By Tarmo Virki, European technology correspondent
HELSINKI (Reuters) - Nokia reported on Thursday a sharp drop in second-quarter profits, increasing the pressure on embattled Chief Executive Olli-Pekka Kallasvuo.
The firm, which makes every third mobile phone sold in the world, has been rocked by two profit warnings and a management shakeup in the second quarter alone as it struggles to keep pace with smartphone rivals Apple and Google.
Nokia is looking for replacement for Kallasvuo, who has spent more than half of this life at the company, sources told Reuters earlier ths week. Kallasvuo may be ousted already this month, the Wall Street Journal reported.
A Nokia spokeswoman declined to comment after the result on whether Kallasvuo still enjoys board support.
Kallasvuo, a 57-year old former company lawyer and chief financial officer who married a veteran Nokia attorney, told CNBC television that talk of his exit was hurting the company and had to stop. [nWLA9017]
"There has been a lot of speculation on my position, on myself, during the last couple of weeks and that is not good for Nokia and must be brought to an end one way or another," a frustrated Kallasvuo said.
Shares in Nokia were up 4.5 percent at 7.305 euros by 1138 GMT, with the Stoxx 600 European technology index up 1.31 percent.
"The topic of management change is more important for the share price than results at the moment," said WestLB analyst Thomas Langer.
HIGH-END CHALLENGE CONTINUES
Nokia's underlying second-quarter earnings per share fell 27 percent from a year ago to 0.11 euros, in line with market expectations.
Nokia had warned on June 16 that phone sales and profits in the quarter would be weaker than earlier forecast, with the Finnish firm forced to slash prices to battle against Apple's iPhone and smartphones using Google's software.
Kallasvuo, called just OPK in the company, said Nokia believes the Nokia N8, its first phone using new Symbian software, will have a user experience superior to that of any smartphone Nokia has created.
"OPK is saying that N8 is going to deliver the best user experience that you've ever seen on Symbian. Well, that's great, but what about the best experience versus your competitors? That's what matters and we just don't think that it's going to be enough," said Gartner analyst Carolina Milanesi.
Nokia said the underlying operating profit margin at its key cellphone unit dropped to 9.5 percent in the second quarter and warned it could fall further in the third quarter.
"What is slightly concerning is the Q3 margin guidance ... Now it all becomes about the fourth quarter. The competition is getting stronger," said Kulbinder Garcha at Credit Suisse.
The N8, expected to reach the market by the end of this quarter, will face stiff rivalry in the holiday-sales-fueled fourth quarter from the new iPhone and Google-phones from Samsung and Sony Ericsson.
Nokia shares have dropped around 20 percent so far this year, strongly underperforming the technology index, which is up 7 percent.
(Reporting by Tarmo Virki and Terhi Kinnunen, Georgina Prodhan and Ian Smith in London and Stockholm newsroom; Editing by Michael Shields)
