ESPOO, FINLAND--(Marketwire - Oct 18, 2012) -
Nokia Corporation
Interim report
October 18, 2012 at 13.00 (CET+1)
This is a summary of the third quarter 2012 interim report published today.
The
complete third quarter 2012 interim report with tables is available at
http://www.results.nokia.com/results/Nokia_results2012Q3e.pdf. Investors
should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
FINANCIAL AND OPERATING HIGHLIGHTS
Nokia Group non-IFRS EPS in Q3 2012 of EUR -0.07, reported EPS EUR -0.26
- Nokia Group achieves operating profitability on an underlying basis, with
Q3
non-IFRS operating margin of 1.1%.
- Nokia Siemens Networks non-IFRS operating margin significantly improved
quarter-on-quarter and year-on-year to 9.2% in Q3; company executing well
on
restructuring and strategy that focuses on key markets and product
segments.
- Devices & Services Q3 non-IFRS operating margin improved
quarter-on-quarter to
negative 7.4%.
- Nokia Group ended Q3 with gross cash of EUR 8.8 billion and net cash of
EUR
3.6 billion.
- Nokia Group Q3 net cash from operating activities of negative EUR 429
million,
including cash outflows related to restructuring activities of
approximately EUR
390 million.
Nokia Group net sales in Q3 2012 were EUR 7.2 billion, down from EUR 7.5
billion
in Q2 2012
- Nokia Siemens Networks net sales increased quarter-on-quarter and
year-on-year
to EUR 3.5 billion.
- Lumia Q3 volumes decreased quarter-on-quarter to 2.9 million units, as we
shared the exciting innovation ahead with our new line of Lumia products.
- Mobile Phones Q3 volumes increased quarter-on-quarter to 77 million
units;
strong sales start for new Asha full touch smartphones, with volumes of 6.5
million units.
Commenting on the Q3 results, Stephen Elop, Nokia CEO, said:
"As we expected, Q3 was a difficult quarter in our Devices & Services
business;
however, we are pleased that we shifted Nokia Group to operating
profitability
on a non-IFRS basis.
In Q3, we continued to manage through a tough transitional quarter for our
smart
devices business as we shared the exciting innovation ahead with our new
line of
Lumia products.
In our mobile phones business, the positive consumer response to our new
Asha
full touch smartphones translated into strong sales. And in Q3, our mobile
phones business delivered a solid quarter with sequential sales growth and
improved contribution margin.
In Location & Commerce, we made progress establishing our platform offering
with
customers like Amazon. This is in line with our plan to expand our location
offering to more customers.
And, Nokia Siemens Networks had a remarkable quarter in which we achieved
record
profitability on a non-IFRS basis and the Nokia Siemens Networks cash
balance
increased for the fourth quarter in a row.
While we continue to focus on transitioning Nokia, we are determined to
carefully manage our financial resources, improve our competitiveness,
return
our Devices & Services business to positive operating cash flow as quickly
as
possible, and ultimately provide more value to our shareholders."
SUMMARY FINANCIAL INFORMATION
+-----------------------------+-------------------------------------+
| | Reported and Non-IFRS |
| | third quarter 2012 results1,2,3 |
| +-------+-------+------+-------+------+
| |Q3/2012|Q3/2011| YoY|Q2/2012| QoQ|
|EUR million | | |Change| |Change|
+-----------------------------+-------+-------+------+-------+------+
|Nokia | | | | | |
| | | | | | |
|Net sales | 7 239| 8 980| -19%| 7 542| -4%|
| | | | | | |
|Operating profit | -576| -71| | -826| |
| | | | | | |
|Operating profit | | | | | |
|(non-IFRS) | 78| 252| -69%| -327| |
| | | | | | |
|Operating margin % | -8.0%| -0.8%| | -11.0%| |
| | | | | | |
|Operating margin % (non-IFRS)| 1.1%| 2.8%| | -4.3%| |
| | | | | | |
|EPS, EUR diluted | -0.26| -0.02| | -0.38| |
| | | | | | |
|EPS, EUR diluted | | | | | |
|(non-IFRS)4 | -0.07| 0.03| | -0.08| |
| | | | | | |
|Net cash from | | | | | |
|operating | | | | | |
|activities | -429| 852| | 102| |
| | | | | | |
|Net cash and | | | | | |
|other liquid | | | | | |
|assets5 | 3 564| 5 067| -30%| 4 197| -15%|
+-----------------------------+-------+-------+------+-------+------+
|Devices & | | | | | |
|Services6 | | | | | |
| | | | | | |
|Net sales | 3 563| 5 392| -34%| 4 023| -11%|
| | | | | | |
|Smart Devices | | | | | |
|net sales | 976| 2 194| -56%| 1 541| -37%|
| | | | | | |
|Mobile Phones | | | | | |
|net sales | 2 366| 2 915| -19%| 2 291| 3%|
| | | | | | |
|Mobile device | | | | | |
|volume | | | | | |
|(mn units) | 82.9| 106.6| -22%| 83.7| -1%|
| | | | | | |
|Smart Devices | | | | | |
|volume | | | | | |
|(mn units) | 6.3| 16.8| -63%| 10.2| -38%|
| | | | | | |
|Mobile Phones | | | | | |
|volume | | | | | |
|(mn units) | 76.6| 89.8| -15%| 73.5| 4%|
| | | | | | |
|Mobile device | | | | | |
|ASP7 | 43| 51| -16%| 48| -10%|
| | | | | | |
|Smart Devices | | | | | |
|ASP7 | 155| 131| 18%| 151| 3%|
| | | | | | |
|Mobile Phones | | | | | |
|ASP7 | 31| 32| -3%| 31| 0%|
| | | | | | |
|Operating | | | | | |
|profit | -683| 168| | -474| |
| | | | | | |
|Operating | | | | | |
|profit | | | | | |
|(non-IFRS) | -263| 258| | -365| |
| | | | | | |
|Operating | | | | | |
|margin % | -19.2%| 3.1%| | -11.8%| |
| | | | | | |
|Operating margin % | | | | | |
|(non-IFRS) | -7.4%| 4.8%| | -9.1%| |
+-----------------------------+-------+-------+------+-------+------+
|Location & | | | | | |
|Commerce6 | | | | | |
| | | | | | |
|Net sales | 265| 282| -6%| 283| -6%|
| | | | | | |
|Operating profit | -56| -85| | -95| |
| | | | | | |
|Operating profit | | | | | |
|(non-IFRS) | 37| 28| 32%| 41| -10%|
| | | | | | |
|Operating | | | | | |
|margin % | -21.1%| -30.1%| | -33.6%| |
| | | | | | |
|Operating | | | | | |
|margin % | | | | | |
|(non-IFRS) | 14.0%| 9.9%| | 14.5%| |
+-----------------------------+-------+-------+------+-------+------+
|Nokia Siemens | | | | | |
|Networks6 | | | | | |
| | | | | | |
|Net sales | 3 501| 3 413| 3%| 3 343| 5%|
| | | | | | |
|Operating profit | 182| -114| | -227| |
| | | | | | |
|Operating profit | | | | | |
|(non-IFRS) | 323| 6| | 27| |
| | | | | | |
|Operating | | | | | |
|margin % | 5.2%| -3.3%| | -6.8%| |
| | | | | | |
|Operating | | | | | |
|margin % | | | | | |
|(non-IFRS) | 9.2%| 0.2%| | 0.8%| |
+-----------------------------+-------+-------+------+-------+------+
Note 1 relating to January-September 2012 results: Nokia reported net sales
were
EUR 22 135 million and reported EPS (diluted) was EUR -0.89 for the period
from
January 1 to September 30, 2012. Further information about the results for
the
period from January 1 to September 30, 2012 can be found on pages 20, 27,
28 and
31 of the complete Q3 2012 interim report with tables.
Note 2 relating to non-IFRS results: Non-IFRS results exclude special items
for
all periods. In addition, non-IFRS results exclude intangible asset
amortization, other purchase price accounting related items and inventory
value
adjustments arising from (i) the formation of Nokia Siemens Networks and
(ii)
all business acquisitions completed after June 30, 2008. Nokia believes
that
our non-IFRS results provide meaningful supplemental information to both
management and investors regarding Nokia's underlying performance by
excluding
the above-described items that may not be indicative of Nokia's business
operating results. These non-IFRS financial measures should not be viewed
in
isolation or as substitutes to the equivalent IFRS measure(s), but should
be
used in conjunction with the most directly comparable IFRS measure(s) in
the
reported results. See note 3 below for information about the exclusions
from our
non-IFRS results. More information, including a reconciliation of our Q3
2012
and Q3 2011 non-IFRS results to our reported results, can be found in our
complete Q3 2012 interim report with tables on pages 19 and 22-26. A
reconciliation of our Q2 2012 non-IFRS results to our reported results can
be
found in our complete Q2 interim report with tables on pages 21-25
published on
July 19, 2012.
