Jefferies & Co. said Nokia Corp.'s (NYSE: NOK) results threw out no worse news than it had expected but it maintained underperform thesis nonetheless.

Nokia's Q2 outlook this morning was poor again as was guidance for fiscal 2011. A multi-year research and development (R&D) savings program was announced and management made remarks on the expected strength of future Windows Phone 7 (WP7)handsets but we still believe it's too early to talk on turnaround. We believe the move to WP7 handsets will see weak sales again in 2012 as Symbian enters end-of-life, said Lee Simpson, an analyst at Jefferies.

Simpson said the overall results was marginally disappointing for investors who perhaps wanted a Nokia SP rally today after good tapes from Qualcomm Inc. (QCOM), Intel Corp. (INTC) and Apple Inc. (AAPL).

Nokia reported earnings of 344 million euros for the first quarter, down from 349 million euros last year. Earnings per share for the quarter stood flat at 0.09 euros. Non-IFRS profit declined to 489 million euros or 0.13 euros a share from 516 million euros or 0.14 euros a share last year.

Nokia's fist quarter sales rose to 10.4 billion euros from 9.52 billion euros. Sales came in above consensus estimates of 10.1 billion euros. The upside came from the Devices & Services segment which posted 7.1 billion euros driven by solid handset unit sales (108.5 million versus 106 million consensus estimate and Jefferies estimate of 104 million; average selling price 65 euros versus Jefferies estimate of 67 euros).

Looking forward into the second quarter, Nokia expects Devices & Services net sales to be between 6.1 billion euros and 6.6 billion euros, and operating margin of 6 percent to 9 percent. A somewhat disappointing performance as consensus called for 6.9 billion and 7.8 percent for each.

Further, Nokia has pulled down its expectation for handset margins in fiscal 2011 to 6 percent to 9 percent (Jefferies estimate 9.7 percent) suggesting third quarter weighs heavily (flat sales on second quarter guided). Nokia sees overall sales flat sequentially in third quarter with Nokia Siemens Networks expected to net in 3.2 billion euros to 3.5 billion euros in second quarter of 2011.

Simpson said Nokia's first quarter results were solid but second quarter guidance was disappointment (Devices & Services sales 6.1 billion euros to 6.6 billion euros and adjusted operating margin of 6 percent to 9 percent) and even a suggestion that third quarter too (supply chain issues likely the culprit) will be bad is of little comfort to investors. A seasonal rebound in fourth quarter is perhaps the best Simpson can hope for as of now.

Good news came in the form of a 1 billion euros R&D saving program (by 2013) but will have little or no impact this year. All in, results threw out no worse news than we’d expected, said Simpson.

Separately, Nokia and Microsoft Corp. (MSFT) announced the signing of a definitive agreement on a partnership that will result in a new global mobile ecosystem, utilizing the very complementary assets of both companies. Completed ahead of schedule, the definitive agreement is consistent with the joint announcement made on February 11.

Nokia and Microsoft also announced significant progress on the development of the first Nokia products incorporating Windows Phone. With hundreds of personnel already engaged on joint engineering efforts, the companies are collaborating on a portfolio of new Nokia devices. Nokia also started porting key applications and services to operate on Windows Phone and joint outreach has begun to third party application developers.

Together, Nokia and Microsoft will innovate with greater speed, and provide enhanced opportunities for consumers and our partners to share in the success of our ecosystem, said Steve Ballmer, Chief Executive Officer of Microsoft.

With the definitive agreement now signed, both companies will begin engaging with operators, developers and other partners to help the industry understand the benefits of joining the new ecosystem. At the same time, work will continue on developing Nokia products on the Windows Phone platform, with the aim of securing volume device shipments in 2012, said Nokia in a statement.

Nokia stock rose 3.61 percent to $8.90 in the pre-market trading on the NYSE.