Apparently, not all warnings are created equally.

Todd Bernier
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Following up two depressing revenue warnings from Ericsson ( ERICY) and Motorola ( MOT), Nokia ( NOK) updated the Street on its third-quarter progress Sept. 11. The mobile-phone market share leader pledged to keep its profitability steady, but said it would fail to achieve previously predicted growth over last year's third-quarter revenue.

Investors could've cared less about sales growth, though, jumping for joy at Nokia's assertion that its margins and handset demand are still healthy, and sending its stock price up more than 10% Monday in one of the day's few bright spots. The stock was up again slightly Tuesday. We sat down with Morningstar wireless analyst Todd Bernier to see what all the fuss was about.

TSC: Investors had a very positive reaction to Nokia's announcement last week. What was behind that?

Bernier: They made their numbers on the handset side, but they missed their growth numbers on the network side. For Nokia, 70% of revenue is generated by handsets. That's the big story.

TSC: Even though we hear that there's not a new generation of handsets to compel buyers, it seems like the handset market is holding up much better than the base-station equipment market.

Bernier: If you're a carrier , the last thing you want to do is reduce how much you spend on things like handsets because those are sources of revenue, as opposed to networks. That is why you're seeing Motorola and Ericsson blow up, because networks are a much bigger piece of their business.

TSC: What do you mean when you say handsets are generators of revenue for carriers?

Bernier: Carriers' goal is to get as many subscribers in the door as possible. So if that means continuing to subsidize the handset for their subscribers, so be it. At the end of the day, those subscribers are profitable to them. Putting new base stations up is not a profitable exercise for them.

TSC: Coming out of last Tuesday's events with the terrorist attack on the World Trade Center , people think the handset market might increase, as well as the base-station market, because Verizon (VZ) and other carriers have to replace equipment, right?

Bernier: Right. The handset has gone from being a luxury item to something that people really depend upon. On the equipment side, I think people are starting to say we should stop ripping up the roads for wireline networks and start building wireless capacity. What people want, or are asking for, is more wireless capacity, so on days like last Tuesday, people can get through.

TSC: How do you think things stand geographically for the handset market? Do you see that perhaps China really hasn't slowed as much as we thought? Are there any geographies that are surprising you on the upside?

Bernier: People are talking a lot about saturation. I think that the rates at a certain point get like Europe's, where saturation is about 40%. But in the States, there is a long way to go; a lot of people here have not gotten a phone yet. In China, Motorola was saying that their profit margins in that area were some of the highest they've seen around the world. Well, of course, it's going to be their highest because they lose money everywhere else. I think when they get a glimmer of good news, it gets magnified by the press, and industry watchers start saying they're back. They're not back.

TSC: People are saying that Nokia is the shining light, that they are the one strong company in this area. Do you think that is still true even with some of the slowdowns you've seen this summer? Do you think that it is at a good price right now?

Bernier: Yes. The thing you have to ask yourself is, is this company here to stay? I think that it goes without saying that with a billion cell-phone users projected by the end of next year, yes, this company is here to stay. And what company is best-positioned to benefit from that demand? It's probably Nokia.

TSC: What about the criticism that Nokia is late with its GPRS General Packet Radio Service , or 2.5G, phones?

Bernier: It'd be nice to be first to market, but look at it this way: If you've got a lead 10 yards into the 100-yard dash, I don't think anybody cares. It's not who's leading at the 10-, 20- or 30-yard marker; it's who wins.