HELSINKI, July 21, 2011 (AFP) - The world's top mobile phone maker Nokia reported a sharp quarterly switch into loss on Thursday, only the second quarterly loss since the company become world leader in 1998.

Nokia's share price rose by 3.1 percent to 4.21 euros on a Helsinki Stock Exchange down 0.7 percent.

"In this case, you have to look at the non-IFRS (accounting standard) result, which was actually a bit better than expected," FIM Bank analyst Michael Schroeder told AFP.

He said that in particular, a deal reached with Apple to pay Nokia royalties on technology used in iPhones had saved Nokia from an even worse result.

The Finnish company posted a net loss of 368 million euros ($520.5 million) compared to the 227-million-euro net profit it posted in the second quarter of 2010. The outcome was far worse than expectations of analysts polled by Dow Jones Newswires who had estimated a loss of 104 million euros.

Sales slipped 7.3 percent to 9.3 billion euros from 10.0 billion euros for the same period last year.

"The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 (second quarter) 2011," chief executive Stephen Elop said in a statement.

But he said that massive re-structuring had already begun to have a "positive impact on the underlying health" of the company.

The upheaval follows a radical shake-up launched by Elop in February, when he announced that Nokia, facing stark competition in the vital smartphone market from iPhone, Blackberry and Google, would abandon its own mobile operating system and start using one designed by Microsoft instead.

This strategy was coupled with plans to cut 4,000 jobs and outsource another 3,000 to Accenture, as part of a massive effort to slash operating expenses by one billion euros in 2013 compared with 2010 -- a target Nokia said Thursday it planned to exceed.

But Nordea Group analyst Sami Sarkamies told AFP that Nokia had not yet hit bottom.

"The third quarter is going to be even worse compared to the second quarter," he said, adding that cost-cutting measures were not expected to take effect until the end of the year.

Nokia declined to issue any guidance on third quarter-sales expectations, and offered what Sarkamies considred an "unusually wide target range" for its non-IFRS operating margin, which in a nutshell would be around or slightly above break-even.

The company hoped that the ramp-up of dual-SIM mobiles, an aggressive marketing campaign as well as a generally better global economy would help third quarter sales.

"We are making better-than expected progress toward our strategic goals," said Elop.

Sarkamies said that Nokia is still struggling with its pricing policy, by trying to sell high-end Symbian smartphones at a time when consumers largely feel that Symbian is a dead-end technology.

"After February, there were fears that Nokia would have to sell its Symbian phones really cheaply in order to keep ahold of what market share they could until the Windows phones were ready, and it looks like this is exactly what's happening," he said.

Even the sleek and seemingly competitive new N9 smartphone will most likely only have a "marginal effect", said Sarkamies, because many consumers "won't dare get on board" even if they like the product.

As a result, Nokia continues to haemorrhage market share to its competitors, and while the company did not give on Thursday any estimates for how low its share had sunk, Sarkamies says that analysts' consensus put it at about 23 percent, down from 33 percent for the second quarter of 2010.

Nokia's gamble on dumping the struggling Symbian platform is an effort to stop the downhill trend of its market share, which has plummeted from the 40 percent the company held in the first half of 2008.

This year Nokia shares have dropped sharply, recently hitting a low point of just 3.80 euros per share, a level not seen since 1997, and two-thirds less than the price in April 2010.

Although still the world's top mobile phone maker, Nokia's market value has plummeted to 14.2 billion euros from nearly 100 billion euros in November 2007.