Nokia said strong sales of Lumia smartphones helped its mobile phone business achieve underlying profitability in the fourth quarter (Q4), raising hopes the struggling handset maker may be past the worst.
The Finnish company, which has been losing market share to Samsung and Apple, said the better-than-expected result was also helped by 50 million euros ($65.2 million) in patent fees, cost cuts and a stronger-than-expected performance from its Nokia Siemens Networks unit.
The update lifted some pressure from Chief Executive Stephen Elop, who has been trying to prove his February 2011 decision to switch to Microsoft Windows software was the right one.
Many investors had said he was running out of time to produce results. Success of the high-end Lumia smartphones has been considered particularly crucial for the company's survival.
"We're very pleased with the Lumia response," Elop said, although he added that sales of the latest 920 models, which use the new Windows Phone 8 software, had been constrained by a shortage of supplies.
Nokia estimated fourth-quarter operating margin in its mobile phone business was between break-even to 2 percent. It previously forecast the margin to be around minus 6 percent.
Official results, including more details on its profit and cash position, are due on Jan. 24.
However, the company said that the competitive environment remains tough and forecast the margin to be minus 2 percent in the first quarter of this year.
Fourth-quarter net sales in devices and services were about 3.9 billion euros ($5.09 billion), Nokia said. It sold a total of 86.3 million devices. Smartphones accounted for 6.6 million units, of which 4.4 million were the Windows-based Lumia handsets.
Nokia shares were up 12.8 percent at 3.38 euros by 1558 GMT as investors cheered the rare positive announcement from Nokia.
"I think it's a good start," said Mirabaud Securities analyst Susan Anthony. But she, and other analysts, were slightly cautious on whether the Lumia strategy was really succeeding.
"We still need evidence that the good initial momentum can continue and will not stall as happened with its Windows Phone 7 devices," she said.
Nokia would not say how many of the 4.4 million Lumias sold were the newest models rather than the heavily discounted ones launched earlier, leaving some analysts sceptical.
Redeye analyst Greger Johansson said it was too early to call it a turnaround.
"They will have to prove a lot more until you can say that," he said. "I'm not still convinced that they are going to manage