Nokia, the world's largest cellphone maker by volume, reported better-than-expected quarterly core earnings, although

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they still fell 73 percent as its new Windows Phones failed to compensate for diving sales of its old smartphones.

Nokia's fourth-quarter core earnings per share of 0.06 euros compared to market expectation for 0.04 euros.

Shares in Nokia rose 7 percent on the news to 4.34 euros.

Fourth-quarter smartphone sales fell 31 percent from a year earlier to 19.6 million handsets, roughly in line with forecasts.

Nokia unveiled a high-profile strategy shift to Microsoft software on its smartphones last February in a bid to rival to Apple (AAPL.O) and Google's Android.

It said it has sold well over 1 million Windows Phones by end-January.

"More than 1 million shipped Windows Phones to date is is more than some were expecting, it's not going to worry Apple or Google," said analyst Nick Dillon from research firm Ovum.

Nokia proposed a 2011 divided of 0.20 euros per share, slightly more than expected.