ESPOO, FINLAND--(Marketwire - Jan 24, 2013) -
Nokia Corporation
Interim report
January 24, 2013 at 13.00 (CET+1)
This is a summary of the fourth quarter and full year 2012 interim report
published today. The complete fourth quarter and full year 2012 interim
report
with tables is available at
http://www.results.nokia.com/results/Nokia_results2012Q4e.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
Fourth quarter 2012 highlights:
Nokia Group non-IFRS EPS in Q4 2012 was EUR 0.06; reported EPS was EUR
0.05.
- Nokia Group achieves underlying operating profitability, with Q4 non-IFRS
operating margin of 7.9%.
- Nokia Group strengthened its net cash position by approximately EUR 800
million sequentially, of which approximately EUR 650 million was generated
by
Nokia Siemens Networks.
- Devices & Services Q4 non-IFRS operating margin improved
quarter-on-quarter to
1.3%, due to an increase in gross margin as well as a decrease in operating
expenses.
- Nokia Siemens Networks non-IFRS operating margin improved
quarter-on-quarter
and year-on-year to a 14.4% in Q4, the highest level of underlying
operating
profitability since its formation in April 2007, primarily due to an
increase in
gross margin.
Full year 2012 highlights:
Nokia Group full year 2012 non-IFRS EPS was EUR -0.17; reported EPS was EUR
-0.84.
- Nokia Group achieves underlying operating profitability, with full year
2012
non-IFRS operating margin of 0.4%.
- Nokia Group ends 2012 with a strong balance sheet and solid cash
position.
Gross cash was EUR 9.9 billion and net cash was EUR 4.4 billion, after
incurring
cash outflows related to restructuring of approximately EUR 1.5 billion and
dividend payment of approximately EUR 750 million.
- To ensure strategic flexibility, the Nokia Board of Directors will
propose
that no dividend payment will be made for 2012 (EUR 0.20 per share for
2011).
Nokia's Q4 financial performance combined with this dividend proposal
further
solidifies the company's strong liquidity position.
Commenting on the results, Stephen Elop, Nokia CEO, said:
"We are very encouraged that our team's execution against our business
strategy
has started to translate into financial results. Most notably we are
pleased
that Nokia Group reached underlying operating profitability in the fourth
quarter and for the full year 2012.
While the first half of 2012 was difficult for Nokia Group, in Q4 2012 we
strengthened our financial position, improved our underlying operating
margin in
Devices & Services, introduced the HERE brand to expand our mapping and
location
experiences, and drove record profitability in Nokia Siemens Networks.
We remain focused on moving through our transition, which includes
continuing to
improve our product competitiveness, accelerate the way we operate and
manage
our costs effectively. All of these efforts are aimed at improving our
financial
performance and delivering more value to our shareholders."
SUMMARY FINANCIAL INFORMATION
+---------------+-----------------------------------++--------------------+
| |Reported and Non-IFRS ||Reported and |
| |fourth quarter 2012 results1,2 ||Non-IFRS full year |
| | ||2012 results1,2 |
| +------+-------+-----+-------+------++------+------+------+
|EUR million | Q4/ |Q4/ |YoY |Q3/ |QoQ || | |YoY |
| | 2012 |2011 |Change|2012 |Change|| 2012 | 2011|Change|
+---------------+------+-------+------+------+------++------+-------+-----+
|Nokia Group | | | | | || | | |
| | | | | | || | | |
|Net sales | 8 041| 10 005| -20%| 7 239| 11%||30 176|38 659 | -22%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | 439| -954| | -576| ||-2 303| -1 073| |
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | | | | | || | | |
|(non-IFRS) | 635| 478| 33%| 78| 714%|| 126| 1 825| -93%|
| | | | | | || | | |
|EPS, EUR | | | | | || | | |
|diluted | 0.05| -0.29| | -0.26| || -0.84| -0.31| |
| | | | | | || | | |
|EPS, EUR | | | | | || | | |
|diluted | | | | | || | | |
|(non-IFRS)3 | 0.06| 0.06| 0%| -0.07| || -0.17| 0.29| |
| | | | | | || | | |
|Net cash from | | | | | || | | |
|operating | | | | | || | | |
|activities | 563| 634| -11%| -429| || -354| 1 137| |
| | | | | | || | | |
|Net cash and | | | | | || | | |
|other liquid | | | | | || | | |
|assets4 | 4 360| 5 581| -22%| 3 564| 22%|| 4360| 5 581| -22%|
+---------------+------+-------+------+------+------++------+-------+-----+
|Devices & | | | | | || | | |
|Services5 | | | | | || | | |
| | | | | | || | | |
|Net sales | 3 854| 5 997| -36%| 3 563| 8%||15 686| 23 943| -34%|
| | | | | | || | | |
|Smart Devices | | | | | || | | |
|net sales | 1 225| 2 747| -55%| 976| 26%|| 5 446| 10 820| -50%|
| | | | | | || | | |
|Mobile Phones | | | | | || | | |
|net sales | 2 468| 3 040| -19%| 2 366| 4%|| 9 436| 11 930| -21%|
| | | | | | || | | |
|Mobile device | | | | | || | | |
|volume | | | | | || | | |
|(million units)| 86.3| 113.5| -24%| 82.9| 4%|| 335.6| 417.1| -20%|
| | | | | | || | | |
|Smart Devices | | | | | || | | |
|volume | | | | | || | | |
|(million units)| 6.6| 19.6| -66%| 6.3| 5%|| 35.1| 77.3| -55%|
| | | | | | || | | |
|Mobile Phones | | | | | || | | |
|volume | | | | | || | | |
|(million units)| 79.6| 93.9| -15%| 76.6| 4%|| 300.5| 339.8| -12%|
| | | | | | || | | |
|Mobile device | | | | | || | | |
|ASP6 | 45| 53| -15%| 43| 5%|| 47| 57| -18%|
| | | | | | || | | |
|Smart Devices | | | | | || | | |
|ASP6 | 186| 140| 33%| 155| 20%|| 155| 140| 11%|
| | | | | | || | | |
|Mobile Phones | | | | | || | | |
|ASP6 | 31| 32| -3%| 31| 0%|| 31| 35| -11%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | 276| 203| 36%| -683| ||-1 100| 884| |
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | | | | | || | | |
|(non-IFRS) | 52| 292| -82%| -263| || -703| 1 683| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | 7.2%| 3.4%| |-19.2%| || -7.0%| 3.7%| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | | | | | || | | |
|(non-IFRS) | 1.3%| 4.9%| | -7.4%| || -4.5%| 7.0%| |
+---------------+------+-------+------+------+------++------+-------+-----+
|Location & | | | | | || | | |
|Commerce5 | | | | | || | | |
| | | | | | || | | |
|Net sales | 278| 306| -9%| 265| 5%|| 1 103| 1 091| 1%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | -56| -1 205| | -56| || -301| -1 526| |
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | | | | | || | | |
|(non-IFRS) | 40| 29| 38%| 37| 8%|| 154| 48| 221%|
