Analysts had predicted a poor set of financials from Nokia Siemens Networks ahead of today's second-quarter earnings announcement from Nokia Corp. (NYSE: NOK - message board), and they were right. (See Bad Start for Nokia Siemens.)

    At first glance, Nokia's earnings report looks healthy.

    The mobile hand set giant reported a significant leap in revenues and a massive 148 percent leap in profits to €2.8 billion ($3.8 billion), sending the Finnish firm's share price soaring more than 7 percent on the Helsinki stock exchange to €22.12. (See Nokia Reports 2Q07.)

    The giant leap in net income includes a near €1.9 billion ($2.6 billion) one-time gain from the formation of the new infrastructure joint venture Nokia Siemens Networks , which began operations on April 1.

    Behind those headline numbers, though, Nokia Siemens Networks (NSN) has experienced a torrid first few months, forcing Nokia, which reports the joint venture's financial performance, to speed up its cost-cutting program and expand it in an effort to reach profitability.

    NSN reported revenues of €3.44 billion ($4.7 billion), and an operating loss of €1.27 billion ($1.74 billion), equal to an operating margin of negative 36.8 percent. That operating loss includes €905 million ($1.24 billion) in restructuring costs and one-time charges, leaving the joint venture with an operating loss after those charges of €361 million ($493 million), or negative 10.5 percent of sales.

    Of that €361 million, €297 million ($406 million) was accounted for by "asset amortization" and "inventory value adjustment" costs.

    Nokia said sales were lower than expected due to "competition related issues," while "price competition in the infrastructure market was unusually aggressive." That's something to which the Alcatel-Lucent (NYSE: ALU - message board) team can relate. (See AlcaLu's Russo: We're Under Attack!.)