Note 3 relating to non-IFRS exclusions:
Q3 2012 - EUR 654 million (net) consisting of:
- EUR 74 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 3 million of net charges related to country
and
contract exits based on new strategy that focuses on key markets and
product
segments.
- EUR 2 million restructuring charge in Location & Commerce
- EUR 454 million restructuring charge and other associated items in
Devices &
Services
- EUR 67 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks
and the acquisition of Motorola Solutions' networks assets
- EUR 91 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and
Motally in
Devices & Services
- EUR 35 million positive item from a cartel claim settlement in Devices &
Services
Q3 2012 taxes - EUR 157 million non-cash deferred tax expense related to
corporate reorganizations arising from Location & Commerce business
integration.
Q2 2012 - EUR 499 million consisting of:
- EUR 190 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 70 million of charges related to country
and
contract exits based on new strategy that focuses on key markets and
product
segments.
- EUR 10 million restructuring charge in Location & Commerce
- EUR 80 million restructuring charge and associated impairments EUR 28
million
in Devices & Services
- EUR 64 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks
and the acquisition of Motorola Solutions' networks assets
- EUR 126 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and
Motally in
Devices & Services
Q2 2012 taxes - EUR 800 million valuation allowances for Devices & Services
deferred tax assets adversely affecting Nokia taxes
Q3 2011 - EUR 323 million (net) consisting of:
- EUR 26 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 59 million restructuring charge and EUR 54 million associated
impairments
in Devices & Services
- EUR 24 million positive Accenture deal closing adjustment in Devices &
Services
- EUR 94 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks
and the acquisition of Motorola Solutions' networks assets
- EUR 113 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and
Motally in
Devices & Services
Note 4 relating to non-IFRS Nokia EPS:
Nokia taxes were unfavorably impacted by Devices & Services taxes as no tax
benefits are recognized for certain Devices & Services deferred tax items.
If
Nokia's earlier estimated long-term tax rate of 26% had been applied,
non-IFRS
Nokia EPS would have been approximately 4.2 Euro cent higher in Q3 2012.
Going
forward on a non-IFRS basis, until a pattern of tax profitability is
reestablished, Nokia expects to record quarterly tax expense of
approximately
EUR 50 million related to its Devices & Services business and approximately
EUR
50 million related to its Nokia Siemens Networks business. Nokia expects to
continue to record taxes related to its Location & Commerce business at a
26%
rate.
Note 5 relating to Nokia net cash and other liquid assets: Calculated as
total
cash and other liquid assets less interest-bearing liabilities. For
selected
information on Nokia Group interest-bearing liabilities, please see the
table on
page 33 of the complete Q3 2012 interim report with tables
Note 6 relating to operational and reporting structure: We adopted our
current
operational structure during 2011 and have three businesses: Devices &
Services,
Location & Commerce and Nokia Siemens Networks and four operating and
reportable
segments: Smart Devices and Mobile Phones within Devices & Services,
Location &
Commerce and Nokia Siemens Networks. Smart Devices focuses on smartphones
and
Mobile Phones focuses on mass market mobile devices, including Asha full
touch
smartphones. Devices & Services also contains Devices & Services Other
which
includes net sales of our luxury phone business Vertu, spare parts and
related
cost of sales and operating expenses, as well as intellectual property
related
income and common research and development expenses. In October 2012, we
completed the divestment of Vertu to EQT VI, a European private equity
firm.
Location & Commerce focuses on the development of location-based services
and
local commerce. Nokia Siemens Networks is one of the leading global
providers of
telecommunications infrastructure hardware, software and services.
Note 7 relating to average selling prices (ASP): Mobile device ASP
represents
total Devices & Services net sales (Smart Devices net sales, Mobile Phones
net
sales, and Devices & Services Other net sales) divided by total Devices &
Services volumes. Devices & Services Other net sales includes net sales of
Nokia's luxury phone business Vertu and spare parts, as well as
intellectual
property income. Smart Devices ASP represents Smart Devices net sales
divided by
Smart Devices volumes. Mobile Phones ASP represents Mobile Phones net sales
divided by Mobile Phones volumes.
NOKIA OUTLOOK
- Nokia expects its non-IFRS Devices & Services operating margin in the
fourth
quarter 2012 to be approximately negative 6%, plus or minus four percentage
points. This outlook is based on our expectations regarding a number of
factors,
including:
- competitive industry dynamics continuing to negatively affect the Smart
Devices and Mobile Phones business units;
- the fourth quarter being a ramp up quarter for our new Lumia products,
which
are expected to start selling in select markets;
- consumer demand, particularly related to our current Lumia products;
- an expected increase in Devices & Services operating expenses as a result
of
new product launches, partially offset by expected cost reductions under
our
restructuring program; and
- the macroeconomic environment.
- Nokia expects the fourth quarter 2012 to be a challenging quarter in
Smart
Devices, with a lower-than-normal benefit from seasonality in volumes,
primarily
due to product transitions and our ramp up plan for our new devices.
- Nokia continues to target to reduce its Devices & Services non-IFRS
operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the
end
of 2013.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin in the fourth quarter 2012 to be approximately positive
8%,
plus or minus four percentage points. This outlook is based on our
expectations
regarding a number of factors, including:
- competitive industry dynamics;
- seasonal variations in customer demand for Nokia Siemens Networks'
equipment
and services;
- regional and product mix;
- expected continued improvement under Nokia Siemens Networks'
restructuring
program; and
- the macroeconomic environment.
- Nokia Siemens Networks continues to target to reduce its non-IFRS
annualized
operating expenses and production overheads by EUR 1 billion by the end of
2013, compared to the end of 2011.
THIRD QUARTER 2012 FINANCIAL AND OPERATING DISCUSSION
NOKIA GROUP
We adopted our current operational structure during 2011 and have three
businesses: Devices & Services, Location & Commerce and Nokia Siemens
Networks
and four operating and reportable segments: Smart Devices and Mobile Phones
within Devices & Services, Location & Commerce and Nokia Siemens Networks.
Smart Devices focuses on smartphones and Mobile Phones focuses on mass
market
mobile devices, including Asha full touch smartphones. Devices & Services
also
contains Devices & Services Other which includes net sales of our luxury
phone
business Vertu, spare parts and related cost of sales and operating
expenses, as
well as intellectual property related income and common research and
development
expenses. In October 2012, we completed the divestment of Vertu to EQT VI,
a
European private equity firm. Location & Commerce focuses on the
development of
location-based services and local commerce. Nokia Siemens Networks is one
of the
leading global providers of telecommunications infrastructure hardware,
software
and services.
The following discussion includes non-IFRS results information. Non-IFRS
results
exclude special items for all periods. In addition, non-IFRS results
exclude
intangible asset amortization, other purchase price accounting related
items and
inventory value adjustments arising from (i) the formation of Nokia Siemens
Networks and (ii) all business acquisitions completed after June 30, 2008.
The following table sets forth the year-on-year and sequential growth rates
in
our net sales on a reported basis and at constant currency for the periods
indicated.
+----------------------------------------------------------------+
| THIRD QUARTER 2012 NET SALES, |
| REPORTED & CONSTANT CURRENCY1 |
+--------------------------------------+------------+------------+
| | YoY Change | QoQ Change |
+--------------------------------------+------------+------------+
| Group net sales - reported | -19% | -4% |
| | | |
| Group net sales - constant currency1 | -23% | -7% |
| | | |
| Devices & Services | | |
| net sales - reported | -34% | -11% |
| | | |
| Devices & Services | | |
| net sales - constant currency1 | -36% | -13% |
| | | |
| Nokia Siemens Networks | | |
| net sales - reported | 3% | 5% |
| | | |
| Nokia Siemens Networks | | |
| net sales - constant currency1 | -3% | 1% |
+--------------------------------------+------------+------------+
Note 1: Change in net sales at constant currency excludes the impact of
changes
in exchange rates in comparison to the Euro, our reporting currency.
At constant currency Nokia Group's net sales would have decreased 23%
year-on-year and decreased 7% sequentially.
The following table sets forth Nokia Group's reported cash flow for the
periods
indicated and financial position at the end of the periods indicated, as
well as
the year-on-year and sequential growth rates.
