Nokia loses place in European blue chip index

Finnish handset maker Nokia Corp. will suffer another blow to its reputation Friday when it drops out of a benchmark index of Europe's biggest stocks because of the sharp fall in its market value in recent months.

The company has had a bad year as its inability to compete with rivals in the fast-growing smartphone market has left it losing market share and profitability.

It lost its position as the world's biggest provider of smartphones to Apple Inc. and was also losing ground to rivals making phones based on Google Inc.'s Android platform. It responded by dumping its own Symbian operating system for smartphones in favor of a partnership with Microsoft Corp., which will provide Nokia with its Windows software. It has also been cutting costs and jobs.

A string of bad news and poor financial results, including a profit warning in February that preceded a second quarter loss, has hit the company's shares hard.

The stock has fallen 42% so far in 2011, and is down 35% since the STOXX Europe 50 index was last reviewed in September 2010, meaning it is no longer big enough to be in an index that aims to include the biggest companies from the biggest sectors in the 18 largest economies in Europe. Its market capitalization is down to EUR16.7 billion, from EUR25.6 billion last September.

Nokia will exit the index after Friday's trading session and fund managers investing in the STOXX Europe 50 index will have to adjust their portfolios to match the new index composition starting on Monday.

Three European banks, which have seen their shares hit by the financial crisis and continuing concerns about bank exposure to sovereign debt, will also leave the STOXX Europe 50 index -- Societe Generale, Intesa Sanpaolo and Unicredit. The four stocks will be replaced by Unilever PLC, LVMH Moet Hennessy, National Grid PLC and Air Liquide SA.

Nokia saw its share of the global smartphone market slip to third place in the second quarter, to 15.2% from 38.1% a year earlier, according to market research firm Strategy Analytics. In terms of overall phones, Nokia held a 34.7% share of the handset market, ahead of Samsung's 19.9% share.