Nokia ( NOK) is set to deliver its third-quarter report Thursday, with many analysts hoping the world's largest handset maker can overcome the global economic slowdown that has hampered cell-phone sales in 2008.

Nokia is expected to post net income of 1.27 billion euros, or 34 euro cents a share, excluding items, according to Thomson Reuters. That would mean a decline of 19.6% from a year ago and a decrease of 6.6% sequentially. Revenue should reach 12.92 billion euros, an increase of just 0.2% from a year earlier.

The Finnish mobile-phone giant has tempered expectations for the third quarter with a preannouncement in September, when it said it expected its mobile device market share in the third quarter to be lower sequentially. That outlook reflects its decision to not meet certain aggressive pricing of some competitors, increasing competition and the temporary impact of a slower ramp-up of a mid-range device.

That outlook has punished Nokia's stock, as shares tumbled more than 30% over the last three months. Rival Motorola ( MOT) has given back 20% and Qualcomm ( QCOM) has slid 12%.

"The Street will be looking to Nokia as global consumer play on handsets to see if business got incrementally worse in September following their early negative pre-announcement," writes Mark McKechnie, analyst with American Technology Research, in an email.

In the preannouncement, Nokia said its strategy is to take market share only when it believes it to be sustainably profitable in the longer term. Nokia also said it has not broadly participated in recent aggressive pricing activity, as the negative impact to profitability would outweigh any short-term incremental benefits to device unit sales.

Nokia's recent warning over mobile-device market share has analysts on edge, especially considering the recent deterioration in global equity markets.

"Given the weak climate in the last two weeks of the quarter, we suspect units may come in soft, but we remain confident in margins," McKechnie writes in his latest research report. Nokia has provided no commentary on margin outlook for the September quarter, but most analyst expect margins to remain around 20%.

As with all handset makers, analysts will focus on other metrics to gauge Nokia's quarterly performance. Among the most important are total handset shipments and the average selling price of its devices. On average, Wall Street is expecting that Nokia shipped 120 million handsets in the third quarter, which would be a meager 7.4% rise from the same quarter a year ago.

By comparison, Nokia saw handset shipments hit 122 million in the second quarter, up a better-than-expected 21% from a year earlier. The increase in shipments raised Nokia's market share to 40% from 38% a year ago and 39% sequentially.

"The third-quarter volume expectations have probably drifted below 120 million by now and investors are bracing for an outright industry volume decline in 2009," says Tero Kuittinen, senior executive director of global equity research with Global Crown Capital. "It's a heck of an environment to figure out the level of expectations."

The average selling price (ASP) of its mobile devices was 74 euros in the second quarter and is expected to hold near that level for the third quarter, which would be a decline of roughly 10% from a year ago. Still, Kuittinen says that ASP performance would be welcome at 74 euros, even if it means losing ground in some emerging markets.

"Nokia has refused to engage in outright dumping, ceding some ground to Samsung in China and Europe," he says. "Middle East/Africa demand looks still OK. India and Brazil remained on track. Nokia's ace in the hole is the newly revamped 50-100 euro portfolio, which now looks remarkably fresh against fading Motorola in emerging markets."

Nokia has also faced considerable pressure in the high-end phone market, losing out to new iterations of Apple's ( AAPL) iPhone and Research In Motion's ( RIMM) Blackberry. Unlike both of those companies, Nokia had no new product introductions during the second quarter.

Lately, though, Nokia has unveiled at least a few of its new offerings, including its new Nokia 5800 touch-screen device, code-named "the Tube." The new handset features a 3.2-inch touch screen, 8 gigabytes of memory, GPS and an accelerometer, similar to the iPhone. AmTech's McKechnie says he is looking for "positive commentary" on both the Tube and the new E71 e-mail phone.

One positive in the company's third-quarter preannouncement was Nokia's reaffirmation that it expects industry mobile-device volume this year to grow approximately 10% from the roughly 1.14 billion units it estimated for 2007.

The big threat to Nokia now is that signs of a very steep decline in consumer demand have surfaced over past three weeks. However, the company still has a good chance of escaping the quarter in relatively good shape.

"Overall, chances of a positive surprise are decent - but only because we just had one of the biggest weeks of equity butchery in the history of mankind," Kuittinen says.