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Wall Street is worried about mighty

Nokia's

(NOK) - Get Nokia Oyj Report

weakening handset prices.

Nokia's

midquarter update earlier Tuesday offered up a snapshot of the wireless king's progress that was mostly in line with expectations. But on a subsequent conference call with analysts, the looming issue was a continuing drop in the average selling price of the company's phones.

Though Nokia fans were able to point to widening profit margins and healthy handset volume growth, skeptics say the falling unit prices reveal a troubling trend. They suggest the handset king is straining to maintain its market dominance. Investors, catching wind of the price chatter, sent Nokia shares down 90 cents, or 5%, to $16.17 Tuesday.

The big Finn phone maker projected annual and sequential declines in its so-called ASP, or per-phone average selling price, for the third quarter. Lehman Brothers analyst Tim Luke estimates that price at around $145, or about 16% below year-ago levels.

Company executives on a conference call Tuesday blamed a weak dollar and a higher percentage of sales in North and South America, where Nokia's lower-priced cell phones are more popular.

But some analysts and investors say while Nokia is making good headway in new markets like Russia and Brazil, it is losing market share in the higher-priced phone markets like Europe.

For example, check out the August sales reports in some of

Vodafone's

(VOD) - Get Vodafone Group Plc Report

markets. While Nokia has five of the 10 top-selling phones, the most popular phone was a color-screen, camera-enabled model from

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SonyEricsson

.

Nokia reps said they were not familiar with the Vodafone report. A Vodafone spokesman said the company doesn't comment on the sales rankings of its handset suppliers.

Analysts predict cell-phone sales will hit a record half-billion units next year as the industry gets swept up in two currents: the surge of new subscribers in emerging markets like India, Eastern Europe and South America, and the urge to upgrade to fancier phones in mature markets like Europe.

Nokia is pushing hard on the emerging market strategy, but faces a more difficult challenge trying to defend its existing markets as users swap their old Nokia phones for the dazzling features of rivals' new models.

Few observers expect

efforts like Nokia's nGage video-game phone will turn the tide.

Word of Nokia's humble midquarter appraisal comes at a time when other players across the wireless industry are raising their financial projections.

Research In Motion

(RIMM)

, the maker of BlackBerry email pagers, said Monday night that second-quarter sales would be as much as 17% higher than previously expected. Research In Motion shares rose $6.50, or 23% to $34.74 in midday trading Tuesday.

Earlier on Monday, cell-phone chipmaker

RF Micro

(RFMD)

raised its third-quarter guidance, citing strong demand as customers work down their surplus inventory levels.