Nokia saw profits surge in a surprising fourth quarter as it bucked recent trends by increasing its lead in the lucrative smartphone space. The Finnish vendor may finally be reversing course as it awaits a much-needed upgrade to its Symbian OS.

Nokia enjoyed an impressive fourth quarter, with profits rising 60 percent despite a 5 percent slide in overall handset sales and its market share in the lucrative smartphone space increasing to 40 percent from an estimated 35 percent in the third quarter. The performance not only beat Wall Street expectations, it indicates that the Finnish manufacturer is finally beginning to execute again. And that’s a strong signal that Nokia is well positioned to leverage Symbian upgrades that will be key to its short-term prospects.

It also reverses — or at least interrupts — a trend that had seen Nokia steadily lose ground to Apple’s iPhone, especially in key Western markets. Indeed, the company was overtaken by Cupertino last fall as the world’s most profitable handset vendor, according to Strategy Analytics. Nokia responded by slashing some research and development jobs and consolidating its handset lineup to focus on higher-end phones — moves that are already paying dividends.

Nokia still has its work cut out for it in the ultra-competitive smartphone segment. The company must find a way to tap the North American market, and its long-term hopes still hinge on a Maemo OS that is just beginning to mature. But the company last month announced plans to re-engineer its Symbian user interface, which has long been a serious vulnerability in an increasingly consumer-driven market. An improved Symbian experience would help Nokia keep pace as it continues to develop Maemo. And as Om noted last week, its focus on location-aware services provides a chance to become the GPS device maker of choice in many markets. If Nokia can continue to regain its momentum, that’s a goal that suddenly seems more plausible.

Image courtesy Flickr user Cyb3rbl@ck.

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