Nokia, the world's biggest mobile phone company, has cheered investors by posting better-than-expected gains in sales and profits.

The firm said that pre-tax profits in the three months to end-September has jumped by almost 17% to 1.25bn euros (�790m; $1.2bn), and that it should be able to maintain similar levels for the rest of the year.

Like its rivals, Nokia has been hit by the slowdown in spending on mobile phones and telecom technology - a slump that it now says may be easing.

The company said it was not planning to revise downwards its forecast for global mobile handset demand - currently 400 million units - despite previous talk that the market would continue to shrink.

New technologies, notably the anticipated success of picture messaging, should help stimulate sluggish demand, chairman and chief executive Jorma Ollila said.

Lower expectations

The news did not thrill the markets - Nokia's stock dipped slightly after the results, before quickly recovering and trading higher, in line with other European hi-tech shares.

Analysts' pleasure at the firm beating its forecasts was diminished by the fact that Nokia has cut its sales outlook five times this year.

Although much has been made of the slowdown in the mobile handset market, the firm has been much harder hit by a sharp decline in corporate investment in mobile networks and other expensive technology.

The slow start of third-generation (3G) mobile networks - which will allow users to download data much faster - has made the entire mobile communications market stumble this year.

But more than some of its rivals, Nokia has kept its performance respectable by implementing job and cost cuts, and exploiting economies of scale.

Kick-start

As for handsets, Nokia hopes that a raft of recent new product launches could kick-start the market.

In the absence of a lift from 3G, the company is pinning its hopes on the attractions of colour screens and digital photography.

Nokia's core European market is almost saturated, with mobile ownership approaching 100% in some places.

Users have proved reluctant to own more than one phone, or even to change their phones as often as manufacturers had hoped.

But Mr Ollila said Nokia remained optimistic.

"Compelling new services and phone features are increasingly moving [consumers] to upgrade their phones, or even look towards owning more than one device," he said.