+----------------------------------------------------------------------+
| NOKIA GROUP CASH FLOW |
| AND FINANCIAL POSITION |
+----------------------+---------+---------+--------+---------+--------+
| | Q3/2012 | Q3/2011 | YoY | Q2/2012 | QoQ |
| EUR million | | | Change | | Change |
+----------------------+---------+---------+--------+---------+--------+
| Net cash from | | | | | |
| operating activities | -429 | 852 | | 102 | |
+----------------------+---------+---------+--------+---------+--------+
| Total cash and | | | | | |
| other liquid assets | 8 779 | 10 809 | -19% | 9 418 | -7% |
+----------------------+---------+---------+--------+---------+--------+
| Net cash and | | | | | |
| other liquid assets1 | 3 564 | 5 067 | -30% | 4 197 | -15% |
+----------------------+---------+---------+--------+---------+--------+
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities.
Year-on-year, net cash and other liquid assets decreased by EUR 1.5 billion
in
the third quarter 2012, primarily due to cash outflows related to
restructuring
and net financial expenses, the payment of the annual dividend totaling EUR
742
million in the second quarter 2012 and capital expenditures, partially
offset by
cash flows related to the receipt of quarterly platform support payments
from
Microsoft (which commenced in the fourth quarter 2011) and positive overall
net
cash from operating activities, excluding cash outflows related to
restructuring
and net financial expenses.
Sequentially, net cash and other liquid assets decreased by EUR 633 million
in
the third quarter 2012, primarily due to cash outflows related to
restructuring,
cash outflows related to net financial expenses, Devices & Services
operating
losses as well as capital expenditures, partially offset by positive Nokia
Siemens Networks operating profits and the receipt of a USD 250 million
(approximately EUR 202 million) quarterly platform support payment from
Microsoft.
In the third quarter 2012, Nokia Siemens Networks' contribution to net cash
from
operating activities was approximately EUR 320 million, primarily due to
net
profit adjusted for non-cash items. At the end of the third quarter 2012,
Nokia
Siemens Networks' contribution to the Nokia gross cash was EUR 2.0 billion
and
contribution to Nokia's net cash was EUR 620 million.
Our agreement with Microsoft includes platform support payments from
Microsoft
to us as well as software royalty payments from us to Microsoft. In the
third
quarter 2012, we received a quarterly platform support payment of USD 250
million (approximately EUR 202 million). Under the terms of the agreement
governing the platform support payments, the amount of each quarterly
platform
support payment is USD 250 million. We have a competitive software royalty
structure, which includes annual minimum software royalty commitments.
Minimum
software royalty commitments are paid quarterly. Over the life of the
agreement,
both the platform support payments and the minimum software royalty
commitments
are expected to measure in the billions of US dollars. The total amount of
the
platform support payments is expected to slightly exceed the total amount
of the
minimum software royalty commitments. In accordance with the contract
terms, the
platform support payments and annual minimum software royalty commitment
payments continue for a corresponding period of time.
DEVICES & SERVICES
The following table sets forth a summary of the results for our Devices &
Services business for the periods indicated, as well as the year-on-year
and
sequential growth rates.
+-------------------------------------------------------------------------+
| DEVICES & SERVICES |
| RESULTS SUMMARY |
+--------------------------+---------+---------+--------+---------+-------+
| | Q3/2012 | Q3/2011 | YoY | Q2/2012 | QoQ |
| | | | Change | |Change |
+--------------------------+---------+---------+--------+---------+-------+
| Net sales (EUR million)1 | 3 563 | 5 392 | -34% | 4 023 | -11% |
+--------------------------+---------+---------+--------+---------+-------+
| Mobile device volume | | | | | |
| (million units) | 82.9 | 106.6 | -22% | 83.7 | -1% |
+--------------------------+---------+---------+--------+---------+-------+
| Mobile device ASP (EUR) | 43 | 51 | -16% | 48 | -10% |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS gross margin (%)| 18.5% | 25.7% | | 18.1% | |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS operating | | | | | |
| expenses (EUR million) | 915 | 1 126 | -19% | 1 090 | -16% |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS operating | | | | | |
| margin (%) | -7.4% | 4.8% | | -9.1% | |
+--------------------------+---------+---------+--------+---------+-------+
Note 1: Includes IPR income recognized in Devices & Services Other net
sales.
The year-on-year and sequential changes in our Devices & Services net
sales,
volumes, average selling prices and gross margin are discussed below under
our
Smart Devices and Mobile Phones business units. On a year-on-year basis
Devices
& Services Other net sales were lower in the third quarter 2012 primarily
due to
the recognition in the third quarter 2011 of approximately EUR 70 million
of
non-recurring IPR income. In the third quarter 2012, Devices & Services
Other
net sales benefitted from sequentially higher IPR income.
We estimate that our current annual IPR income run-rate is approximately
EUR
0.5 billion.
We ended the third quarter 2012 within the normal 4 to 6 week channel
inventory
range. On an absolute unit basis and in days of supply channel inventories
declined sequentially.
Net Sales and Volumes by Geographic Area
The following table sets forth the net sales for our Devices & Services
business
for the periods indicated, as well as the year-on-year and sequential
growth
rates, by geographic area. IPR income is allocated to the geographic areas
contained in this chart.
+----------------------------------------------------------------------+
| DEVICES & SERVICES NET SALES |
| BY GEOGRAPHIC AREA |
+----------------------+---------+---------+--------+---------+--------+
| | | | YoY | | QoQ |
| EUR million | Q3/2012 | Q3/2011 | Change | Q2/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 985 | 1 394 | -29% | 1 096 | -10% |
| | | | | | |
| Middle East & Africa | 682 | 957 | -29% | 663 | 3% |
| | | | | | |
| Greater China | 278 | 1 240 | -78% | 542 | -49% |
| | | | | | |
| Asia-Pacific | 977 | 1 197 | -18% | 948 | 3% |
| | | | | | |
| North America | 36 | 73 | -51% | 128 | -72% |
| | | | | | |
| Latin America | 605 | 531 | 14% | 646 | -6% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 3 563 | 5 392 | -34% | 4023 | -11% |
+----------------------+---------+---------+--------+---------+--------+
The following table sets forth the mobile device volumes for our Devices &
Services business for the periods indicated, as well as the year-on-year
and
sequential growth rates, by geographic area.
+----------------------------------------------------------------------+
| DEVICES & SERVICES MOBILE DEVICE |
| VOLUMES BY GEOGRAPHIC AREA |
+----------------------+---------+---------+--------+---------+--------+
| | | | YoY | | QoQ |
| million units | Q3/2012 | Q3/2011 | Change | Q2/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 16.8 | 20.7 | -19% | 15.3 | 10% |
| | | | | | |
| Middle East & Africa | 19.1 | 26.0 | -27% | 19.4 | -2% |
| | | | | | |
| Greater China | 5.8 | 15.9 | -64% | 7.9 | -27% |
| | | | | | |
| Asia-Pacific | 30.1 | 32.4 | -7% | 28.6 | 5% |
| | | | | | |
| North America | 0.3 | 0.7 | -57% | 0.6 | -50% |
| | | | | | |
| Latin America | 10.8 | 10.9 | -1% | 11.9 | -9% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 82.9 | 106.6 | -22% | 83.7 | -1% |
+----------------------+---------+---------+--------+---------+--------+
On a year-on-year basis, the decreases in Greater China net sales and
volumes
were primarily due to Symbian.
On a year-on-year basis, the decreases in North America net sales and
volumes
were primarily due to Mobile Phones.
The sequential decreases in net sales and volumes in North America were
primarily due to lower operator and distributor demand for Lumia as well as
our
efforts to prepare the distribution channel for the upcoming sales start of
new
devices.
Net sales in China decreased sequentially primarily due to lower net sales
of
our Lumia and Symbian devices, primarily reflecting competitive pressures.
Volumes in China decreased sequentially primarily due to lower volumes of
our
Symbian devices, primarily reflecting competitive pressures.
Net sales in Europe decreased sequentially primarily due to lower net sales
of
our Symbian and Lumia products, partially offset by higher net sales of our
Mobile Phones devices. Volumes in Europe increased sequentially primarily
due to
higher volumes of our Mobile Phones devices, partially offset by lower
volumes
of our Symbian and Lumia products.
At constant currency Devices & Services' net sales would have decreased 36%
year-on-year and decreased 13% sequentially.
Operating Expenses
Devices & Services non-IFRS operating expenses decreased 19% year-on-year
and
16% sequentially in the third quarter 2012. On a year-on-year basis,
operating
expenses related to Mobile Phones and Smart Devices decreased 3% and 33%,
respectively, in the third quarter 2012. In addition to the factors
described
below, the year-on-year changes resulted from the proportionate allocation
of
operating expenses being affected by the relative mix of sales and gross
profit
performance between Mobile Phones and Smart Devices. This resulted in
higher and
lower relative allocations to Mobile Phones and Smart Devices,
respectively. On
a sequential basis, operating expenses related to Mobile Phones and Smart
Devices decreased by 13% and 18%, respectively, in the third quarter 2012.
