Nokia said its profit for the fourth quarter of 2008 fell to $746.7 million, a huge drop from $2.7 billion in the third quarter. Revenue was $16.4 billion, compared with $20.37 billion in the third quarter.

For the full year, Nokia’s profit was $5.19 billion, on revenue of $65.7 billion. In units sold, Nokia reported 113.1 million phones, down 4% from the prior quarter and 15% from last year.

“In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry. We are taking action to reduce overall costs and to preserve our strong capital structure,” CEO Olli-Pekka Kallasvuo said. “We believe Nokia has a tremendous opportunity to capture value as the Internet services market evolves and grows.”

Nokia said it expects industry-wide phone sales to be 10% lower in 2009 than in 2008, not 5% as previously predicted. As of Dec. 31, 2008, Nokia had 128,445 employees, up slightly from 2007.

News in the quarter included the end of sales in Japan, renewal of a patent licensing deal with BlackBerry maker Research In Motion (RIM) and the launch of several new phones, including touchscreen devices to compete against the Apple iPhone.

During the full year, Nokia sold its identity and security appliance businesses, while acquiring companies Navteq, OZ Communications, Plazes AG, Symbian Limited and Trolltech ASA. Nokia-Siemens Networks acquired Apertio and Atrica.

Gartner research director Carolina Milanesi said Nokia is in good condition to handle the slow economy. “Moreover, the services offering it is building with OVI makes it stand out from its competitors. It will be able to offer value added to its hardware in a way that some of its competitors will not,” she said. “Its key focus for the year should be to improve usability of its devices so that consumers can truly take advantage of such services.”