Updated from 11:48 a.m. ET

Nokia

(NOK) - Get Report

dropped as much as 9% Thursday as rumors of a profit warning from the world's largest maker of mobile phone handsets swirled through the market.

Nokia's American depositary receipts recently rebounded and were down $1.10 cents, or 4.5%, to $23.15 in midday trading.

Worries about further

diminishing growth of handset sales are punishing Nokia, which had double the worldwide market share of its nearest competitor,

Motorola

(MOT)

, in the fourth quarter, according to research firm

Dataquest

.

Johan Carlstrom, an analyst with Swedish investment bank

Handelsbanken

, thinks the selloff is unwarranted. "A profit warning is already discounted in the share price," Carlstrom says. "Around these levels, the stock is cheap." Nokia is off 63% from its 52-week high of $62.50. (He rates Nokia a buy, and his firm hasn't done underwriting for the company.)

In January, the three major manufacturers -- Nokia, Motorola and

Ericsson

(ERICY)

-- all took down their estimates for industry-wide handset sales in 2001. Still, there is increasing concern that the companies will reduce those estimates even more because of slow first-quarter handset sales in mature European markets like Italy, France, Germany and Britain, as well as a more sustained economic slowdown in the U.S. than originally envisioned.

Carlstrom says he's considering another reduction for his 2001 handset forecast, to a range of 490 million to 510 million from 525 million. European sales have slowed because fewer people than expected are

replacing their current phones.

Nokia, which shrank its industry-wide forecast last month to a range of 500 million to 550 million units, from 550 million, says in accordance with the

Securities and Exchange Commission's

fair disclosure rules, it can't comment on whether those figures will change. Carlstrom says the company reaffirmed its 2001 forecast when he spoke with management on Wednesday.

Even if Nokia should reduce that estimate further, to maybe 490 million phones, "Lower global volumes are already discounted in the price," Carlstrom says. He does acknowledge, though, that a figure as low as 450 million would be a drastic reduction and one that's not factored into the share price.

Lower handset growth will cut into Nokia's anticipated revenue, unless it manages to increase its market share significantly. Indeed, on a conference call at the end of January, the company stated that one of its goals for the year is aggressively to take more share.

In the fourth quarter, Nokia expanded its leadership to 33.9% of the market, while Motorola slipped to 12.7% and No. 3 Ericsson dipped to 8.7%.