Devices & Services non-IFRS research and development expenses decreased 21%
year-on-year in the third quarter 2012. On a sequential basis, Devices &
Services non-IFRS research and development expenses decreased 14% in the
third
quarter 2012. Both the year-on-year and sequential declines were primarily
due
to cost reductions related to ramping down Symbian and MeeGo activities,
the
focusing of our efforts and reductions in certain projects within Mobile
Phones,
and overall cost controls.
Devices & Services non-IFRS sales and marketing expenses decreased 17%
year-on-year in the third quarter 2012. Year-on-year, marketing expenses
declined
primarily due to lower marketing expenditure on Symbian as well as cost
controls, partially offset by higher marketing expenditure on Lumia
products. On
a sequential basis, Devices & Services non-IFRS sales and marketing
expenses
decreased 23% in the third quarter 2012. Sequentially, marketing expenses
decreased primarily due to lower expenditure on Lumia products following
the
North America launch in the second quarter, headcount reductions and cost
controls.
Devices & Services non-IFRS administrative and general expenses decreased
16%
year-on-year in the third quarter 2012 primarily related to cost savings in
support functions, particularly in IT and real estate management and shared
function cost categorization. On a sequential basis, Devices & Services
non-IFRS
administrative and general expenses increased 31% in the third quarter 2012
due
to shared function cost categorization which more than offset cost savings
in
support functions.
In the third quarter 2012, Devices & Services non-IFRS other income and
expense
had a negative year-on-year and sequential impact on profitability. On a
reported basis, other income and expense was significantly adversely
affected in
the third quarter 2012 primarily as a result of restructuring-related
expenses
discussed below, which were recognized in Devices & Services Other.
Operating Margin
The lower year-on-year Devices & Services non-IFRS operating margin in the
third
quarter 2012 was primarily due to lower net sales and gross margin,
partially
offset by lower operating expenses.
The sequentially higher Devices & Services non-IFRS operating margin in the
third quarter 2012 was primarily due to lower operating expenses as well as
slightly higher gross margin.
Cost Reduction Activities and Planned Operational Adjustments
+-------------------------------------------------------------------------+
|DEVICES & SERVICES |
|RESTRUCTURING SUMMARY |
+-------------+---------+-------------+------------+------------+---------+
| | Q3/2012 |Cumulative up| Q4/2012| 2013|Total |
| |(approx- |to Q3/2012 |(approximate|(approximate|(approx. |
|EUR (million)| imate) |(approximate)| estimate)| estimate)|estimate)|
+-------------+---------+-------------+------------+------------+---------+
|Restructuring| | | | | |
|related | | | | | |
|charges | 454| 1 400|Not provided|Not provided| 1 800|
+-------------+---------+-------------+------------+------------+---------+
|Restructuring| | | | | |
|related | | | | | |
|cash outflows| 200| 800| 400| 400| 1 600|
+-------------+---------+-------------+------------+------------+---------+
Nokia continues to target to reduce its Devices & Services non-IFRS
operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the
end
of 2013.
At the end of the third quarter 2012, Devices & Services and Corporate
Common
had approximately 38 000 employees, a reduction of approximately 15 500
compared
to third quarter 2011, and approximately 5 300 compared to second quarter
2012.
In connection with the implementation of our strategy announced in February
2011, we have announced and made a number of changes to our operations. In
the
third quarter of 2012, we recognized restructuring charges and other
associated
items of EUR 454 million related to our restructuring activities in Devices
&
Services. By the end of the third quarter 2012, we had recorded cumulative
Devices & Services restructuring charges and other associated items of
approximately EUR 1.4 billion. In total, we expect cumulative Devices &
Services
restructuring charges of approximately EUR 1.8 billion before the end of
2013.
By the end of the third quarter 2012, Devices & Services had cumulative
restructuring related cash outflows of approximately EUR 800 million. We
expect
Devices & Services restructuring related cash outflows to be approximately
EUR
400 million in fourth quarter 2012 and approximately EUR 400 million in
2013. Of
the total expected charges relating to restructuring activities of
approximately
EUR 1.8 billion, we expect Devices & Services non-cash charges to be
approximately EUR 200 million.
SMART DEVICES
The following table sets forth a summary of the results for our Smart
Devices
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
+-------------------------------------------------------------------------+
| SMART DEVICES |
| RESULTS SUMMARY |
+---------------------------+---------+---------+------+---------+--------+
| | | | YoY| | QoQ |
| | Q3/2012 | Q3/2011 |Change| Q2/2012 | Change |
+---------------------------+---------+---------+------+---------+--------+
| Net sales (EUR millions)1 | 976 | 2 194 | -56% | 1 541 | -37% |
+---------------------------+---------+---------+------+---------+--------+
| Smart Devices volume | | | | | |
| (million units) | 6.3 | 16.8 | -63% | 10.2 | -38% |
+---------------------------+---------+---------+------+---------+--------+
| Smart Devices ASP (EUR) | 155 | 131 | 18% | 151 | 3% |
+---------------------------+---------+---------+------+---------+--------+
| Gross margin (%) | -3.5% | 20.7% | | 1.7% | |
+---------------------------+---------+---------+------+---------+--------+
| Operating expenses | | | | | |
| (EUR millions)2 | 441 | 656 | -33% | 540 | -18% |
+---------------------------+---------+---------+------+---------+--------+
| Contribution margin (%)2 | -48.9% | -8.7% | | -32.9% | |
+---------------------------+---------+---------+------+---------+--------+
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year decrease in operating expenses resulted from the
proportionate allocation of operating expenses being affected by the
relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices, resulting in lower relative allocations to Smart Devices in the
first,
second and third quarters 2012.
Net Sales
On a year-on-year basis, the decline in our Smart Devices net sales in the
third
quarter 2012 was primarily due to lower volumes partially offset by higher
ASPs.
On a year-on-year basis, the volume decline was primarily due to lower
Symbian
volumes partially offset by Lumia volumes. On a year-on-year basis, ASPs
benefitted from the higher proportion of Lumia net sales.
On a sequential basis, the decline in our Smart Devices net sales in the
third
quarter 2012 was primarily due to lower Lumia and Symbian volumes. This was
partially offset by higher Smart Devices ASPs, primarily due to higher
Symbian
ASPs as well as a positive impact related to deferred revenue on services
sold
in combination with our devices.
Volume
During the third quarter 2012 we shipped 6.3 million Smart Devices units,
of
which approximately 2.9 million were Lumia products.
The year-on-year decline in our Smart Devices volumes in the third quarter
2012
continued to be driven by the strong momentum of competing smartphone
platforms
relative to our Smart Devices portfolio. Greater China, Europe,
Asia-Pacific and
Middle East and Africa showed significant year-on-year decreases in
volumes,
whereas North America and Latin America remained approximately at the same
level
in the third quarter 2012.
On a sequential basis, the decline in our Smart Devices volumes in the
third
quarter 2012 was primarily due to lower Symbian and Lumia volumes. All
regions
showed a sequential decline in the third quarter 2012 except Middle East
and
Africa which remained approximately at the same level.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in the third quarter
2012 was
primarily due to a positive mix shift towards sales of our Lumia products
which
carry a higher ASP than our Symbian devices, as well as a positive impact
related to deferred revenue on services sold in combination with our
devices.
Sequentially, the increase in our Smart Devices ASP in the third quarter
2012
was primarily due to higher Symbian ASPs as well as a positive impact
related to
deferred revenue on services sold in combination with our devices. The ASP
of
our Lumia products in the third quarter 2012 was EUR 160, compared to EUR
186 in
the second quarter 2012. This decline was primarily due to a higher
proportion
of sales of the lower priced Nokia Lumia offering as well as increased
erosion
of our prices primarily due to our pricing actions.
Gross Margin
The significant year-on-year decline in our Smart Devices gross margin in
the
third quarter 2012 was primarily due to the recognition of approximately
EUR
120 million of allowances related to excess component inventory, future
purchase
commitments and an inventory revaluation related to our current Lumia
products,
as well as greater price erosion than cost erosion and higher fixed costs
per
unit, because of lower sales volumes. From an operating system perspective,
the
year-on-year decline in our Smart Devices gross margin in the third quarter
2012 was primarily due to a lower Symbian gross margin. In addition sales
of
Lumia products which were not available in the third quarter 2011 had a
lower
gross margin in the third quarter 2012 than Symbian devices in the third
quarter
2011.
