Updated from 10:24 a.m. EDT

Nokia ( NOK) saw signs of stability in the mobile phone market but cut its networking equipment sales target amid a continued slump in telco spending.

The Finnish phone shop met adjusted profit expectations for the first quarter and says it has seen a significant decline in the massive surplus of mobile phones in most markets. Investors took this as a sign that the worst may be over for Nokia and sent the shares up 10% early Thursday.

On a conference call with analysts, Nokia chief Olli-Pekka Kallasvuo said the company had managed through "an unprecedented" inventory glut. He added that mobile phone demand was "no longer falling in an uncontrolled manner" and that he was "encouraged by the signs of stabilization."

The picture wasn't quite as cheery on the wireless infrastructure side of the business, however.

Sales for the gearmaking joint-venture between Nokia and Siemens ( SI) are expected to fall 10% below 2008 levels, Nokia said. That was below the company's prior target. Nokia blamed belt tightening by phone companies, an increase in vendor financing used by companies like Alcatel Lucent ( ALU) and Cisco ( CSCO) that loan money to customers that buy gear, and a decision by Chinese buyers to buy more from Chinese suppliers.

On the cost front, Nokia says it fired 3,000 people in the first quarter and took a separation charge of $122.5 million. The company has also restricted employee travel, closed facilities and exited the phone business in Japan to help further reduce expenses.

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