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % |-20.1%|-393.8%| |-21.1%| ||-27.3%|-139.9%| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | | | | | || | | |
|(non-IFRS) | 14.4%| 9.5%| | 14.0%| || 13.9%| 4.4%| |
+---------------+------+-------+------+------+------++------+-------+-----+
|Nokia Siemens | | | | | || | | |
|Networks5 | | | | | || | | |
| | | | | | || | | |
|Net sales | 3 988| 3 815| 5%| 3 501| 14%||13 779| 14 041| -2%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | 251| 67| 275%| 182| 38%|| -799| -300| |
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | | | | | || | | |
|(non-IFRS) | 575| 176| 227%| 323| 78%|| 778| 225| 246%|
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | 6.3%| 1.8%| | 5.2%| || -5.8%| -2.1%| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | | | | | || | | |
|(non-IFRS) | 14.4%| 4.6%| | 9.2%| || 5.6%| 1.6%| |
+---------------+------+-------+------+------+------++------+-------+-----+
Note 1 relating to non-IFRS (also referred to as "underlying") results: In
addition to information on our reported IFRS results, we provide certain
information on a non-IFRS, or underlying business performance, basis.
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 business 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 2
below
for information about the exclusions from our non-IFRS results. More
information, including a reconciliation of our Q4 2012 and Q4 2011 non-IFRS
results to our reported results, can be found in our complete Q4 2012
interim
report with tables on pages 18 and 20-24. A reconciliation of our full year
2012 and full year 2011 non-IFRS results to our reported results can be
found in
the same report on pages 40-45. A reconciliation of our Q3 2012 non-IFRS
results to our reported results can be found in our complete Q3 interim
report
with tables on pages 19 and 22-26 published on October 18, 2012.
Note 2 relating to non-IFRS exclusions:
Q4 2012 - EUR 196 million (net) consisting of:
- EUR 255 million restructuring charge and other associated item in Nokia
Siemens Networks, including EUR 34 million of net charges related to
country and
contract exits based on new strategy that focuses on key markets and
product
segments, as well as an impairment of assets of EUR 2 million.
- EUR 9 million restructuring charge in Location & Commerce
- EUR 2 million restructuring related impairments in Devices & Services
- EUR 75 million net benefit from releases of restructuring provisions in
Devices & Services
- EUR 21 million positive item from a cartel claim settlements in Devices &
Services
- EUR 52 million net gain on sale of Vertu business in Devices & Services
- EUR 79 million net gain on sale of real estate 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 87 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
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.
Q4 2011 - EUR 1 432 million (net) consisting of:
- EUR 1 090 million partial impairment of goodwill in Location & Commerce
- EUR 25 million restructuring charge in Location & Commerce
- EUR 119 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 100 million restructuring charge and EUR 36 million associated
impairments
in Devices & Services
- EUR 2 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and
Motally in
Devices & Services
- EUR 86 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 23 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 49 million benefit from a cartel claim settlement
Note 3 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 0.5 Euro cent higher in Q4 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 4 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 53 of the complete Q4 2012 interim report with tables
Note 5 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 through October 12,
2012,
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. On November 13, 2012, Nokia
introduced HERE, the new brand for its location and mapping service. For
financial reporting purposes, the Location & Commerce business will be
renamed
as the HERE business, starting with the first quarter 2013. Nokia Siemens
Networks is one of the leading global providers of telecommunications
infrastructure hardware, software and services. Nokia Siemens Networks
completed
the acquisition of Motorola Solutions' networks assets on April 30, 2011.
Accordingly, the results of Nokia Siemens Networks for 2012 are not
directly
comparable to 2011.
Note 6 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 through October 12, 2012, 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 Devices & Services non-IFRS operating margin in the
first
quarter 2013 to be approximately negative 2 percent, plus or minus four
percentage points. This outlook is based on Nokia's expectations regarding
a
number of factors, including:
- competitive industry dynamics continuing to negatively affect the Mobile
Phones and Smart Devices business units;
- the first quarter being a seasonally weak quarter;
- consumer demand, particularly for our Lumia and Asha smartphones;
- continued ramp up for our new Lumia smartphones;
- expected cost reductions under Devices & Services' restructuring program;
and
- the macroeconomic environment.
- 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 expects Location & Commerce non-IFRS operating margin in the first
quarter 2013 to be negative due to lower recognized revenue from internal
sales,
which carry higher gross margin, and to a lesser extent by a negative mix
shift
within external sales.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin in the first quarter 2013 to be approximately positive 3
percent, plus or minus four percentage points. This outlook is based on
Nokia
Siemens Networks' expectations regarding a number of factors, including:
- competitive industry dynamics;
- the first quarter being a seasonally weak quarter;
- product and regional mix;
- expected continued improvement under Nokia Siemens Networks'
restructuring
program; and
- the macroeconomic environment.
- Nokia Siemens Networks now targets to reduce its non-IFRS annualized
operating
expenses and production overheads by more than EUR 1 billion by the end of
2013, compared to the end of 2011. Nokia Siemens Networks previous target
was 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.