On a sequential basis, the decline in our Smart Devices gross margin in the
third quarter 2012 was primarily due to higher fixed costs per unit,
because of
lower sales volumes, as well as greater price erosion than cost erosion.
The EUR
120 million of allowances noted above also adversely affected our Smart
Devices
gross margin in the third quarter 2012, but to a lesser extent than the EUR
220
million of such allowances in the second quarter 2012. From an operating
system
perspective, the sequential decline in our Smart Devices gross margin in
the
third quarter was primarily due to a lower Lumia gross margin, partially
offset
by a higher Symbian gross margin.
Increases or decreases to Smart Devices inventory related allowances may be
required in the future depending on several factors, including future
consumer
demand, particularly related to our current Lumia products.
MOBILE PHONES
The following table sets forth a summary of the results for our Mobile
Phones
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
+-------------------------------------------------------------------------+
| MOBILE PHONES |
| RESULTS SUMMARY |
+---------------------------+---------+---------+------+---------+--------+
| | | | YoY| | QoQ |
| | Q3/2012 | Q3/2011 |Change| Q2/2012 | Change |
+---------------------------+---------+---------+------+---------+--------+
| Net sales (EUR millions)1 | 2 366 | 2 915 | -19% | 2 291 | 3% |
+---------------------------+---------+---------+------+---------+--------+
| Mobile Phones | | | | | |
| volume (million units) | 76.6 | 89.8 | -15% | 73.5 | 4% |
+---------------------------+---------+---------+------+---------+--------+
| Mobile Phones ASP (EUR) | 31 | 32 | -3% | 31 | 0% |
+---------------------------+---------+---------+------+---------+--------+
| Gross margin (%) | 21.7% | 23.6% | | 24.1% | |
+---------------------------+---------+---------+------+---------+--------+
| Operating expenses | | | | | |
| (EUR million)2 | 393 | 404 | -3% | 450 | -13% |
+---------------------------+---------+---------+------+---------+--------+
| Contribution margin (%)2 | 4.9% | 10.1% | | 4.3% | |
+---------------------------+---------+---------+------+---------+--------+
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year increase in operating expenses resulted from the
proportionate allocation of operating expenses being affected by the
relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices, resulting in higher relative allocations to Mobile Phones in the
first,
second and third quarters 2012.
Net Sales
On a year-on-year basis, the decline in our Mobile Phones net sales in the
third
quarter 2012 was primarily due to lower volumes as well as lower ASPs. On a
sequential basis, the increase in our Mobile Phones net sales in the third
quarter 2012 was due to higher volumes.
Volume
During the third quarter 2012 we shipped 76.6 million Mobile Phones units,
of
which 6.5 million were Asha full touch smartphones.
On a year-on-year basis, the decrease in our Mobile Phones volumes in the
third
quarter 2012 was primarily due to the decline in volumes of our lower
priced
devices that we sell to our customers for below EUR 30. Volumes of our
higher
priced devices also declined, partially offset by volumes of our newly
launched
Asha full touch smartphones.
On a sequential basis, the increase in our Mobile Phones volumes in the
third
quarter 2012 was primarily due to volumes of our Asha full touch
smartphones. In
addition, volumes of our devices that we sell to our customers for below
EUR 30
increased sequentially, whereas volumes of our QWERTY devices declined
sequentially.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the third quarter 2012
was
primarily due to an increased proportion of sales of lower priced devices.
On a sequential basis, our Mobile Phones ASP was approximately flat in the
third
quarter 2012 as higher sales of our lower priced devices that we sell to
our
customers for below EUR 30 were offset by higher sales of our Asha full
touch
smartphones which carry higher ASPs.
Gross Margin
Both on a year-on-year as well as a sequential basis, the decline in our
Mobile
Phones gross margin in the third quarter 2012 was primarily due to a
greater
proportion of sales of lower gross margin devices.
LOCATION & COMMERCE
The following table sets forth a summary of the results for Location &
Commerce
for the periods indicated, as well as the year-on-year and sequential
growth
rates.
+-------------------------------------------------------------------------+
| LOCATION & COMMERCE |
| RESULTS SUMMARY |
+--------------------------+---------+---------+-------+---------+--------+
| | | | YoY | | QoQ |
| | Q3/2012 | Q3/2011 |Change | Q2/2012 | Change |
+--------------------------+---------+---------+-------+---------+--------+
| Net sales (EUR millions) | 265 | 282 | -6% | 283 | -6% |
+--------------------------+---------+---------+-------+---------+--------+
| External net sales | | | | | |
| (EUR millions) | 179 | 181 | -1% | 180 | -1% |
+--------------------------+---------+---------+-------+---------+--------+
| Internal net sales | | | | | |
| (EUR millions) | 86 | 101 | -15% | 103 | -17% |
+--------------------------+---------+---------+-------+---------+--------+
| Non-IFRS | | | | | |
| gross margin (%) | 80.4% | 81.6% | | 77.4% | |
+--------------------------+---------+---------+-------+---------+--------+
| Non-IFRS operating | | | | | |
| expenses (EUR millions) | 175 | 201 | -13% | 185 | -5% |
+--------------------------+---------+---------+-------+---------+--------+
| Non-IFRS operating | | | | | |
| margin (%) | 14.0% | 9.9% | | 14.5% | |
+--------------------------+---------+---------+-------+---------+--------+
Net Sales
Starting in the third quarter 2012, we are disclosing additional financial
information for Location & Commerce: external and internal net sales.
External
net sales represent sales of content licenses, platform licenses, and
applications to customers other than Nokia. Currently, Location & Commerce
external net sales are predominantly from the licensing of map content.
Over
time, we expect a gradual but steady migration of external net sales
towards
platform related revenue as our customers increasingly use the Nokia
Location
Platform, which enables new and innovative location services and
applications.
Internal net sales represent Location & Commerce sales in conjunction with
Nokia
devices.
In the third quarter 2012, the year-on-year decline in external Location &
Commerce net sales was primarily due to lower sales to our personal
navigation
device customers as industry volumes continued to decline, almost entirely
offset by higher sales of map content licenses to vehicle customers due to
higher consumer uptake of vehicle navigation systems. In the third quarter
2012, the sequential decline in external Location & Commerce net sales was
primarily due to lower map update sales, related to the timing of our
update
campaigns, and seasonally lower vehicles sales, almost entirely offset by
the
non-recurrence of a negative sales adjustment related to historical license
fees
in the normal course of business for a particular customer.
In the third quarter 2012, the year-on-year and sequential declines in
internal
Location & Commerce net sales were due to declines in sales to our Smart
Devices
business unit.
Gross Margin
On a year-on-year basis, the decline in Location & Commerce non-IFRS gross
margin in the third quarter 2012 was primarily due to lower personal
navigation
device sales which carry higher gross margins, lower internal sales which
carry
higher gross margins, and higher vehicle sales which carry lower gross
margins.
In addition, there was a shift of research and development operating
expenses to
cost of sales as a result of the divestment of the media advertising
business
and a lower allocation of production costs from Location & Commerce to
Devices &
Services as the usage of certain shared services has declined.
On a sequential basis, the increase in Location & Commerce non-IFRS gross
margin
in the third quarter 2012 was primarily due to the non-recurrence of a
negative
sales adjustment related to historical license fees in the normal course of
business for a particular customer, as well as lower map update sales which
carry a lower gross margin.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased
13%
year-on-year and 4% sequentially in the third quarter 2012 primarily due to
cost
reductions as well as a shift in expenses from research and development to
costs
of sales related to the divestment of the media advertising business.
Location & Commerce non-IFRS sales and marketing expenses decreased 21%
year-on-year and 4% sequentially in the third quarter 2012. On a
year-on-year basis, the
decrease was primarily due to cost reduction actions. On a sequential
basis, the
decrease was primarily due to lower marketing costs due to timing of update
campaigns.
Location & Commerce non-IFRS administrative and general expenses increased
6%
year-on-year and decreased 19% sequentially in the third quarter 2012. On a
year-on-year basis, the increase was primarily due to the higher use of
services
provided by shared support functions. On a sequential basis, the decrease
was
primarily due to lower use of services provided by shared support
functions.
Location & Commerce non-IFRS other income and expense for the third quarter
2012 was approximately zero, compared to expense of EUR 1 million in the
third
quarter 2011 and income of EUR 7 million in the second quarter 2012.
Operating Margin
The higher year-on-year Location & Commerce non-IFRS operating margin in
the
third quarter 2012 was primarily due to lower operating expenses, partially
offset by lower net sales and lower gross margin.
