Nokia Oyj, the Finnish mobile-phone maker seeking to reverse falling sales, reported fourth-quarter profitability for its handset business exceeding its forecast, helped by recovering demand and cost cuts. The stock jumped.

Operating profit at its handset division, excluding some items, was at a break-even level or as much as 2 percent of sales, Espoo, Finland-based Nokia said today in a statement. In October, the company projected an operating loss for the unit of as much as 10 percent of sales.

Improving earnings signal that Nokia is finding buyers for its latest devices such as the Lumia smartphone and that Chief Executive Officer Stephen Elop’s cost cuts are working. Before the fourth quarter, Nokia had accumulated 4.8 billion euros ($6.3 billion) in losses since Elop started his bet in early 2011 on phones using Microsoft Corp.’s Windows software.

“This clearly shows Nokia is making good progress with consumers,” said Robert Jakobsen, a Jyske Bank A/S analyst in Silkeborg, Denmark.

Nokia shares rose as much as 18 percent to 3.54 euros and traded at 3.49 euros at 3:54 p.m. Helsinki time. The stock tumbled 22 percent last year, its fifth straight annual drop.

Apple Competition

Nokia said it sold 4.4 million Lumia smartphones in the fourth quarter, rising from the third quarter’s 2.9 million. Total fourth-quarter mobile-phone sales were 86.3 million units, including 9.3 million of the lower-priced full-touch Asha smartphones.

Nokia Siemens Networks, the company’s equipment joint venture with Siemens AG, had a fourth-quarter operating profit of 13 percent to 15 percent of sales excluding some items, also beating Nokia’s forecast.

“This is clearly very positive news from Nokia as it both shows that the company’s new Lumia product launches are performing well and that the NSN networks business has gained good momentum,” said Louis Landeman, an analyst at Danske Bank A/S in Stockholm. “The company’s restructuring programs are reducing costs faster than expected.”

To cut expenses, Elop has eliminated more than 20,000 jobs and closed production and research sites. He has also introduced devices such as the Lumia 920 to stop customer defections to Apple Inc.’s iPhone and devices running Google Inc.'s Android software.

In the first quarter, the handset unit will probably have an operating loss equivalent to 2 percent of sales, Nokia said. That prediction has an error margin of plus or minus 4 percentage points, the company said.

The network venture will probably have a first-quarter operating margin of 3 percent, plus or minus 4 percentage points, Nokia said.

(Source: Bloomberg)