FOURTH QUARTER 2012 FINANCIAL AND OPERATING DISCUSSION
NOKIA GROUP
See note 5 to our Summary Financial Information table above concerning our
current operational and reporting structure which we adopted during 2011.
The
following discussion includes information on a non-IFRS, or underlying
business
performance, basis. See notes 1 and 2 to our Summary Financial Information
table
above for information about our underlying non-IFRS results and the
non-IFRS
exclusions for the periods discussed below.
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.
+----------------------------------------------------------------+
| FOURTH QUARTER 2012 NET SALES, |
| REPORTED & CONSTANT CURRENCY1 |
+--------------------------------------+------------+------------+
| | YoY Change | QoQ Change |
+--------------------------------------+------------+------------+
| Group net sales - reported | -20% | 11% |
| | | |
| Group net sales - constant currency1 | -23% | 12% |
| | | |
| Devices & Services | | |
| net sales -reported | -36% | 8% |
| | | |
| Devices & Services | | |
| net sales - constant currency1 | -40% | 8% |
| | | |
| Nokia Siemens Networks | | |
| net sales -reported | 5% | 14% |
| | | |
| Nokia Siemens Networks | | |
| net sales - constant currency1 | 1% | 16% |
+--------------------------------------+------------+------------+
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 increased 12% 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 |
+---------------------+--------+--------+-------+--------+-------+
| | | | YoY | | QoQ |
| EUR million |Q4/2012 |Q4/2011 |Change |Q3/2012 |Change |
+---------------------+--------+--------+-------+--------+-------+
| Net cash from | | | | | |
| operating activities| 563 | 634 | -11% | -429 | |
+---------------------+--------+--------+-------+--------+-------+
| Total cash and | | | | | |
| other liquid assets | 9 909 | 10 902 | -9% | 8 779 | 13% |
+---------------------+--------+--------+-------+--------+-------+
| Net cash and | | | | | |
| other liquid assets1| 4 360 | 5 581 | -22% | 3 564 | 22% |
+---------------------+--------+--------+-------+--------+-------+
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities.
Year-on-year, net cash and other liquid assets decreased by EUR 1.2 billion
in
the fourth quarter 2012, primarily due to cash outflows related to
restructuring
of approximately EUR 1.5 billion, the payment of the dividend of
approximately
EUR 750 million, cash outflows related to net financial expenses and taxes
as
well as capital expenditures. This was partially offset by positive overall
net
cash from operating activities, excluding cash outflows related to
restructuring, net financial expenses and taxes, as well as cash flows
related
to the receipt of quarterly platform support payments from Microsoft (which
commenced in the fourth quarter 2011).
Sequentially, net cash and other liquid assets increased by EUR 796 million
in
the fourth quarter 2012, primarily due to positive Nokia Siemens Networks
operating profits, the receipt of a USD 250 million (approximately EUR 196
million) quarterly platform support payment from Microsoft and proceeds
from
real estate sales and business divestments, partially offset by cash
outflows
related to restructuring, taxes and net financial expenses as well as
capital
expenditures.
In the fourth quarter 2012, Nokia Siemens Networks' contribution to net
cash
from operating activities was approximately EUR 740 million, primarily due
to
net profit adjusted for non-cash items. At the end of the fourth quarter
2012,
Nokia Siemens Networks' contribution to the Nokia gross cash was EUR 2.4
billion
and contribution to Nokia's net cash was EUR 1.3 billion.
Our agreement with Microsoft includes platform support payments from
Microsoft
to us as well as software royalty payments from us to Microsoft. In the
fourth
quarter 2012, we received a quarterly platform support payment of USD 250
million (approximately EUR 196 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. Over the life of the
agreement the total amount of the platform support payments is expected to
slightly exceed the total amount of the minimum software royalty commitment
payments. To date the amount of platform support payments received by Nokia
has
exceeded the amount of minimum royalty commitment payments to Microsoft.
Thus
for the remainder of the life of the agreement the total amount of the
minimum
software royalty commitment payments are expected to exceed the total
amount of
the platform support payments. In accordance with the terms of the
agreement,
the platform support payments and annual minimum software royalty
commitment
payments continue for a corresponding period of time.
During fourth quarter 2012, Nokia Group performed its annual goodwill
impairment
assessment. The methodology and models used for the annual impairment
assessment
are consistent with our second quarter 2012 interim analysis and our last
annual
assessment performed during the fourth quarter 2011. Inputs to the
valuation
model, such as cash flows, discount rates and growth rates, have been
updated to
reflect our most recent projections and they materially align with the
interim
analysis conducted during second quarter 2012.
At the date of our 2012 annual impairment assessment, goodwill amounting to
EUR
530 million, EUR 899 million, EUR 3 270 million and EUR 183 million was
allocated to Mobile Phones, Smart Devices, Location & Commerce and Nokia
Siemens
Networks, respectively. No goodwill impairment charge was recorded during
the
fourth quarter 2012 as a result of the goodwill impairment assessment.
However a
change in any of the key assumptions used in measuring the recoverable
value of
our Location & Commerce business could have resulted in goodwill
impairment.
While we believe the estimated recoverable values are reasonable, 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 could result in impairment charges.
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 |
+--------------------------+--------+---------+--------+---------+--------+
| | | | YoY | | QoQ |
| |Q4/2012 | Q4/2011 | Change | Q3/2012 | Change |
+--------------------------+--------+---------+--------+---------+--------+
| Net sales (EUR million)1 | 3 854 | 5 997 | -36% | 3 563 | 8% |
+--------------------------+--------+---------+--------+---------+--------+
| Mobile device volume | | | | | |
| (million units) | 86.3 | 113.5 | -24% | 82.9 | 4% |
+--------------------------+--------+---------+--------+---------+--------+
| Mobile device ASP (EUR) | 45 | 53 | -15% | 43 | 5% |
+--------------------------+--------+---------+--------+---------+--------+
| Non-IFRS gross margin (%)| 23.9% | 25.8% | | 18.5% | |
+--------------------------+--------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| expenses (EUR million) | 869 | 1 262 | -31% | 915 | -5% |
+--------------------------+--------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| margin (%) | 1.3% | 4.9% | | -7.4% | |
+--------------------------+--------+---------+--------+---------+--------+
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.