The approximately flat sequential Location & Commerce non-IFRS operating
margin
in the third quarter 2012 was primarily due to higher gross margin and
lower
operating expenses, partially offset by lower net sales and lower other
income.
NOKIA SIEMENS NETWORKS
The following table sets forth a summary of the results for Nokia Siemens
Networks for the periods indicated, as well as the year-on-year and
sequential
growth rates.
+-------------------------------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| RESULTS SUMMARY |
+-------------------------+---------+---------+--------+---------+--------+
| | | | YoY | | QoQ |
| | Q3/2012 | Q3/2011 | Change | Q2/2012 | Change |
+-------------------------+---------+---------+--------+---------+--------+
| Net sales (EUR million) | 3 501 | 3 413 | 3% | 3 343 | 5% |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS gross | | | | | |
| margin (%) | 32.2% | 26.8% | | 26.6% | |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| expenses (EUR million) | 797 | 936 | -15% | 836 | -5% |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| margin (%) | 9.2% | 0.2% | | 0.8% | |
+-------------------------+---------+---------+--------+---------+--------+
Net Sales
The following table sets forth Nokia Siemens Networks net sales for the
periods
indicated, as well as the year-on-year and sequential growth rates, by
geographic area.
+----------------------------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| NET SALES BY GEOGRAPHIC AREA |
+----------------------+---------+---------+--------+---------+--------+
| | | | YoY | | QoQ |
| EUR millions | Q3/2012 | Q3/2011 | Change | Q2/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 918 | 1 074 | -15% | 990 | -7% |
| | | | | | |
| Middle East & Africa | 325 | 301 | 8% | 304 | 7% |
| | | | | | |
| Greater China | 313 | 302 | 4% | 340 | -8% |
| | | | | | |
| Asia-Pacific | 1 266 | 978 | 29% | 1 028 | 23% |
| | | | | | |
| North America | 285 | 304 | -6% | 300 | -5% |
| | | | | | |
| Latin America | 394 | 454 | -13% | 381 | 3% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 3501 | 3413 | 3% | 3343 | 5% |
+----------------------+---------+---------+--------+---------+--------+
The year-on-year increase in Nokia Siemens Networks' net sales in the third
quarter 2012 was primarily due to higher sales of infrastructure equipment
and
slightly higher sales of services, partially offset by a decline in sales
of
business areas not consistent with Nokia Siemens Networks' strategic focus.
On a
regional basis, the year-on-year growth was primarily due to higher net
sales in
Asia Pacific, most notably in Japan which saw strong growth in sales of
both
infrastructure equipment and services. This was partially offset by lower
sales
in Europe of both infrastructure equipment and services, particularly
infrastructure equipment sales in Western Europe, primarily due to the
continuation of the weaker operator investment environment in that region
and
lower services sales consistent with Nokia Siemens Networks' focused
strategy.
The sequential increase in Nokia Siemens Networks' net sales in the third
quarter 2012 was driven by the higher sales of infrastructure equipment.
Sales
of services were approximately flat compared to the second quarter 2012.
On a
regional basis, the sequential growth was primarily due to higher net sales
in
Asia Pacific, most notably in Japan which saw strong growth in sales of
both
infrastructure equipment and services. This was partially offset by lower
sales
in Europe of both services and infrastructure equipment, particularly
infrastructure equipment sales in Western Europe. In addition, sales of
both
services and infrastructure equipment in China also declined primarily due
to
ongoing technology transitions which have made the timing of operator
spending
volatile.
At constant currency Nokia Siemens Networks' net sales would have decreased
3%
year-on-year and increased 1% sequentially.
Gross Margin
On both a year-on-year and sequential basis, the increase in Nokia Siemens
Networks' non-IFRS gross margin in the third quarter 2012 was due to an
unusually favorable product and regional mix towards higher gross margin
revenues, particularly in infrastructure equipment, driven mainly by Nokia
Siemens Networks priority markets including Japan and Korea. In addition,
Nokia
Siemens Networks' non-IFRS gross margin in the third quarter 2012 was also
driven by structural cost savings in its production overheads as part of
its
broader cost savings targets.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses
decreased
14% year-on-year and 5% sequentially in the third quarter 2012 primarily
due to
improvements in overall research and development efficiency.
Year-on-year, Nokia Siemens Networks' non-IFRS sales and marketing expenses
decreased 15% in the third quarter 2012 primarily due to structural cost
savings, partially offset by higher sales. On a sequential basis, Nokia
Siemens
Networks non-IFRS sales and marketing expenses decreased 6% in the third
quarter
2012 primarily due to structural cost savings, partially offset by the
higher
net sales.
Nokia Siemens Networks' non-IFRS administrative and general expenses
decreased
18% year-on-year in the third quarter 2012 primarily due to structural cost
savings, partially offset by higher net sales. On a sequential basis, Nokia
Siemens Networks non-IFRS administrative and general expenses increased 3%
in
the third quarter 2012, primarily due to lower expense reallocation to
other
function costs which more than offset structural cost savings.
Nokia Siemens Networks' non-IFRS other income and expense for the third
quarter
2012 was an expense of EUR 8 million, compared to income of EUR 26 million
in
the third quarter 2011 and expense of EUR 25 million in the second quarter
2012. On both a year-on-year and sequential basis, this was primarily due
to
changes in the doubtful account allowances.
Operating Margin
The year-on-year and sequential increase in Nokia Siemens Networks non-IFRS
operating margin in the third quarter 2012 was primarily due to the higher
gross
margin, lower operating expenses, and to a lesser extent, higher net sales.
Strategy Update and Global Restructuring Program
+----------+---------+-----------+---------+---------+---------+---------+
|NOKIA SIEMENS NETWORKS |
|RESTRUCTURING SUMMARY |
+----------+---------+-----------+---------+---------+---------+---------+
| | | Cumulative| Q4/2012| 2013 | 2014 | Total|
| | Q3/2012| up to| (approx.| (approx.| (approx.| (approx.|
|EUR |(approx.)| Q3/2012 | est.)| est.)| est.)| est.)|
|(million) | | (approx.)| | | | |
+----------+---------+-----------+---------+---------+---------+---------+
|Restruct- | | | | | | |
|uring | | | | | | |
|related | | | Not | Not | Not | |
|charges | 74| 1 000| provided| provided| provided| 1 200|
+----------+---------+-----------+---------+---------+---------+---------+
|Restruct- | | | | | | |
|uring | | | | | | |
|related | | | | | | |
|cash | | | | | | |
|outflows | 180| 450| 250| 400| 100| 1 200|
+----------+---------+-----------+---------+---------+---------+---------+
On November 23, 2011 Nokia Siemens Networks announced its strategy to focus
on
mobile broadband and services and the launch of an extensive global
restructuring program.
At the end of the third quarter 2012, NSN had approximately 60 600
employees, a
reduction of approximately 14 300 compared to third quarter 2011, and
approximately 2 700 compared to second quarter 2012.
Nokia Siemens Networks continues to target to reduce its non-IFRS
annualized
operating expenses and production overheads by EUR 1 billion by the end of
2013, compared to the end of 2011. While these savings are expected to come
largely from organizational streamlining, the company will also target
areas
such as real estate, information technology, product and service
procurement
costs, overall general and administrative expenses, and a significant
reduction
of suppliers in order to further lower costs and improve quality.
In the third quarter of 2012, Nokia Siemens Networks recognized
restructuring
charges and other associated items of EUR 74 million related to this
restructuring program, resulting in cumulative charges of approximately EUR
1.0
billion. In total, Nokia Siemens Networks expects cumulative restructuring
charges of approximately EUR 1.2 billion related to this restructuring
program
before the end of 2012. By the end of the third quarter 2012, Nokia Siemens
Networks had cumulative restructuring related cash outflows of
approximately EUR
450 million related to this restructuring program. Nokia Siemens Networks
expects restructuring-related cash outflows to be approximately EUR 250
million
in the fourth quarter 2012, approximately EUR 400 million in 2013, and
approximately EUR 100 million in 2014 related to this restructuring
program.
Cash preservation is a clear priority at Nokia Siemens Networks, and the
company
intends to be self-funding in all aspects of its operations. Nokia Siemens
Networks' restructuring program, combined with the company's focus on
improving
its financial performance, is designed to enable the company to end 2012
with
higher net cash than at the end of 2011.
THIRD QUARTER 2012 OPERATING HIGHLIGHTS
NOKIA OPERATING HIGHLIGHTS
- Nokia was again selected as a component of the Dow Jones Sustainability
World
Index (DJSI) and Dow Jones Sustainability Europe Index in the DJSI 2012
Review.
