Nokia Corp. reported better than expected first quarter profits Thursday despite confirming that its market share around the world dropped below 30 percent for the first time in over a decade, as the world's top cellphone maker continued to lose ground to its rivals.

Though the Finnish company said its net profit for the quarter fell euro5 million to euro344 million ($499 million) a year earlier, the markets were impressed by the news that operating profit only fell 14 percent during the period instead of the anticipated 40 percent decline.

Nokia shares were up 3 percent at euro6.11 ($8.87) in afternoon trading in Helsinki.

Elsewhere in its statement, Nokia revealed that its revenues grew by 9 percent to euro10.40 billion from euro9.52 billion in the same period in 2010, while smartphone sales were up 6 percent at euro7 billion.

Despite the increase in smartphone sales, Nokia confirmed that its overall global market share plunged to 29 percent, from 33 percent a year earlier and 31 percent in the previous quarter.

CEO Stephen Elop said Nokia has now signed a "definitive" deal with Microsoft Corp. to develop software for smartphones "and that product design and engineering work was "well under way."

But he cautioned that the company faced "a more challenging second quarter."

Nokia said the tsunami and earthquake in Japan had disrupted the supply of some components linked to Japanese suppliers and would impact its results in the second quarter.

Nokia is the world's top cellphone maker but faces stiff competition in top-end smartphones from Apple Inc.'s iPhone, Android-based handsets and Research in Motion's Blackberry.

However, Nokia said it sold 24 million smartphones, 13 percent more than in 2010.

Total handset sales were only slightly up at 108.5 million, Nokia said.