Nokia Corporation (NYSE: NOK) shares rose over eight percent today after the company announced spectacular earnings that beat Wall Street estimates. The mobile device maker reported fourth quarter revenues of 15.7 billion Euros versus a consensus of 14.9 billion on sales of 133.5 million mobile devices, up 27% year-over-year and 20% from last quarter. The company also said that it expects a normal seasonal decline in the first quarter, but plans to maintain market share and expand over the next year.

Many investors were shocked by these strong earnings following the poor results posted yesterday by Motorola, Inc. (NYSE: MOT). Nokia showed the opposite story with excellent growth driven by market share gains in Latin America, Europe and Asia Pacific. The company’s mobile phone margins were also at an all-time high at a time when many believe Motorola may cut their prices in order to compete. Earnings estimates for Nokia are expected to be lifted by 5 to 10 percent following this news.

This news is devastating to Motorola shareholders hit with poor earnings just days ago. It is now clear that Motorola’s decline was not the result of an industry slowdown but rather of another decline in market share that could hurt the company. More, the planned price-cutting measures would clearly hurt Motorola more than Nokia given the latter’s strong and improving margins on its mobile phones. Motorola also faces an uphill battle in foreign markets that it has relied on in the past to drive growth.

Nokia does have a little to worry about, however, with the threat of price-cutting. The cellular industry has relied solely on added features, more minutes and other benefits to attract customers rather than pure price-cutting. If Motorola decides that it is the only hope to recover, Nokia and other may have to follow suit. This could spark a price war that could kill margins and hurt all companies involved. Alternatively, if Nokia decides to stay out, they could lose substantial market share.

In the end, this is great news for Nokia and bad news for Motorola. It will be interesting to see how this story plays out over the next few months, but Motorola will need a substantial number of changes in order to turn themselves around in the face of such strong competition.

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