- Nokia was included by the Carbon Disclosure Project (CDP) in the Carbon
Disclosure Leadership Index and the Carbon Performance Leadership Index,
receiving recognition both for its disclosure of climate change information
and
the action it is taking to reduce its emissions.
- Since the end of the quarter, Nokia completed its divestment of Vertu,
the
global leader in luxury mobile phones, to EQT VI. The transaction was
originally
announced on June 14, 2012. As part of the transaction, approximately 1
000
employees have transferred with Vertu. Nokia retains a 10% minority
shareholding
in Vertu.
DEVICES & SERVICES OPERATING HIGHLIGHTS
SMART DEVICES
- Nokia announced the Nokia Lumia 920 and the Nokia Lumia 820, the first
devices
in Nokia's Windows Phone 8 range which are expected to ship in select
markets
during the fourth quarter 2012. The Nokia Lumia 920 is the flagship Windows
Phone 8 smartphone, including the latest advances in Nokia PureView imaging
innovation as well as wireless charging. The Nokia Lumia 820 is a stylish,
mid-range smartphone that delivers high-end performance in a compact
package. Both
the Lumia 820 and Lumia 920 come with Nokia City Lens, a new augmented
reality
experience.
- Nokia announced a range of wireless charging accessories and
partnerships. The
Fatboy Recharge Pillow provides an alternative way to charge the Lumia 920
and
Lumia 820 wirelessly, while HARMAN'S JBL brand introduced the JBL PowerUP,
a
wireless charging docking station with high quality audio in retro styling.
Nokia has also agreed with Virgin Atlantic to put wireless charging
stations in
the London Heathrow Clubhouse lounge and Coffee Bean & Tea Leaf to put
charging
plates on tables in some of their cafés.
- Nokia completed the acquisition of all technologies and intellectual
property
from Scalado AB to strengthen Nokia's leading position in mobile imaging.
As
part of the transaction, approximately 50 world-class imaging specialists
transferred to Nokia.
- Nokia announced the launch of its free music streaming service Nokia
Music in
the United States. Nokia Music is a free mobile experience exclusive to
Nokia
Lumia handsets, providing consumers with a simple and delightful way to
discover
and enjoy music.
- Nokia announced the Nokia Purity Pro Wireless Stereo Headset by Monster.
The
new headset, which comes in different colors, offers a wire-free connection
to
your phone. Music transfer is by Bluetooth and the headset features
one-touch
pairing with your smartphone using NFC.
MOBILE PHONES
- Nokia announced the Nokia Asha 308 and Asha 309, new additions to the
Asha
Touch family. The dual SIM Nokia Asha 308 and single SIM Nokia Asha 309
give
consumers fast web access at low cost. Nokia also released a new version of
Nokia Xpress Browser, which enables up to 90% more efficient mobile
browsing and
faster access to rich web applications compared to conventional browsers.
The
Asha 308 and Asha 309 offer a fluid 'swipe' user interface and an open
environment for third-party application development, characteristics that
have
earned the complete Asha Touch range full smartphone classification from
global
market research companies and analysts such as GfK.
- Nokia unveiled Nokia Life+, the latest evolution of its widely-used Nokia
Life
service. Nokia Life+ is a Web application, which will provide millions of
people
with valuable information on education, health and "infotainment" topics.
Nokia
Life+ will be supported by the Nokia Asha 308 and Nokia Asha 309
smartphones
alongside a wide range of Nokia mobile phones.
LOCATION & COMMERCE OPERATING HIGHLIGHTS
Nokia's Location & Commerce business continued to strengthen both its
portfolio
of location-based offerings with updates to its signature applications and
its
customer base through new partnerships and licensing deals during the third
quarter:
- With its global footprint, high quality and broad array of features such
as
geocoding, routing and traffic, we believe the Nokia Location Platform
(NLP) is
the world's most advanced location platform, offering numerous
opportunities for
third parties to build upon. During the third quarter, Amazon became an NLP
licensee for maps and geocoding.
- After announcing earlier this year that it is teaming up with Groupon to
bring
local and national deals to Nokia customers, Location & Commerce released a
new
version of Nokia Maps for the Lumia range that integrates Groupon Now!
Deals
into the app.
- Location & Commerce brought Nokia City Lens to its Lumia range. Nokia
City
Lens is an augmented reality application, which turns the phone's camera
viewfinder into a new way to see information about restaurants, shops,
hotels
and more overlaid onto the surfaces of buildings for an intuitive way to
find
hidden gems.
- Location & Commerce released an updated version of Nokia Transport, a
mobile
application for the Lumia range providing underground, tram, suburban train
and
bus directions for more than 500 cities in 46 countries in a convenient
way.
- Location & Commerce released an update to the beta version of Nokia
Pulse, an
application for smarter messaging, automatically tagging even simple
messages
with location information to make them more useful and powerful.
- Nokia announced that Location & Commerce is providing NAVTEQ Traffic
services
to Spectrum Medya, a leading Turkish broadcaster, for distribution via
Radio
Data System (RDS).
- Location & Commerce continued to deliver automotive-grade maps content
and
solutions to a number of major industry players. During the quarter, Nokia
announced that it is supplying NAVTEQ Maps to BMW for its next-generation
navigation system for the BMW 7-series ; to Hyundai, for its new head
units; to
Mercedes, for its A-Class models; to Volkswagen, for systems for brands
throughout the Volkswagen group; to Pioneer, for its aftermarket
navigation
systems; and to Peugeot, for its Peugeot 107 model, which represents the
first
ever embedded navigation system in an A segment car at Peugeot.
- Nokia announced that Location & Commerce is supplying modified
pan-European
reference data to the Ford Motor Company to enable its Emergency Assistance
technology to not only identify the location of the driver in need of help,
but
also the appropriate language needed to alert local emergency service
operators.
- Nokia announced that its Location & Commerce business has collaborated
with
Esri to advance the location intelligence capabilities of Esri's Business
Analyst and Community Analyst products by providing high-quality NAVTEQ
Maps.
- Nokia announced that Location & Commerce is supplying its global Transit
and
Pedestrian Content (TaP) for Garmin's new Urban Guidance function.
- In indoor mapping, Location & Commerce continued to steadily increase its
coverage of venues and buildings around the world and now covers 5 100
venues
and altogether 18 000 buildings in 40 countries.
NOKIA SIEMENS NETWORKS OPERATING HIGHLIGHTS
- Nokia Siemens Networks continued its mobile broadband deal momentum,
adding
commercial LTE deals in the third quarter, including: refarming the GSM
frequency band and providing infrastructure and services for a 4G roll-out
for
Optus in Australia; enabling Slovenia's first commercial 4G services for
Si.mobil; launching Russia's first TD-LTE 4G network for Mobile
TeleSystems; and
modernizing the Radio Access Network and expanding HSPA+ and LTE networks
for
Polkomtel in Poland.
- Nokia Siemens Networks also worked with Cisco and Harris Corporation to
support FirstNet's goal of a nationwide, multi-vendor public safety LTE
broadband network for first responder communications in the U.S., with the
successful completion of the initial phase of testing.
- In LTE technology developments, Nokia Siemens Networks announced the
expansion
of its portfolio, to enable smooth 4G rollouts using the 'Digital Dividend'
in
the Asia Pacific region, Latin America and other parts of the world. Nokia
Siemens Networks showcased LTE's low latency and high data transmission
rates
with Telefónica Germany at the first ever pan-European technology
festival
Campus Party in Berlin in September. In September, Nokia Siemens Networks
achieved a world record speed of 1.6 Gbps receiving and sending data in
simultaneous downlink and uplink connections at its lab in Arlington
Heights,
Illinois, U.S.
- In Optical, Nokia Siemens Networks deployed a new overlay network across
Europe to address the sizeable growth in data traffic, delivering speeds of
100G and beyond, for fiber-based telecom service provider TeliaSonera
International Carrier. Nokia Siemens Networks' optical technology has been
accorded Approved Product List (APL) status by the U.S. government's
Defense
Information Systems Agency (DISA), enabling the Department of Defense (DoD)
to
purchase and deploy the company's optical technology.
- At the end of September, Nokia Siemens Networks set in motion a series of
Liquid Net and Customer Experience Management portfolio launches and
updates to
be released during October 2012. These will culminate in a new approach to
delivering mobile broadband, charting a path for operators to be able to
profitably provide a gigabyte of personalized data per day for every user
by
2020.
- Since the end of the third quarter, Nokia Siemens Networks has completed
the
divestment of the assets of the non-core IPTV business to Belgacom and
Accenture.