Smartphone Volumes
In the fourth quarter 2012, Devices & Services total smartphone volumes
were
15.9 million units, composed of:
- 9.3 million Asha full touch smartphones in Mobile Phones
- 4.4 million Lumia smartphones in Smart Devices
- 2.2 million Symbian smartphones in Smart Devices
Devices & Services Other
Both year-on-year and sequentially, Devices & Services Other net sales were
lower in the fourth quarter 2012 primarily due to the divestment of Vertu.
Following the divestment of Vertu, Devices & Services Other net sales are
comprised of IPR income and sales of spare parts. In the fourth quarter
2012,
Devices & Services Other net sales benefitted from non-recurring IPR income
of
approximately EUR 50 million. Within Devices & Services Other, we estimate
that
our current annual IPR income run-rate is approximately EUR 0.5 billion.
Channel Inventory
We ended the fourth quarter 2012 at the higher end of our normal 4 to 6
week
channel inventory range. On an absolute unit basis channel inventories
increased
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 | Q4/2012 | Q4/2011 | Change | Q3/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 1 210 | 1 922 | -37% | 985 | 23% |
| | | | | | |
| Middle East & Africa | 745 | 1 065 | -30% | 682 | 9% |
| | | | | | |
| Greater China | 213 | 1 008 | -79% | 278 | -23% |
| | | | | | |
| Asia-Pacific | 941 | 1 297 | -27% | 977 | -4% |
| | | | | | |
| North America | 196 | 53 | 270% | 36 | 444% |
| | | | | | |
| Latin America | 549 | 652 | -16% | 605 | -9% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 3 854 | 5 997 | -36% | 3 563 | 8% |
+----------------------+---------+---------+--------+---------+--------+
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 | Q4/2012 | Q4/2011 | Change | Q3/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 19.4 | 25.3 | -23% | 16.8 | 15% |
| | | | | | |
| Middle East & Africa | 21.8 | 25.9 | -16% | 19.1 | 14% |
| | | | | | |
| Greater China | 4.6 | 14.7 | -69% | 5.8 | -21% |
| | | | | | |
| Asia-Pacific | 28.7 | 34.7 | -17% | 30.1 | -5% |
| | | | | | |
| North America | 0.7 | 0.5 | 40% | 0.3 | 133% |
| | | | | | |
| Latin America | 11.1 | 12.4 | -10% | 10.8 | 3% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 86.3 | 113.5 | -24% | 82.9 | 4% |
+----------------------+---------+---------+--------+---------+--------+
On a year-on-year basis, the increases in North America net sales and
volumes
were primarily due to our Smart Devices business unit, most notably higher
net
sales and volumes of our Lumia devices. On a year-on-year basis, the
decrease in
Greater China net sales was primarily due to our Smart Devices business
unit,
most notably lower net sales of our Symbian devices. On a year-on-year
basis,
the decrease in Greater China volumes was primarily due to our Smart
Devices
business unit, most notably lower volumes of our Symbian devices as well as
lower volumes of our Mobile Phones devices.
On a sequential basis, the increases in North America net sales and volumes
were
primarily due to our Smart Devices business unit, most notably higher net
sales
and volumes of our Lumia devices. On a sequential basis, the decreases in
Greater China net sales and volumes were primarily due to lower net sales
and
volumes our Mobile Phones devices.
At constant currency Devices & Services' net sales would have decreased 40%
year-on-year and increased 8% sequentially.
Operating Expenses
Devices & Services non-IFRS operating expenses decreased 31% year-on-year
and
5% sequentially in the fourth quarter 2012. On a year-on-year basis,
operating
expenses related to Mobile Phones and Smart Devices decreased 19% and 34%
respectively, in the fourth quarter 2012. On a sequential basis, operating
expenses related to Mobile Phones decreased by 12% while Smart Devices
operating
expenses increased 9%, respectively, in the fourth quarter 2012. In
addition to
the factors described below, the year-on-year changes were affected by 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.
Devices & Services non-IFRS research and development expenses decreased 34%
year-on-year in the fourth quarter 2012. On a sequential basis, Devices &
Services non-IFRS research and development expenses decreased 8% in the
fourth
quarter 2012. Both the year-on-year and sequential declines were primarily
due
to ramping down Symbian and MeeGo, reductions in certain Mobile Phones
related
activities and overall cost controls.
Devices & Services non-IFRS sales and marketing expenses decreased 28%
year-on-year in the fourth quarter 2012. On a year-on-year basis marketing
expenses
declined primarily due to lower marketing expenditure on Symbian, a lower
cost
base as a result of business divestments and tight cost control, partially
offset by higher marketing expenditure related to our Lumia devices. On a
sequential basis, Devices & Services non-IFRS sales and marketing expenses
increased 3% in the fourth quarter 2012. Sequentially, marketing expenses
increased primarily due to higher expenditure on Lumia and seasonality,
partially offset by business divestments, headcount reductions and tight
cost
control.
Devices & Services non-IFRS administrative and general expenses decreased
30%
year-on-year in the fourth quarter 2012 and 35% sequentially. The
year-on-year
and sequential decreases are primarily related to cost savings in support
functions, business divestments and shared function cost categorization.
In the fourth quarter 2012, Devices & Services non-IFRS other income and
expense
had a negative year-on-year and positive sequential impact on
profitability. On
a reported basis, other income and expense was positively affected in the
fourth
quarter 2012 primarily as a result of net gains from the sale of real
estate of
EUR 79 million, the divestment of the Vertu business of EUR 52 million and
a
positive item of EUR 21 million from a cartel claim settlement, as well as
an
EUR 75 million net benefit related to restructuring provision releases as
discussed in the "Cost Reduction Activities and Planned Operational
Adjustments"
section below.
