As we enter 2002, our strategic position is better than ever. I am more than happy

Jorma Ollila, chief executive, Nokia

And the Finland-based firm forecast "improving conditions" this year.

While profits were down on the 1.77bn euros reported a year ago, investors greeted the firm's statement as evidence it had seen the worst of the telecoms downturn.

Nokia shares rose 8% to 26.46 euros in Helsinki on Thursday morning.

The results come a day after Motorola, the world's second largest handset maker, revealed it was still running at a loss despite widespread cut backs.

Third ranking mobile phone maker Ericsson will release results on Friday.

Boss satisfied

Nokia warned that the mobile phone market's short term prospects remained weak, with sales likely to be 6-10% lower in the first three months of 2002 than they were a year before.

But the firm predicted a pick-up in revenue later in the year, with both mobile phone and infrastructure divisions set to report 15% sales growth over 2002.

"As we enter 2002, our strategic position is better than ever," chief executive Jorma Ollila said.

"I am more than happy with Nokia's... performance."

'Turnaround' hopes

The figures were greeted as "clearly better than expected" by Nordea Securities analyst Mika Paloranta.

This year is going to be the turnaround. The handset market looks likely to pick up

Telecoms analyst

And a broker told BBC News Online that the statement heralded a recovery for the sector, attempting to break free of a two-year slump.

"This year is going to be the turnaround," the broker said.

"The handset market looks likely to pick up, and service quality problems on lots of mobile networks means they're going to have to pick up their equipment spending again.

"And it will be the biggest players - Nokia, Alcatel and so on - who gain the most."

Sales forecast

Last year saw handset sales sector wide slide sharply as major markets became saturated.

Inventories at equipment suppliers mounted as networks cut back, ending years of heavy investment.

A slow start to faster data technologies such as GPRS and third-generation mobiles has also hit confidence in the formerly bullish sector.

Nokia stuck by forecasts that global sales of mobile phones would hit 420-440 million this year, compared with about 380 million in 2001.