FORWARD-LOOKING STATEMENTS
It should be noted that certain statements herein that are not historical
facts
are forward-looking statements, including, without limitation, those
regarding:
A) the expected plans and benefits of our partnership with Microsoft to
bring
together complementary assets and expertise to form a global mobile
ecosystem
for smartphones; B) the timing and expected benefits of our new strategies,
including expected operational and financial benefits and targets as well
as
changes in leadership and operational structure; C) the timing of the
deliveries
of our products and services; D) our ability to innovate, develop, execute
and
commercialize new technologies, products and services; E) expectations
regarding
market developments and structural changes; F) expectations and targets
regarding our industry volumes, market share, prices, net sales and margins
of
our products and services; G) expectations and targets regarding our
operational
priorities and results of operations; H) expectations and targets regarding
collaboration and partnering arrangements; I) the outcome of pending and
threatened litigation; J) expectations regarding the successful completion
of
restructurings, investments, acquisitions and divestments on a timely basis
and
our ability to achieve the financial and operational targets set in
connection
with any such restructurings, investments, acquisitions and divestments;
and K)
statements preceded by "believe," "expect," "anticipate," "foresee,"
"target,"
"estimate," "designed," "aim", "plans," "intends," "will" or similar
expressions. These statements are based on management's best assumptions
and
beliefs in light of the information currently available to it. Because they
involve risks and uncertainties, actual results may differ materially from
the
results that we currently expect. Factors that could cause these
differences
include, but are not limited to: 1) our success in the smartphone market,
including our ability to introduce and bring to market quantities of
attractive,
competitively priced Nokia products that operate on the Windows Phone
operating
system that are positively differentiated from our competitors' products,
both
outside and within the Windows Phone ecosystem; 2) our ability to make
Nokia
products that operate on the Windows Phone operating system a competitive
choice
for consumers, and together with Microsoft, our success in encouraging and
supporting a competitive and profitable global ecosystem for Windows Phone
products that achieves sufficient scale, value and attractiveness to all
market
participants; 3) reduced demand for, and net sales of, Nokia products that
operate on the Windows Phone 7 operating system in anticipation and
availability
of Nokia products with the new Windows Phone 8 operating system; 4) the
difficulties we experience in having a competitive offering of Symbian
devices
and maintaining the economic viability of the Symbian smartphone platform
during
the transition to Windows Phone as our primary smartphone platform; 5) our
ability to effectively and timely implement planned changes to our
operational
structure, including the planned restructuring measures, and to
successfully
complete the planned investments, acquisitions and divestments in order to
improve our operating model and achieve targeted efficiencies and
reductions in
operating expenses as well as our ability to accurately estimate the
related
restructuring charges and restructuring related cash outflows; 6) our
future
sales performance, among other factors, may require us to recognize
allowances
related to excess component inventory, future purchase commitments and
inventory
write-offs in our Devices & Services business; 7) our ability to realize
a
return on our investment in next generation devices, platforms and user
experiences; 8) our ability to produce attractive and competitive devices
in our
Mobile Phones business unit including feature phones and devices with more
smartphone-like features such as full touch devices, in a timely and cost
efficient manner with differentiated hardware, software, localized services
and
applications; 9) the intensity of competition in the various markets where
we do
business and our ability to maintain or improve our market position or
respond
successfully to changes in the competitive environment; 10) our ability to
retain, motivate, develop and recruit appropriately skilled employees; 11)
the
success of our Location & Commerce strategy, including our ability to
establish
a successful location-based platform, provide support for our Devices &
Services
business and create new sources of revenue from our location-based services
and
commerce assets; 12) our actual performance in the short-term and long-term
could be materially different from our forecasts, which could impact future
estimates of recoverable value of our reporting units and may result in
impairment charges; 13) our success in collaboration and partnering
arrangements
with third parties, including Microsoft; 14) our ability to increase our
speed
of innovation, product development and execution to bring new innovative
and
competitive mobile products and location-based or other services to the
market
in a timely manner; 15) our dependence on the development of the mobile and
communications industry, including location-based and other services
industries,
in numerous diverse markets, as well as on general economic conditions
globally
and regionally; 16) our ability to protect numerous patented standardized
or
proprietary technologies from third-party infringement or actions to
invalidate
the intellectual property rights of these technologies; 17) our ability to
maintain and leverage our traditional strengths in the mobile product
market if
we are unable to retain the loyalty of our mobile operator and distributor
customers and consumers as a result of the implementation of our strategies
or
other factors; 18) the success, financial condition and performance of our
suppliers, collaboration partners and customers; 19) our ability to manage
efficiently our manufacturing and logistics, as well as to ensure the
quality,
safety, security and timely delivery of our products and services; 20) our
ability to source sufficient amounts of fully functional quality
components,
sub-assemblies, software and services on a timely basis without
interruption and
on favorable terms; 21) our ability to manage our inventory and timely
adapt our
supply to meet changing demands for our products; 22) any actual or even
alleged
defects or other quality, safety and security issues in our products; 23)
the
impact of a cybersecurity breach or other factors leading to any actual or
alleged loss, improper disclosure or leakage of any personal or consumer
data
collected by us or our partners or subcontractors, made available to us or
stored in or through our products; 24) our ability to successfully manage
the
pricing of our products and costs related to our products and operations;
25)
exchange rate fluctuations, including, in particular, fluctuations between
the
euro, which is our reporting currency, and the US dollar, the Japanese yen
and
the Chinese yuan, as well as certain other currencies; 26) our ability to
protect the technologies, which we or others develop or that we license,
from
claims that we have infringed third parties' intellectual property rights,
as
well as our unrestricted use on commercially acceptable terms of certain
technologies in our products and services; 27) the impact of economic,
political, regulatory or other developments on our sales, manufacturing
facilities and assets located in emerging market countries; 28) the impact
of
changes in government policies, trade policies, laws or regulations where
our
assets are located and where we do business; 29) the potential complex tax
issues and obligations we may incur to pay additional taxes in the various
jurisdictions in which we do business and our actual or anticipated
performance,
among other factors, could result in allowances related to deferred tax
assets;
30) any disruption to information technology systems and networks that our
operations rely on; 31) unfavorable outcome of litigations; 32)
allegations of
possible health risks from electromagnetic fields generated by base
stations and
mobile products and lawsuits related to them, regardless of merit; 33)
Nokia
Siemens Networks ability to implement its new strategy and restructuring
plan
effectively and in a timely manner to improve its overall competitiveness
and
profitability; 34) Nokia Siemens Networks' success in the
telecommunications
infrastructure services market and Nokia Siemens Networks' ability to
effectively and profitably adapt its business and operations in a timely
manner
to the increasingly diverse service needs of its customers; 35) Nokia
Siemens
Networks' ability to maintain or improve its market position or respond
successfully to changes in the competitive environment; 36) Nokia Siemens
Networks' liquidity and its ability to meet its working capital
requirements;
37) Nokia Siemens Networks' ability to timely introduce new competitive
products, services, upgrades and technologies; 38) Nokia Siemens Networks'
ability to execute successfully its strategy for the acquired Motorola
Solutions
wireless network infrastructure assets; 39) developments under large,
multi-year
contracts or in relation to major customers in the networks infrastructure
and
related services business; 40) the management of our customer financing
exposure, particularly in the networks infrastructure and related services
business; 41) whether ongoing or any additional governmental investigations
into
alleged violations of law by some former employees of Siemens may involve
and
affect the carrier-related assets and employees transferred by Siemens to
Nokia
Siemens Networks; and 42) any impairment of Nokia Siemens Networks customer
relationships resulting from ongoing or any additional governmental
investigations involving the Siemens carrier-related operations transferred
to
Nokia Siemens Networks, as well as the risk factors specified on pages
13-47 of
Nokia's annual report on Form 20-F for the year ended December 31, 2011
under
Item 3D. "Risk Factors." Other unknown or unpredictable factors or
underlying
assumptions subsequently proving to be incorrect could cause actual results
to
differ materially from those in the forward-looking statements. Nokia does
not
undertake any obligation to publicly update or revise forward-looking
statements, whether as a result of new information, future events or
otherwise,
except to the extent legally required.
Nokia, Helsinki - October 18, 2012
- Nokia plans to publish its fourth quarter and annual 2012 report on
January
24, 2013.
- Nokia plans to publish the "Nokia in 2012" annual report, which includes
the
review by the Board of Directors and the audited annual accounts, in week
13 of
2013.
- Nokia's Annual General Meeting is scheduled to be held on May 7, 2013.
www.nokia.com
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: NOKIA via Thomson Reuters ONE
[HUG#1650314]