Nokia reported a worse-than-expected 90 per cent slump in first quarter profits today. It was the Finnish mobile group's worst results since 2001as the global economic downturn continued to hit phone sales.

Even with the news, shares in the mobile phone company surged 8.7 per cent to 11.01 euros as it stuck to its forecast that mobile sales would decline by only 10 per cent in 2009. Some analysts had been concerned that Nokia would cut the forecast.

The world’s largest mobile phone maker said that net profit in the three months ending March 31 had plummeted to €122 million (£107 million) from €1.22 billion last year. In what is proving to be the toughest year ever for mobile phone makers, Nokia’s earnings per share sank to €0.03 from €0.32 in 2008, lower than analysts’ expectations of €0.06 and its weakest level since the third quarter of 2001.

Analysts blamed the economic downturn and, less significantly, the effect of such products as Apple’s iPhone and RIM’s BlackBerry – both of which have taken high-end users away from Nokia.

Mobile phone companies are braced for mobile sales to fall in 2009 as a result of the economic downturn, in what would be only the second annual decline in the industry's 15-year history.

Nokia’s sales fell 27 per cent to €9.28 billion from €12.7 billion in the first quarter last year, with sales of handsets down 33 per cent to €6.2 billion.

However, the Finnish company calmed jittery investors by reaffirming its prediction that the mobile market would shrink by only 10 per cent this year, retaining its widely monitored operating margin forecast and hinting that demand would become more predictable.

“Under the circumstances these are good results for Nokia,” said Caroline Milanesi, an analyst at Gartner. “It’s still been a very challenging quarter, but at least things didn’t get any worse.”

Olli-Pekka Kallasvuo, Nokia’s chief executive, said inventories of unsold mobile phones had decreased substantially in the quarter. “(This) has also resulted in the demand picture becoming more predictable as we enter the second quarter,” he said.

Rick Simonson, the chief financial officer of Nokia, said that there were “nascent signs of relative stability” going into the second quarter, but added: “It’s a little bit too early to call a bottom on demand in the mobile devices business.”

Nokia has fared better than many rivals during the slump. To cope with slowing demand the company cut costs in early 2009, slashing jobs across its operations while also halting the use of subcontractors in phone manufacturing.

Last month it announced 1,700 layoffs worldwide.

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