HELSINKI, FINLAND: 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.

Its net profit fell by 40 per cent to 227 million euros (290 million dollars), compared to 380 million euros for the same quarter a year earlier.

The world’s leader in handset market that its revenue grew a mere 1 percent in the period to 10 billion euros from 9.9 billion euros a year earlier.

Nokia is looking for replacement for Kallasvuo, who has spent more than half of this life at the company, sources told Reuters earlier this 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 told CNBC television the speculation of his exit was hurting the company and had to stop.

"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," Kallasvuo said.

Shares in Nokia were up 0.9 percent at 7.05 euros by 1032 GMT (6:32 a.m. EDT), with the Stoxx 600 European technology index up 0.5 percent.

Nokia's underlying second-quarter earnings per share fell 27 percent from a year ago to 0.11 euros, in line with market consensus, as the firm struggles to keep pace with smartphone rivals Apple and Google.

Nokia warned on June 16 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.

Nokia repeated its phone unit outlook for 2010, issued in June.

"No news is good news," said Pohjola analyst Hannu Rauhala.

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.

"Nokia's ongoing lack of competitiveness in the high-tier continues to squeeze profit margins," said CCS Insight analyst Geoff Blaber.

Nokia shares have dropped around 20 percent so far this year, strongly underperforming the technology index, which is up 7 percent.