Operating Margin
The lower year-on-year Devices & Services non-IFRS operating margin in the
fourth 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
fourth quarter 2012 was primarily due to higher gross margin and to a
lesser
extent lower operating expenses.
Cost Reduction Activities and Planned Operational Adjustments
+-------------------------------------------------------------------------+
|DEVICES & SERVICES RESTRUCTURING SUMMARY |
+-------------+-------------+-------------+---------+--------+------------+
| | | | Q1/2013| 2013 | |
| | |Cumulative up|(approxi-|(approx-| Total|
| | Q4/2012| to Q4/2012| mate| imate|(approximate|
|EUR (million)|(approximate)|(approximate)|estimate)|estimate| estimate)|
+-------------+-------------+-------------+---------+--------+------------+
|Restructuring| | | | | |
|related | | | Not| Not| |
|charges | -73| 1 400| provided|provided| 1 600|
+-------------+-------------+-------------+---------+--------+------------+
|Restructuring| | | | | |
|related cash | | | | | |
|outflows | 300| 1 100| 150| 300| 1 400|
+-------------+-------------+-------------+---------+--------+------------+
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 fourth quarter 2012, Devices & Services and Corporate
Common
had approximately 33 200 employees, a reduction of approximately 16 500
compared
to fourth quarter 2011, and approximately 5 000 compared to third 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
fourth quarter of 2012, we recognized a net benefit of EUR 73 million
related to
restructuring provision releases and impairments related to our
restructuring
activities in Devices & Services. By the end of the fourth quarter 2012, we
had
recorded cumulative Devices & Services restructuring charges and other
associated items of approximately EUR 1.4 billion. In total, we expect now
cumulative Devices & Services restructuring charges of approximately EUR
1.6
billion before the end of 2013. This is approximately EUR 200 million less
than
what we estimated earlier.
By the end of the fourth quarter 2012, Devices & Services had cumulative
restructuring related cash outflows of approximately EUR 1.1 billion. We
expect
Devices & Services restructuring related cash outflows to be approximately
EUR
150 million in first quarter 2013 and approximately EUR 300 million in full
year
2013. Of the total expected charges relating to restructuring activities of
approximately EUR 1.6 billion, we expect Devices & Services non-cash
charges to
be approximately EUR 200 million. This means that we also now expect total
restructuring related cash outflows to be approximately EUR 200 million
less
than what we estimated earlier.
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 |
| | Q4/2012 | Q4/2011 | Change |Q3/2012 | Change |
+--------------------------+---------+---------+--------+--------+--------+
| Net sales (EUR million)1 | 1 225 | 2 747 | -55% | 976 | 26% |
+--------------------------+---------+---------+--------+--------+--------+
| Smart Devices volume | | | | | |
| (million units) | 6.6 | 19.6 | -66% | 6.3 | 5% |
+--------------------------+---------+---------+--------+--------+--------+
| Smart Devices ASP (EUR) | 186 | 140 | 33% | 155 | 20% |
+--------------------------+---------+---------+--------+--------+--------+
| Gross margin (%) | 18.0% | 19.9% | | -3.5% | |
+--------------------------+---------+---------+--------+--------+--------+
| Operating expenses | | | | | |
| (EUR million)2 | 481 | 732 | -34% | 441 | 9% |
+--------------------------+---------+---------+--------+--------+--------+
| Contribution margin (%)2 | -21.6% | -7.0% | | -48.9% | |
+--------------------------+---------+---------+--------+--------+--------+
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 was affected by 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, third and fourth quarters 2012. Accordingly, fourth quarter 2012
operating expenses are not directly comparable to fourth quarter 2011
operating
expenses.
Net Sales
On a year-on-year basis, the decline in our Smart Devices net sales in the
fourth quarter 2012 was due to lower volumes partially offset by higher
ASPs. On
a sequential basis, the increase in our Smart Devices net sales in the
fourth
quarter 2012 was due to higher ASPs and volumes.
Volume
During the fourth quarter 2012 we shipped 6.6 million Smart Devices units,
of
which 4.4 million were Lumia devices. During the fourth quarter 2012 our
Smart
Devices volumes were affected by supply constraints as we ramped up our
production capacity, particularly related to the Lumia 920, which have
continued
into the first quarter 2013. Symbian devices accounted for 2.2 million
units of
our Smart Devices volumes in the fourth quarter 2012. We expect our Symbian
devices to account for a significantly smaller portion of our overall Smart
Devices volumes in the first quarter 2013 and going forward.
The year-on-year decline in our Smart Devices volumes in the fourth quarter
2012 continued to be driven by the strong momentum of competing smartphone
platforms and our portfolio transition from Symbian devices to Lumia
devices.
The decline was primarily due to lower Symbian device volumes, partially
offset
by higher Lumia device volumes. On a geographical basis, the decrease in
volumes
was due to lower volumes in Greater China, Europe, Asia-Pacific, Middle
East and
Africa and Latin America, partially offset by an increase in volumes in
North
America.
On a sequential basis, the increase in our Smart Devices volumes in the
fourth
quarter 2012 was primarily due to higher Lumia device volumes, partially
offset
by lower Symbian device volumes. On a geographical basis, the increase in
volumes was primarily due to higher volumes in North America and Europe,
partially offset by lower volumes in all other regions.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in the fourth quarter
2012
was primarily due to a positive mix shift towards sales of our Lumia
devices
which carry a higher ASP than our Symbian devices, partially offset by our
pricing actions taken in previous quarters in 2012 related to certain Lumia
devices.
Sequentially, the increase in our Smart Devices ASP in the fourth quarter
2012
was primarily due to a positive mix shift towards sales of our newly
launched
Lumia devices which had a higher ASP, partially offset by general price
erosion.
The ASP of our Lumia devices in the fourth quarter 2012 was EUR 192,
compared to
EUR 160 in the third quarter 2012. The increase in Lumia ASPs was primarily
due
to a positive mix shift towards sales of our newly launched Lumia devices
which
had a higher ASP.
