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Nokia spices up the market

The cell phone maker's shares rise as the company says earnings will be in line with earlier estimates, though it expects lower cell phone sales growth.

Cell phone maker Nokia expects lower cell phone sales growth in the first quarter, but earnings will be in line with earlier estimates, the company announced Thursday.

Shares jumped on the announcement. Shares closed up $3.15, or more than 14 percent, to $24.95.

"Saying they are going to hit their number is positive in this kind of market, no matter what your company does," said analyst Peter Friedland of WR Hambrecht. "But ratcheting down sales growth isn't."

Nokia expects cell phone sales for the first quarter to grow 20 percent, compared with an earlier estimate of between 25 percent and 30 percent, Chief Executive Jorma Olilla said in a statement.

Nokia also cut its estimates for global cell phone sales. It now expects between 450 million and 500 million to be sold this year, down from an estimated 500 million to 550 million.

But the company will report earnings per share of 19 cents, in line with a survey of 30 analysts conducted by First Call, Olilla told investors.

The company blamed the lowered expected sales on the stronger than anticipated effect of "demanding market conditions...especially in the United States, (where) economic uncertainty has increased in the past few weeks."

Nokia's expected slowdown in cell phone sales completes the bad-news hat trick among the top three cell phone makers. In the past few weeks, No. 2 phone maker Ericsson and No. 3 Motorola have issued profit warnings and lowered their own sales forecasts.

Other cell phone makers, including Siemens and Matsushita, have also issued profit warnings.

Friedland said that most handset makers as early as six months ago were hoping consumers would replace their cell phones with the newer, more expensive models. But that hasn't happened.

"That has a double impact," Friedland said. "If you're selling less handsets, that'll impact growth. Also, if the handsets you're not selling are the higher-revenue-generating ones, that'll impact revenue."