The third-quarter results also showed growth in Lumia smartphone sales, although analysts said Microsoft will still face a tough time in pushing its way into the competitive consumer devices market with the Nokia deal, which is due to close some time in the first quarter.
Sales of Lumia smartphones rose 19 per cent quarter-on-quarter to 8.8 million units, thanks to the launch of more models and what the company said was strong demand, particularly for the Lumia 520.
It was still a distant third in the smartphone race, however, with total sales of nearly 15 million including its Asha range of devices, while Apple sold over 33.8 iPhones in the same quarter. Market leader Samsung Electronics is variously estimated to have shipped between 85 and 88.4 million smartphones in the period, according to new reports this week from analysts Juniper Research and Strategy Analytics.
"We continue to see competitive challenge at the higher-end of the market, both in terms of pricing and required marketing support," Nokia's finance chief Timo Ihamuotila told investors on a conference call, saying such concerns were what drove it to sell the handset business to Microsoft.
Greger Johansson, analyst at research firm Redeye, said Microsoft will be taking over a business that is still struggling to increase sales volumes and profitability. The phone division's operating margin was a negative 1.6 per cent in the last quarter.
"I still think it is not obvious they are going to turn that side around," he said.
Stripping out the business being sold to Microsoft, Nokia said its underlying group operating margin in the third quarter would have been 11.5 per cent, 7.7 per centage points higher than the actual underlying margin.
The phone division's operating margin was running at a loss of 1.6 per cent.
RISING MARGINS
Shares in Nokia rose over 7 per cent to mark the year's high of 5.42 euros, a rise of 85 per cent so far this year.
Inge Heydorn, fund manager at Sentat Asset Management, said investors were impressed by Nokia's forecast for NSN's profit margin to improve in the fourth quarter to around 12 per cent, plus or minus 4 per centage points, from 8.4 per cent in the third quarter.
"The share reaction is justified with the superb margin forecast," he said.
The unit's core operating profit fell 33 per cent in the third quarter from a year ago to 218 million euros ($301 million), on sales down 24 per cent at 5.2 billion euros. This was below the average profit forecast of 228 million given in a Reuters poll, as the impact of earlier cost cuts waned and major contracts were completed.
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