Gross Margin
The year-on-year decline in our Smart Devices gross margin in the fourth
quarter
2012 was primarily due to greater price erosion than cost erosion,
partially
offset by a positive product mix shift towards higher gross margin Lumia
devices
as well as the absence of Symbian related allowances which were recognized
in
the fourth quarter 2011. From an operating system perspective, the
year-on-year
decline in our Smart Devices gross margin in the fourth quarter 2012 was
primarily due to a lower Symbian gross margin.
On a sequential basis, the increase in our Smart Devices gross margin in
the
fourth quarter 2012 was primarily due to the absence of approximately EUR
120
million of inventory related allowances which were recognized in the third
quarter 2012 as well as a positive product mix shift towards higher gross
margin
devices, and lower Symbian fixed costs per unit. From an operating system
perspective, the sequential increase in our Smart Devices gross margin in
the
fourth quarter was primarily due to a higher Lumia gross margin as well as
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 consumer
demand
and continued ramp up particularly related to our new Lumia devices.
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 |
+------------------------------------+-------+-------+------+------+------+
| | Q4/| Q4/| YoY| Q3/| QoQ|
| | 2012| 2011|Change| 2012|Change|
+------------------------------------+-------+-------+------+------+------+
|Net sales (EUR million)1 | 2 468| 3 040| -19%| 2 366| 4%|
+------------------------------------+-------+-------+------+------+------+
|Mobile Phones volume (million units)| 79.6| 93.9| -15%| 76.6| 4%|
+------------------------------------+-------+-------+------+------+------+
|Mobile Phones ASP (EUR) | 31| 32| -3%| 31| 0%|
+------------------------------------+-------+-------+------+------+------+
|Gross margin (%) | 22.2%| 27.7%| | 21.7%| |
+------------------------------------+-------+-------+------+------+------+
|Operating expenses (EUR million)2 | 346| 429| -19%| 393| -12%|
+------------------------------------+-------+-------+------+------+------+
|Contribution margin (%)2 | 8.2%| 13.5%| | 4.9%| |
+------------------------------------+-------+-------+------+------+------+
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 was affected by 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, third and fourth quarters 2012. Accordingly, fourth quarter 2012
operating expenses are not directly comparable to fourth quarter 2011
operating
expenses.
Net Sales
On a year-on-year basis, the decline in our Mobile Phones net sales in the
fourth quarter 2012 was due to lower volumes as well as lower ASPs. On a
sequential basis, the increase in our Mobile Phones net sales in the fourth
quarter 2012 was primarily due to higher volumes.
Volume
During the fourth quarter 2012 we shipped 79.6 million Mobile Phones units,
of
which 9.3 million were Asha full touch smartphones.
On a year-on-year basis, the decrease in our Mobile Phones volumes in the
fourth
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. Overall volumes of
our
higher priced devices that we sell to our customers for above EUR 30 also
declined, despite the addition of Asha full touch smartphone volumes in the
fourth quarter 2012.
On a sequential basis, the increase in our Mobile Phones volumes in the
fourth
quarter 2012 was primarily due to the increase in volumes of our lower
priced
devices that we sell to our customers for below EUR 30. Volumes of our
higher
priced devices that we sell to our customers for above EUR 30 also
increased,
partially due to growth in volumes of our Asha full touch smartphones.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the fourth quarter
2012 was
primarily due to general price erosion and an increased proportion of sales
of
lower priced devices, partially offset by the net positive impact related
to
foreign currency fluctuations.
On a sequential basis, our Mobile Phones ASP was flat in the fourth quarter
2012 as a mix shift towards higher priced devices, including our full touch
Asha
smartphones, as well as the net positive impact from foreign currency
fluctuations were offset by general price erosion.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in the fourth
quarter
2012 was primarily due to a negative product mix shift towards lower gross
margin devices, as well as the net negative impact related to foreign
currency
fluctuations.
On a sequential basis, the increase in our Mobile Phones gross margin in
the
fourth quarter 2012 was primarily due to greater cost erosion than price
erosion, partially offset by the net negative impact related to foreign
currency
fluctuations.
LOCATION & COMMERCE
On November 13, 2012, Nokia introduced HERE, the new brand for its location
and
mapping service. For financial reporting purposes, the Location & Commerce
business will be renamed as the HERE business, starting with the first
quarter
2013.
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|
| |Q4/2012|Q4/2011|Change|Q3/2012|Change|
+--------------------------------+-------+-------+------+-------+------+
|Net sales (EUR millions) | 278| 306| -9%| 265| 5%|
+--------------------------------+-------+-------+------+-------+------+
|External net sales (EUR million)| 204| 200| 2%| 179| 14%|
+--------------------------------+-------+-------+------+-------+------+
|Internal net sales (EUR million)| 74| 106| -30%| 86| -14%|
+--------------------------------+-------+-------+------+-------+------+
|Non-IFRS gross margin (%) | 82.0%| 77.8%| | 80.4%| |
+--------------------------------+-------+-------+------+-------+------+
|Non-IFRS operating | | | | | |
|expenses (EUR million) | 189| 206| -8%| 175| 8%|
+--------------------------------+-------+-------+------+-------+------+
|Non-IFRS operating | | | | | |
|margin (%) | 14.4%| 9.5%| | 14.0%| |
+--------------------------------+-------+-------+------+-------+------+
Net Sales
In the fourth quarter 2012, the year-on-year increase in external Location
&
Commerce net sales was primarily due to higher sales of map content
licenses to
vehicle customers due to higher consumer uptake of vehicle navigation
systems.
In the fourth quarter 2012, the sequential increase in external Location &
Commerce net sales was primarily due to a higher consumer uptake of vehicle
navigation systems as well as seasonally higher sales to personal
navigation
devices customers.
In the fourth 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 increase in Location & Commerce non-IFRS gross
margin in the fourth quarter 2012 was primarily due to lower deferred cost
of
sales associated with internal sales and a higher gross margin within the
vehicle segment, partially offset by lower sales to personal navigation
device
customers.
