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Nokia company warned on Wednesday that its second-quarter profits and sales could be lower than expected. The world’s No.1 mobile phones’ maker cited intense competition from rivals, shifts in product mix toward lower margin products, and higher costs for its concerns about financial results.

Now, many different foreign cell phone companies are competing vigorous with each other in Chinese cell phone market. Some people are worrying that Nokia will lose the command of cell phone market. The Finnish cell phone maker said that profit margins at its devices and services business–its key cell phone unit–would be at the lower end of its forecast, or below, in the second quarter and throughout 2010.

Nokia had earlier predicted that the cell phone unit’s operating margin would be 9-12 percent in Q2 and 11-13 percent for the full year. Sales will also be at the lower end or slightly below previous guidance of €6.7-7.2 billion, Nokia said. That’s primarily the result of tougher competition in the high-end market, higher component costs, and lower-than-expected average selling prices and device volumes, it said.

According to Nokia CFO Timo Ihamuotila, “the third quarter is expected to remain challenging” as the company goes through a “painful transition” in the smartphone segment. Profitability has been hit by higher component costs because of the depreciation of the euro, Ihamuotila said. “The majority of our sales are outside the euro area so that’s obviously having an effect,” he said. Nokia is facing intense competition from rivals, mainly Apple Inc., in the high-end smartphone market. Apple, which recently began selling its latest generation iPhone, the iPhone 4, is betting that the sales of the newest model will beat previous sales record. Apple sold 1 million units of the iPhone 3GS in the first 3 days of debut in 2009.

Nokia also warned that its share in the global cell phone market could dip in 2010. Earlier it had forecast that its share would increase slightly. According to data compiled by researcher Strategy Analytics and International Data Corporation (IDC), Nokia shipped 107.8 million cell phones (including smartphones) in the January-March quarte. That was almost as much as the next four cellphone makers combined. Samsung sold 64.3 million, LG 27.1 million, RIM 10.6 million, and Sony Ericsson 10.5 million.

Nokia had predicted that its Internet services offering will reach its 2011 targets of 300 million users or annual revenues of €2 billion. However, the signs of payback are not encouraging. While some of the new services have failed to gain traction, others have either been ended or outsourced. None have come close to matching the phenomenal success of Apple’s App store. While Nokia and Apple company are fighting each other, the customers benefit a lot from their fight.