By Jussi Rosendahl
HELSINKI (Reuters) - Nokia , the world's No. 3 telecom network equipment maker, posted a surprise rise in quarterly profits on Thursday helped by lucrative software sales and a refusal to chase after lower-margin contracts that had hurt profits previously.
The Finnish company, which in April proposed a 15.6 billion euro takeover of French rival Alcatel-Lucent , said operating profit at its network unit was 313 million euros ($343 million), or 11.5 percent of sales.
That was up from 281 million euros a year earlier, and well above analysts' average forecast of a profit of 235 million and a margin of 8.3 percent, according to a Reuters poll.
Network equipment sales were 2.73 billion euros, below a market consensus of 2.84 billion, as the company focused on more profitable contracts. This contrasted to earlier this year, when it signed several lower-margin deals to win business in China that cut into profits.
"Operative performance was really good, software sales were exceptionally high, which boosted margin," said Inderes analyst Mikael Rautanen, who has been recommending investors reduce holdings in the stock. He expected a positive market reaction.
Nokia's total non-IFRS group profit increased 51 percent from a year ago to 521 million euros, topping the 334 million forecast by analysts. The results was boosted by a 110 million euro gain on the sale of a Chinese investment.
The company also said its strategic review of its HERE navigation business was now in an advanced stage. Last week, Reuters reported that the company was closing in on a deal to sell the maps operation to German carmakers for between 2.5 billion and 3 billion euros.
(Reporting by Jussi Rosendahl; editing by Eric Auchard and Jason Neely)