Nokia made losses of 1.41bn euros (£1.1bn) in the last three months as the mobile phone maker lost more market share to Samsung and Apple.
Sales fell 19% to 7.54bn euros, with smartphone sales falling 34% to 1.54bn euros. Nokia was the world's leading mobile phone maker for more than a decade, but has faced fierce competition.
Nokia chief executive Stephen Elop said the company was facing "greater than expected competitive challenges".
The company said it had sold four million Lumia smartphones, which have Microsoft's Windows software, in line with the market's forecast.
Last week, Nokia halved the price in the US of its flagship Lumia 900 phone, which the company hopes will challenge Samsung and Apple products.
Shares in Nokia rose as the figures were not as bad a feared, and investors also took comfort from news that the firm had improved its cash position during the three months.
Nick Dillon, analyst at Ovum, said: "After a seemingly endless run of bad news, these results offer a glimmer of hope for Nokia.
"The company has managed to double the sales of Lumia devices since the last quarter - if it can maintain this momentum then it could be on the road to recovery."
All three major major credit ratings agencies have cut Nokia bonds to "junk" as the firm has issued two profit warnings and announced plans to cut one in five jobs.
Mr Elop said in a statement: "We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly.
"Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges."
bbc.co.uk
Sales fell 19% to 7.54bn euros, with smartphone sales falling 34% to 1.54bn euros. Nokia was the world's leading mobile phone maker for more than a decade, but has faced fierce competition.
Nokia chief executive Stephen Elop said the company was facing "greater than expected competitive challenges".
The company said it had sold four million Lumia smartphones, which have Microsoft's Windows software, in line with the market's forecast.
Last week, Nokia halved the price in the US of its flagship Lumia 900 phone, which the company hopes will challenge Samsung and Apple products.
Shares in Nokia rose as the figures were not as bad a feared, and investors also took comfort from news that the firm had improved its cash position during the three months.
Nick Dillon, analyst at Ovum, said: "After a seemingly endless run of bad news, these results offer a glimmer of hope for Nokia.
"The company has managed to double the sales of Lumia devices since the last quarter - if it can maintain this momentum then it could be on the road to recovery."
All three major major credit ratings agencies have cut Nokia bonds to "junk" as the firm has issued two profit warnings and announced plans to cut one in five jobs.
Mr Elop said in a statement: "We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly.
"Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges."
bbc.co.uk
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