said it would post earnings of 17 euro cents a share, or about 20 cents (U.S.), for the first quarter. That's in line with analysts' estimates. But the sales shortfall indicates that Nokia's failure to roll out new models that consumers deem cool is undermining the company's efforts elsewhere.

Nokia executives reiterated that the company would introduce 40 new handsets this year, matching last year's pace.

"There is plenty to come," said Nokia executives on a conference call Tuesday morning. "We've only seen the beginning of the array of products to come to market this year."