Nokia, the world's top mobile-phone manufacturer, bucked the trend in a gloomy telecom market by announcing a 10 percent increase in first-half profits.
But despite relatively strong profits, Nokia disappointed markets by trimming its full-year earnings, networks operating margins and global handsets sales projections, with chief executive Jorma Ollila warning the sector would not show dramatic improvement until next year.
"Economic conditions in the latter part of the year will continue to be hard," he said.
Nokia's profits were in the upper range of analysts' estimates, and the price of its shares initially rose on the news in Helsinki before falling back 4.11 percent to close at 13.77 euros.
Other telecom stocks across Europe reacted mildly to the Nokia report, with analysts saying the figures were largely expected following a mid-quarter report in June.
In Stockholm, Swedish rival Ericsson, which is to publish its report for the first half on Friday, fell and then rose before going flat at 14.90 kronor, while in Paris, Alcatel was up 3.48 percent at 7.14 euros.
Nokia announced net profits had risen to 1.72 billion euros, but slipped by 3 percent to 1.82 billion euros excluding goodwill amortization and non-recurring items.
Sales dropped to 13.9 billion euros in the second half, and the group trimmed its full-year earnings per share guidance to 0.79-0.84 euros from the 0.83 euros previously announced.
Recent months have seen growing concerns about the future of the telecom industry, which is crippled by debts amid doubt about whether new technology will be as profitable as forecast.
In addition, there have been repeated delays in the launch of third-generation mobile telephony technology, featuring sound and image messaging and mobile e-mail and which is considered key to the sector's revival.
As a result, Nokia's Networks division posted a 52 percent decline in operating profit in the first half.
The group said its overall sales growth would be driven by volume deliveries of a number of advanced high value-added models during the second half and revenue from 3G network sales, "assuming the necessary technology milestones are satisfied."
The delays have also affected mobile phone sales, as customers postpone the purchase of new handsets until the new services are available.
Nokia cut its full-year global handset sales forecast to 400 million from the 400-420 million seen previously. The new outlook is in line with that predicted Wednesday by US mobile phone maker Motorola.
"I was expecting neutral or slightly negative results and this is slightly disappointing," Mika Metsaelae, a telecoms analyst at Kaupthing Sofi said.
"Important is Nokia's third-quarter guidance which is considerably lower. If they want to reach their full year earnings per share, there is a big pressure for the fourth quarter," he said.
Nokia said meanwhile it expected its full-year market share to show an increase on last year's 37 percent, leaving its rivals in the dust.
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