Nokia reported a 17 percent drop in full-year net sales in 2013 to 12.7 billion euros ($17.3 billion) on Thursday.
However, net sales came in at 3.5 billion euros in the fourth quarter, up 18 percent on the same quarter a year before.
The earnings are the last the Finnish phone maker will report before handing over its handset unit to software giant Microsoft. In November, Nokia confirmed the sale, after more than 99 percent of shareholders voted to approve the 5.4 billion euros ($7.2 billion) deal.
Sales at Nokia's network equipment unit, NSN — the main business that will remain after it relinquishes its handset division — were down 22 percent year-on-year.
It said it expected 2014 operating margins for NSN to be towards the higher end of the targeted 5 to 10 percent range with a margin of approximately 5 percent in the first quarter. That compares with an operating margin of 9.7 percent in 2013, up from 5.7 percent in 2012.
Shares of Nokia were trading down 2.74 percent after the report was released Thursday morning.
Nokia Chairman Risto Siilasmaa said the fourth quarter was a watershed moment for the company and that the closing of the Microsoft transaction would "significantly improve Nokia's earnings profile".
"Today, we are more focused, more innovative and more disciplined. With these fundamental elements in place, we believe NSN (Nokia Solutions and Networks) is well-positioned to deliver solid business performance for the year ahead," he said in a report on Nokia's earnings.
Nokia has experienced a turbulent year, with increasing market competition in the crowded smartphone industry. Apple, Samsung and HTC launched new handsets to compete with Nokia's flagship Lumia smartphone.
Alex Wilhelm, writer at online technology magazine Tech Crunch, said the sales figures for Nokia's Lumia Windows Phone will provide "a report card of sorts for Microsoft".
"Given that Nokia makes and sells the vast majority of Windows Phone devices, its sales are proxy for the larger market for the phones. So if Nokia had a good quarter selling Lumias, Microsoft had a good quarter selling Windows Phones."
Dow component Microsoft will reports its own earnings after Wall Street closes on Thursday.