Nokia, the world's largest cellphone maker by volume, reported better-than-expected quarterly core earnings, although they still fell 73 percent as its new Windows Phones failed to compensate for diving sales of its old smartphones.

Nokia's fourth-quarter core earnings per share of 0.06 euros compared to market expectation for 0.04 euros.

Shares in Nokia rose 7 percent on the news to 4.34 euros.

Fourth-quarter smartphone sales fell 31 percent from a year earlier to 19.6 million handsets, roughly in line with forecasts.

Nokia unveiled a high-profile strategy shift to Microsoft software on its smartphones last February in a bid to rival to Apple and Google's Android.

It said it has sold well over 1 million Windows Phones by end-January.

More than 1 million shipped Windows Phones to date is more than some were expecting, it's not going to worry Apple or Google, said analyst Nick Dillon from research firm Ovum.

Nokia proposed a 2011 divided of 0.20 euros per share, slightly more than expected.

(Reporting by Helsinki newsroom; Editing by Jodie Ginsberg)