Will mobile games be big business?

The Finnish firm now said it expected the global handset market to hit 460 million units this year, up from its previous estimate of 450 million units.

The upbeat statement, which follows on the heels of similar comments from Samsung, Motorola and Siemens, comes even though the firm reported flat handset sales of 5.6bn euros (�3.9bn) during the July to September quarter.

"After the reports from Motorola and Siemens it is clear that the market for handsets is very strong but that has not translated into sales growth for Nokia," said Hakan Wranne at Fischer Partners.

Nokia's net profits rose to 823m euros during the quarter, a significant gain over the 610m euros made during the same period a year earlier.

Stalled networks

Despite the positive outlook for handset sales, Nokia was much more cautious about network equipment sales.

The roll out of the next generation of mobile phones is stalled in many countries, as mobile firms shy away from making further investment in the current harsh economic climate.

Nokia's network sales fell 21% to 1.2bn euros during the quarter.

"Altogether the result was positive... the biggest surprise was that Nokia Networks gave careful guidance for the fourth quarter," said Mika Paloranta, an analyst at Carnegie.

Gaming hopes

In order to boost revenue and sell more profitable handsets whilst waiting for the new generation of phones, Nokia has just launched its N-Gage mobile gaming device.

N-Gage has just gone on sale at 30,000 stores around the world, and Nokia said it was already seeing strong orders from distributors and retailers.

Analysts said one of the reasons that Nokia's overall sales figures was flat was because its most popular models were also its cheapest.

Nokia still dominates the market, selling 36% of all handsets around the world.

But Germany's Siemens, Nokia's much smaller rival, managed a dramatic 44% rise in sales during the past three months.

Nokia's shares fell by 2.6% to 14.3 euros shortly following the announcement, as investors worried about network sales.