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Nokia's earnings disappoint as it struggles to combat Apple's iPhone

Finnish cellphone maker Nokia conceded this week that it faces "tough" competition in the high-end smartphone realm, as its disappointing quarterly earnings were a stark contrast from yet another blockbuster quarter for Apple and the iPhone.

Nokia this week revealed that earned 349 million euros, or $465 million, in the first quarter of 2010. Though that was an increase from the 122 million euros earned a year prior, it was also short of estimates expected by analysts due to lower-than-expected mobile device sales.

According to the Financial Times, Nokia conceded that its best handsets are struggling to compete in the high-end market. The company said the average selling price of its phones dropped to 62 euros, down from 66 euros. Smartphones prices saw a large drop, down from 190 euros a year ago to 155 euros in the first quarter of calendar 2010.

"We continue to face tough competition with respect to the high end of our mobile device portfolio," Nokia Chief Exeuctive Olli-Pekka Kallasvuo said

Nokia is still the overall worldwide market leader in both smartphones and total cell phones, but it has lost significant ground since Apple entered the market in 2007. Those losses are widely believed to have inspired Nokia to sue Apple over the alleged use of 10 patented wireless standards in the iPhone.

Apple responded to Nokia with its own lawsuit, accusing the Finnish company of infringing on 13 iPhone-related patents. The battle of the two smartphone giants is expected to drag out for years, with both companies looking for a court hearing to be held in 2012. The U.S. International Trade Commission —the group with which the complaints were filed —has agreed to look into both Nokia's and Apple's complaints against the other.

Nokia's earnings reveal this week is in sharp contrast to Apple's own record-setting second fiscal quarter of 2010. On Tuesday, Apple announced its highest-ever quarterly iPhone sales at 8.75 million, topping the previous holiday quarter, based on strong international growth of the handset. The strong iPhone sales propelled Apple to a nearly 90 percent increase in profits, exceeding analyst expectations and pushing the company's stock price to new heights.