On a sequential basis, the increase in Location & Commerce non-IFRS gross
margin
in the fourth quarter 2012 was primarily due to lower deferred cost of
sales
associated with internal sales, a higher gross margin within the vehicle
segment, and seasonally higher sales to personal navigation device
customers.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased
10%
year-on-year due to cost reductions. On a sequential basis, research and
development expenses increased 5% sequentially in the fourth quarter 2012
primarily due to increased project spending relating to software
development and
map creation.
Location & Commerce non-IFRS sales and marketing expenses decreased 8%
year-on-year primarily due to cost reduction actions. On a sequential
basis, sales and
marketing expenses increased 22% sequentially in the fourth quarter due to
higher marketing costs and investments to establish the new HERE brand.
Location & Commerce non-IFRS administrative and general expenses increased
6%
year-on-year and increased 12% sequentially in the fourth quarter 2012. On
a
year-on-year and sequential basis, the increase was primarily due to the
higher
use of services provided by shared support functions.
Location & Commerce non-IFRS other income and expense for the fourth
quarter
2012 was approximately zero, compared to expense of EUR 3 million in the
fourth
quarter 2011 and approximately zero in the third quarter 2012.
Operating Margin
The year-on-year increase in Location & Commerce non-IFRS operating margin
in
the fourth quarter 2012 was primarily due to lower operating expenses and
higher
gross margin, partially offset by lower net sales.
The approximately flat sequential Location & Commerce non-IFRS operating
margin
in the fourth quarter 2012 was primarily due to higher net sales and gross
margin, almost entirely offset by higher operating expenses.
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 |
| | Q4/2012 | Q4/2011 | Change | Q3/2012 |Change |
+--------------------------+---------+---------+--------+---------+-------+
| Net sales (EUR million) | 3 988 | 3 815 | 5% | 3 501 | 14% |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS gross margin (%)| 36.0% | 29.2% | | 32.2% | |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS operating | | | | | |
| expenses (EUR million) | 843 | 943 | -11% | 797 | 6% |
+--------------------------+---------+---------+--------+---------+-------+
| Non-IFRS operating | | | | | |
| margin (%) | 14.4% | 4.6% | | 9.2% | |
+--------------------------+---------+---------+--------+---------+-------+
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 million | Q4/2012 | Q4/2011 | Change | Q3/2012 | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 1 058 | 1 272 | -17% | 918 | 15% |
| | | | | | |
| Middle East & Africa | 388 | 394 | -2% | 325 | 19% |
| | | | | | |
| Greater China | 416 | 438 | -5% | 313 | 33% |
| | | | | | |
| Asia-Pacific | 1 176 | 909 | 29% | 1 266 | -7% |
| | | | | | |
| North America | 426 | 293 | 45% | 285 | 49% |
| | | | | | |
| Latin America | 524 | 509 | 3% | 394 | 33% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 3 988 | 3 815 | 5% | 3 501 | 14% |
+----------------------+---------+---------+--------+---------+--------+
The year-on-year increase in Nokia Siemens Networks' net sales in the
fourth
quarter 2012 was primarily due to higher sales of both infrastructure
equipment
and 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, as well as in North America which also saw strong
growth
in sales of both infrastructure equipment and services. This was partially
offset by lower sales in Europe, most notably in Western Europe due to
declines
in sales of both infrastructure equipment and services. In the fourth
quarter
2012, Nokia Siemens Networks net sales benefited from non-recurring IPR
income
of approximately EUR 30 million.
The sequential increase in Nokia Siemens Networks' net sales in the fourth
quarter 2012 was primarily due to higher sales of both services and
infrastructure equipment consistent with industry seasonality. On a
regional
basis, the sequential growth was primarily due to higher net sales in North
America which saw strong growth in sales of both infrastructure equipment
and
services, Latin America which saw strong growth in sales of both
infrastructure
equipment and services and Greater China which saw strong growth in sales
of
both services and infrastructure equipment, partially offset by lower sales
in
Asia Pacific, most notably Japan which saw a decline primarily in sales of
infrastructure equipment. In the fourth quarter 2012, Nokia Siemens
Networks net
sales benefited from non-recurring IPR income of approximately EUR 30
million.
At constant currency Nokia Siemens Networks' net sales would have increased
1%
year-on-year and increased 16% sequentially.
Gross Margin
On a year-on-year basis, the increase in Nokia Siemens Networks' non-IFRS
gross
margin in the fourth quarter 2012 was due to favorable product and regional
mix
towards higher gross margin revenues, particularly in infrastructure
equipment
and to a lesser extent services, driven mainly by Nokia Siemens Networks
priority markets including Japan, Korea and North America, partially offset
by
lower infrastructure equipment gross margin in Europe. In addition, the
year-on-year increase in Nokia Siemens Networks non-IFRS gross margin was
also due to
structural cost savings in its production overheads as part of its broader
cost
savings targets.
On a sequential basis, the increase in Nokia Siemens Networks' non-IFRS
gross
margin in the fourth quarter 2012 was due to favorable product and regional
mix
towards higher gross margin revenues, in both services and infrastructure
equipment, driven mainly by Latin America, North America and Europe,
partially
offset by Asia Pacific most notably in Japan. In addition, the sequential
increase in Nokia Siemens Networks non-IFRS gross margin was also due to
seasonally strong high gross margin software sales as well as 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
10% year-on-year in the fourth quarter 2012 primarily due to improvements
in
overall research and development efficiency. Sequentially, Nokia Siemens
Networks' non-IFRS research and development expenses increased 7% primarily
due
to higher accrued incentive expenses consistent with Nokia Siemens
Networks'
business performance in the fourth quarter 2012, partially offset by cost
control initiatives.
