Nokia, the world's top cellphone maker by volume, reported on Thursday a third profit fall in a row as it continues to struggle in smartphone business, and warned of weak start of the year.

Nokia's underlying earnings per share fell to 0.22 euros, roughly in line with analysts' average forecast of 0.19 euros in a Reuters poll, when excluding 2.5 euro cent boost from lower than usual taxes.

Nokia said first quarter operating profit margin at its phone unit would drop to 7-10 percent in January-March, missing analysts consensus of 10.2 percent.

The phone market has recovered from a slump in 2009 when the global economic slowdown dampened demand for the latest gadgets. Demand this year has surged for new smartphones like Apple's iPhone 4 and Samsung's Galaxy S.

The world's top handset maker by volume and sales has lacked a hit smartphone since the N95, which was launched in 2006, predating Apple's entry into the cellphone market.

Chinese manufacturers are also eating into Nokia's dominance in low-price emerging markets.

Stephen Elop, who took over as Nokia's chief executive last year, warned the company faces some significant challenges in its competitiveness and execution.

Nokia said Elop would unveil his plan to revamp the strategy of the struggling phone maker on February 11.

Shares in Nokia were 4.5 percent lower by 1109 GMT.

(Reporting by Tarmo Virki)

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