Wireless stocks fielded a whole new round of mash notes Monday, setting the stage for Nokia (NOK) - Get Report to have its two cents.

The Helsinki-based tech shop is due to provide its midquarter financial update early Tuesday morning. Though the company will speak its piece on any number of issues, the key point for investors in the surging wireless sector will be demand -- and whether Nokia thinks it's sustainable.

Nokia's remarks are always closely watched because of the company's enormous reach, but Tuesday's comments will take on the additional weight of a sector that has been building momentum at a wicked pace.

Take Monday's news from chipmaker

RF Micro

(RFMD)

. Its shares surged 12% after the company boosted second-quarter financial guidance to call for a slight profit. The wireless chipmaker cited strengthening demand and an improving product mix for the uptick. The development only added to many investors' sense that the sector is in position for a long run -- a sense that some analysts hope Nokia will confirm.

"There have been good anecdotal comments coming out of the industry lately," says Friedman Billings Ramsey analyst Chris Versace, who has a buy rating on Nokia. "We saw with RFMD today that they are seeing strong demand across all their customers. That's very positive."

Nokia joined in the fun Monday, adding 41 cents to $16.95.

Around the Margins

Still, some investors are a bit leery of mighty Nokia. Many of the chip suppliers are coming off a weak quarter plagued by inventory gluts and the SARS outbreak, so it's hard to tell if the industry's apparent improvement indeed indicates increased demand.

Another point of interest will be Nokia's handset volume growth. The company has promised better than 10% year-over-year growth in the third quarter. Investors will be keen to hear if handset prices are falling and if Nokia can maintain its 23% profit margin.

Nokia has more than a dozen new phones coming to the market in the coming months, and it is also trying to break into the code division multiple access, or CDMA, market. Those efforts may be reflected in the company's costs and could potentially dry up the lush margins.

But the bulls are encouraged by Nokia's track record of success in rolling out new model phones using the same platform, and its legendary talent for squeezing suppliers to keep expenses to a minimum.

"If the

average selling price per phone is flat, that will be fine," says one Wall Street hedge fund manager who is long the stock. "But if the ASPs are worse, people will get scared."

Analysts expect Nokia to post a third-quarter profit of 19 cents a share on $7.8 billion in sales, according to a Multex tally. That compares with year-ago earnings of 20 cents a share on revenue of $7.9 billion. For the year, the handset king is expected to show a 2% sales decline from 2002.

Nodding Off?
Nokia for 2003

Investors will also be curious to know whether Nokia will have a handset approved by

Verizon

(VZ) - Get Report

, the nation's largest cell-phone service. With the preholiday buying season just ahead, many industry observers expect to see at least one of the Nokia models pass muster.

Although Nokia makes phones that represent five of the top 10 models sold by Verizon's European partner

Vodafone

(VOD) - Get Report

, it has yet to offer a CDMA handset from the current batch to meet Verizon's qualifications.