Nokia (NOK) - Get Report can't catch a break.

Recent reports about handset sales in Europe and signs of life from old rivals






could signal some troubling trends for the top phone maker.

Recent retail reports show encouraging signs for the batch of handsets from the

Sony Ericsson

joint venture. And evidence that penny-pinching telcos are unwilling to bear more of the cost of their customers' new phone purchases seems to be leaving some analysts with a dim view of European sales trends.

Citing sales reports from the U.K.'s Carphone Warehouse, Lehman Brothers says the 2003 European handset market growth looks to be weaker than the recently lowered projections of 10%. One culprit, according to Lehman and the retailer's report, is the erosion of so-called phone subsidies or contributions a telco makes toward a customer's phone purchase.

Fewer subsidies translate to phone price increases and dampening sales. The European handset market was expected to grow by as much as 13% this year after dropping some 20% last year.

For handset king Nokia, that adds to the already worrisome news that demand for network equipment continues to decline. Nokia

warned earlier this month that wireless infrastructure sales would drop about 20% below last year's levels.

With the largest share of the handset market, Nokia has the most to lose if these trends continue. Last year, Nokia had 36% of the market, with 15% going to No. 2 Motorola and 10% held by


. Former No. 3 Ericsson fell out of the money in 2001 when it joined forces with


(SNE) - Get Report

. After a dismal 2002 when the JV's handset sales fell 30%, the company has started to stabilize.

One of the first out of the blocks with features like fancier ring tones, video messaging and camera readiness, the Sony Ericsson handsets were the top two sellers in Ericsson's homeland of Sweden in February. That suggests Sony Ericsson is building on the success it had late last year with its previous generation of phones.

Nokia's decision earlier this month to push into the North American market with code division multiple access, or CDMA, phones is seen by industry watchers as a reaction to the threat of a rebuilding Ericsson and Motorola.

Over the past three years, as Motorola and Ericsson

stumbled on strategies and

flailed about looking to fix their finances, Nokia sailed along, relatively speaking, despite a

succession of sales


But there are signs that Ericsson and Motorola are not simply going to go away. In fact, US Bancorp Piper Jaffray issued a report Monday upgrading Ericsson to buy on the strength of pending management changes and continued cost cuts. While the Piper report warns that Ericsson's network gear business -- about 80% of sales -- is facing a potential drop in demand as telcos back off their next generation, or 3G, upgrade plans, the report says the sputtering giant is getting back on its feet.

Investors say that with market sentiments linked almost purely to the developments in the Iraqi war, stock-specific strategies are difficult to pursue. One San Francisco-based money manager says Nokia presents the biggest investment challenge, because positive developments for Motorola or Ericsson likely will come at the Finnish giant's expense.

"Motorola is trading at the bottom of a 10-year trough," says the hedge fund manager, who is long the stock. If the company shows any progress on its turnaround, this is likely to represent a bottom, he says.

And similarly, as Ericsson parades new chief Carl-Henric Svanberg before investors during the upcoming road shows pegged to his April 8 appointment, the message that a new steady hand on the wheel may begin to turn sentiment on the company, says the California money manager, who has no position.

"They have a charismatic new guy who is going out on a road show, which will probably build support in the near term," says the money manager.

And as one sell-sider pointed out, Ericsson dramatically lowered its first-quarter guidance, giving the new chief a reasonable chance to surpass expectations.

But that leaves Nokia, on the other hand, with a reasonable chance to disappoint.