The loss compared with a profit of €344 million a year earlier, while revenue fell 30 per cent to €7.4 billion from €10.4 billion in 2011.
Net sales of devices crashed 40 per cent to €4.2 billion, with smartphone sales dropping by more than half to €1.7 billion, and the company gave a dim outlook.
It said operating margins in the second quarter would be "similar to or below the first quarter 2012 level of negative 3 per cent," and that it would speed up a cost cutting goal of €1 billion by 2013.
The Finnish company said it would share "further details as quickly as possible."
CEO Stephen Elop conceded the company had faced "greater than expected competitive challenges" and some challenging markets, including Britain.
"We exceeded expectations in markets including the United States but establishing momentum in certain markets ... has been more challenging," he said. "We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly."
Colin Giles, head of global sales since January 2010, will leave the company as it restructures the sales unit, "reducing a layer of sales management," a statement from Nokia said.
The company has been the leading handset maker since 1998 but after reaching a global goal of 40 per cent market share in 2008, its share has continued to shrink.
Nokia hopes to remedy the slide with its new Windows Phone 7, which launched in October, eight months after Elop announced a partnership with Microsoft Corp.
Nokia has adopted the Windows operating system in its new phones, phasing out the MeeGo and Symbian platforms, considered clumsy by many operators.
Still, sales of smartphones dropped to 12 million in the first quarter, from 24 million a year earlier, while volume sales of cellphones fell to 83 million from 108 million in 2011.
Elop, who earlier described the first-quarter as disappointing, said Nokia had sold more than 2 million Windows-based Lumia phones in the first quarter and that it had a "clear sense of urgency to move our strategy forward even faster."
In 2011, Nokia announced more than 10,000 layoffs to lower expenses and has not ruled out more cutbacks.
The company has said it would not provide annual targets for 2012 since it was in a "year of transition."
It said operating margins in the network operations — called Nokia Siemens Networks — would "clearly improve in the second quarter 2012 compared to the first quarter 2012 level of negative 5 per cent," but it gave no figures.
Last year, Nokia was still the world's top cellphone maker with annual unit sales of some 419 million devices. But in the last quarter of the year it posted a net loss of €1.07 billion, a marked reverse from the 745 million profit a year earlier, as sales slumped 21 per cent with smartphone sales plunging 23 per cent.
Its stock has fallen by half since Elop announced the deal with Microsoft, and it dropped to a 15-year low of €2.98 earlier this week after Moody's ratings agency downgraded its debt grade to near junk status.
On Thursday, its share price dipped only 1 per cent to €3.00 ($3.93) in Helsinki, as investors had been expecting a downturn after last week's profit warning.
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