The world's top cell phone maker Nokia calmed jittery investors on Thursday by reaffirming its forecast for the handset market and saying visibility was improving, sending its shares higher.

January-March sales fell 27 percent as the economic downturn sapped demand for new phones, with the firm reporting a historic 12-million-euro ($15.79 million) loss before taxes, its first-ever quarterly pretax loss.

The cell phone market is facing its toughest year ever in 2009, with Nokia repeating its forecast for market volumes to fall around 10 percent.

But Nokia shares gained a much as 10 percent, cheered by the firm holding steady on its outlook after a grim quarter marked by mostly negative news. At 1143 GMT (7:43 a.m. EDT) the share was up 8.2 percent at 10.96 euros.

Nokia Chief Executive Olli-Pekka Kallasvuo said the amount of unsold cellphones in stores and warehouses 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.

Nokia's Chief Financial Officer Rick Simonson told Bloomberg TV it was too early to call the bottom of the market. To cope with slowing demand Nokia has focused on cost cuts in early 2009, slashing jobs across its operations while also halting the use of subcontractors in phone manufacturing.

The margin at the handset unit fell to 10.4 percent in the quarter, but beat analysts' average forecast of 8.6 percent.

I think the key number is the handset margin which is above 10 percent, and that's better than expected, said analyst James Dawson from Morgan Stanley.

And holding the guidance with kind of a reasonable tone in the outlook statement will probably be taken relatively bullishly, Dawson said.

HOLDING STEADY

Nokia repeated that the underlying operating margin at its key phones unit would top 10 percent in the first half of the year, and be in the range of 13-19 percent for the second half.

Nokia said it expects the market fall to slow in the second half of the year.

Although it's another poor performance we maintain our belief that Nokia is in a stronger relative position than its competitors with greater margins and the significant advantage of scale and distribution, said CCS Insight analyst Geoff Blaber.

Sony Ericsson has said it will report a massive first quarter loss on Friday, with smaller rival Motorola also struggling.

Nokia cut its network infrastructure market outlook, saying it expected a contraction of some 10 percent in euro terms in 2009 versus a previous call for a fall of 5 percent or more. The comments sent shares in Swedish rival Ericsson lower.

(Reporting by Tarmo Virki, Additional reporting by Brett Young, Georgina Prodhan; Editing by David Cowell)

Electronics