Investors are elated over

Nokia's

(NOK) - Get Report

announcement Thursday that it'll meet its first-quarter earnings targets. However, few are paying much heed to the cell phone leader's pronouncement that it won't meet its sales targets and that it has drastically reduced its forecast for industrywide handset sales in 2001.

Nokia's performance this quarter has been closely watched, with some predicting the company would issue a profit

shortfall while others were thinking it would

beat earnings expectations.

Shares of Nokia recently were up $3.11, or 14%, to $24.91. And granted, it's good news that Nokia is the only one of the three largest mobile-phone makers that will actually meet its first-quarter earnings-per-share target, in this case 0.19 euro. (The

First Call/Thomson Financial

consensus estimate is 17 cents a share.) The company also noted that its market share has increased (over 32% at the end of 2000), profit margins have climbed and inventory levels have dropped.

"This is the only good company making really good profits in the business worldwide," says Herve van Caloen, a portfolio manager with

Simms Capital Management

, which owns Nokia.

But Nokia will hit its earnings target largely through cost cutting, something it can't rely on forever. And neither the fact that its sales will fall short of expectations nor that the company believes the industry won't sell as many phones this year as originally projected bode well for Nokia and its competitors.

Nokia, based in Finland, forecast first-quarter sales growth of about 20% over the year-earlier period, compared to an earlier estimate of 25% to 30%, blaming "the stronger than anticipated impact of demanding market conditions," especially weakness in the U.S. economy.

It also projects 2001 industry sales of 450 million to 500 million units, down from an earlier projection of between 500 million and 550 million units, which in itself was down from an even earlier projection of 550 million. The low end of Nokia's new range is now among the industry's most bearish.

Considering the steady decline in the number of cell phones consumers are expected to buy this year, there are questions about how sustainable Nokia's fixes are and whether it too will suffer an eventual profit shortfall.

"Their sales growth targets

from earlier this year are not going to hold," says Jeffrey Schlesinger, an analyst with

UBS Warburg

. "Our expectation is for modest growth in the second quarter, less than 10% sequentially." (He rates Nokia a buy, and his firm hasn't done underwriting for the company.) In January, not only did Nokia project first-quarter growth of 25% to 30%, but also it forecast first half net sales growth at the higher end of 25% to 35%. The company didn't say anything Thursday about first half numbers.

Continued sales shortfalls may well damage earnings at some point, a la

Motorola

(MOT)

and

Ericsson

(ERICY)

, which both warned earlier this quarter. After all, cost cuts can offset slowing sales only for so long. And it won't be able to get better terms from suppliers and raise prices -- as some analysts suggest it's doing -- forever.