Struggling smartphone maker Nokia delivered preliminary first-quarter earnings on Thursday, reporting sharply improved sales of its Lumia lineup of Windows Phone handsets. But other bad news dampened any excitement about Lumia sales as the firm continues to fall short of its own promises.

“At the highest level, we are pleased that Nokia achieved underlying operating profitability for the third quarter in a row,” Nokia CEO Stephen Elop noted. “While operating in a highly competitive environment, Nokia is executing our strategy with urgency and managing our costs very well.”

Nokia sold 5.6 million Lumia handsets in the first quarter, up 27 percent from the 4.4 million in the previous quarter and in line with expectations. “People are responding positively to the Lumia portfolio,” Mr. Elop said. The firm has now sold 20 million Lumia handsets overall since late 2011.

But that’s where the good news ends.

Related: "Nokia Sold 4.4 Million Lumias in Q4, but Only 700,000 in North America"

Nokia’s other phones are not doing well: Overall phone unit sales dropped an alarming 30 percent, year over year, to 55.8 million units in the quarter. And Nokia continues to struggle in North America, where sales of Lumia handsets actually fell 33 percent to 400,000 units. A new “hero” phone is coming to the US market “later this quarter,” according to Mr. Elop.

Although Nokia’s net cash position has actually stabilized to about €4.5 billion, that change has come at great cost, and after a period of steady negative cash flow. The firm sold its corporate headquarters and now leases it back from the new owners. And Nokia canceled its dividend for shareholders.

And Nokia, which once pledged that its turnaround would take two years (a time that has now elapsed), says that things are only going to get worse in the coming quarter, with margins falling 2 percent compared with the current quarter (in which margins were up an anemic 0.1 percent.) Some expect the second quarter to be a make-or-break time for CEO Stephen Elop.

Certainly, the competition hasn’t stood still. The two leading smartphone makers, Samsung and Apple, have sold a predicted 62 million and 37 million handsets in the first quarter, respectively.

Related: "Microsoft Claim of Limited Windows Phone Success Comes Under Attack"