Nokia reported stronger-than-expected profits for the third quarter, boosted by solid demand for its cheap smartphones, and said on Thursday (Oct. 21) it would cut up to 1,800 jobs under its new chief executive.

Third-quarter underlying earnings per share for the world's largest handset maker dropped to €0.14 (20 cents) from €0.17 (24 cents) a year ago, but beat all forecasts -- which ranged from €0.08 (11 cents) to €0.12 (17 cents) -- in a Reuters poll of 36 analysts.

The results were the first since Canadian Stephen Elop took over at the helm on Sept. 21 from Olli-Pekka Kallasvuo, who presided over a halving in Nokia's market value during his four years in charge.

The strong numbers sent Nokia shares more than 9% higher. They were up 6.5% by 1225 GMT.

"I think it's an excellent report given that the company's portfolio of products was very weak in the quarter," said Morgan Stanley analyst James Dawson.

"The handset profits are 30% ahead of expectations, so it's clearly a very big beat versus what the market was looking for," Dawson said.

In its key phone unit Nokia was able to increase the average sale price to €65 ($91) -- the first annual price rise in almost a decade -- as new, cheap smartphones like the C5 and the E5 went on sale over the summer.

"It's about selling family cars rather than sports cars -- that's where Nokia is making the money," said Gartner analyst Carolina Milanesi.

Nokia shares have still dropped around 7.5% so far this year -- mostly due to problems on the fatter-margin high-end market -- compared with a 10% gain in the STOXX Europe 600 technology index.

Nokia's N8 model, its first serious rival to Apple's iPhone, started shipping on the last day of September and sales are yet to start on many markets.

Nokia sold 110.4 million phones in the quarter, with its market share dropping to just 30%, missing all analysts' expectations. The Finnish group suffered like smaller rival Sony Ericsson from component shortages.

Nokia said it expects part shortages to continue weighing on the cellphone business into 2011, while it forecast its phone unit's underlying operating profit margin to be 10-12% in the December quarter.

Analysts had expected a margin of 11.4% in the poll.

Nokia said the 1,800 job cuts -- close to 3% of staff at its main business -- would hit most product creation business in its Symbian Smartphones organization and its Services organization.

New CEO Elop had risen rapidly over the past five years from CEO of Web software maker Macromedia to chief operating officer of Juniper Networks to head of Microsoft's Business Division, which makes Office software.

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