Year-on-year, Nokia Siemens Networks' non-IFRS sales and marketing expenses
decreased 11% in the fourth quarter 2012 primarily due to structural cost
savings, partially offset by higher accrued incentive expenses consistent
with
Nokia Siemens Networks' business performance in the fourth quarter 2012. On
a
sequential basis, Nokia Siemens Networks non-IFRS sales and marketing
expenses
increased 3% in the fourth quarter 2012 primarily due to higher accrued
incentive expenses consistent with Nokia Siemens Networks' business
performance
in the fourth quarter 2012, partially offset by structural cost savings.
Nokia Siemens Networks' non-IFRS administrative and general expenses
decreased
13% year-on-year in the fourth quarter 2012 primarily due to structural
cost
savings. On a sequential basis, Nokia Siemens Networks non-IFRS
administrative
and general expenses increased 5% in the fourth quarter 2012, primarily due
higher accrued incentive expenses consistent with Nokia Siemens Networks'
business performance in the fourth quarter 2012, as well as higher expense
reallocation to other function costs, which more than offset structural
cost
savings.
Nokia Siemens Networks' non-IFRS other income and expense for the fourth
quarter
2012 was an expense of EUR 16 million, compared to income of EUR 5 million
in
the fourth quarter 2011 and expense of EUR 8 million in the third 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 increase in Nokia Siemens Networks non-IFRS operating
margin in
the fourth quarter 2012 was primarily due to the higher gross margin and
higher
net sales, and to a lesser extent, lower operating expenses.
The sequential increase in Nokia Siemens Networks non-IFRS operating margin
in
the fourth quarter 2012 was primarily due to the higher net sales and gross
margin, partially offset by higher operating expenses.
Strategy Update and Global Restructuring Program
+-------------------------------------------------------------------------+
|NOKIA SIEMENS NETWORKS RESTRUCTURING SUMMARY |
+-------------+---------+----------+---------+--------+---------+---------+
| | |Cumulative| | | | |
| | | up to| Q1/2013| 2013 | 2014 | Total|
| | Q4/2012| Q4/2012|(approxi-|(approx-|(approxi-|(approxi-|
| |(approxi-| (approxi-| mate| imate| mate| mate|
|EUR (million)| mate)| mate)|estimate)|estimate|estimate)|estimate)|
+-------------+---------+----------+---------+--------+---------+---------+
|Restructuring| | | | | | |
|related | | | Not| Not| Not| |
|charges | 257| 1 300| provided|provided| provided| 1 300|
+-------------+---------+----------+---------+--------+---------+---------+
|Restructuring| | | | | | |
|related cash | | | | | | |
|outflows | 180| 650| 200| 450| 200| 1 300|
+-------------+---------+----------+---------+--------+---------+---------+
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 fourth quarter 2012, Nokia Siemens Networks had
approximately
58 400 employees, a reduction of approximately 15 300 compared to fourth
quarter
2011, and approximately 2 200 compared to third quarter 2012.
Nokia Siemens Networks now targets to reduce its non-IFRS annualized
operating
expenses and production overheads by more than EUR 1 billion by the end of
2013, compared to the end of 2011. Nokia Siemens Networks previous target
was 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.
By the end of the fourth quarter of 2012, Nokia Siemens Networks had
recorded
cumulative restructuring charges and other associated items of
approximately EUR
1.3 billion related to this restructuring program. In total we now expect
cumulative Nokia Siemens Networks' restructuring charges of approximately
EUR
1.3 billion by the end of 2013, virtually all of which have now been
recognized.
This is approximately EUR 100 million more than our previous estimate.
By the end of the fourth quarter 2012, Nokia Siemens Networks had
cumulative
restructuring related cash outflows of approximately EUR 650 million
related to
this restructuring program. Nokia Siemens Networks expects
restructuring-related
cash outflows to be approximately EUR 200 million in the first quarter
2013,
approximately EUR 450 million for the full year 2013, and approximately EUR
200
million for the full year 2014 related to this restructuring program. This
means
that we also now expect total restructuring related cash outflows to be
approximately EUR 100 million more than what we estimated earlier.
Nokia Siemens Networks is focused on maintaining a strong financial
position and
liquidity profile. Cash generation is a clear priority at Nokia Siemens
Networks, and the company intends to be self-funding in all aspects of its
operations.
Q4 OPERATING HIGHLIGHTS
NOKIA OPERATING HIGHLIGHTS
- Nokia completed its divestment of Vertu, the global leader in luxury
mobile
phones, to EQT VI. As part of the transaction, approximately 1 000
employees
have transferred with Vertu. Nokia retains a 10% minority shareholding in
Vertu.
- Nokia entered into a new patent license agreement with Research In
Motion. The
agreement results in settlement of all existing patent litigation between
the
companies and withdrawal of pending actions in the US, UK and Canada
related to
a recent arbitration tribunal decision.
- Nokia sold its head office building in Espoo, Finland, to Finland-based
Exilion and has leased it back from Exilion on a long-term lease. The
selling
price was EUR 170 million.
- Nokia completed an offering of EUR 750 million of senior unsecured
convertible
bonds due 2017 convertible into ordinary shares of Nokia Corporation. Nokia
intends to use the net proceeds of the offering to prudently manage its
capital
structure, proactively address upcoming maturities while preserving
existing
pools of liquidity and for general corporate purposes.
DEVICES & SERVICES OPERATING HIGHLIGHTS
SMART DEVICES
- Nokia commenced shipments of the Nokia Lumia 920 and the Nokia Lumia 820,
the
first devices in Nokia's Windows Phone 8 range. The Lumia 920 is the
flagship
Windows Phone 8 smartphone, introducing the latest advances in Nokia
PureView
imaging innovation. The Lumia 820 brings high end smartphone innovation
like
wireless charging, super-sensitive touch displays and new augmented reality
experiences, starting with Nokia City Lens, to a midrange price point.
- Nokia and Verizon Wireless commenced shipments of the Nokia Lumia 822,
which
provides Verizon Wireless customers with the high-end smartphone features
of the
Nokia Lumia 820 in a unique design package running on America's largest 4G
LTE
network.
- Nokia and China Mobile announced the Lumia 920T, the first TD-SCDMA
Windows
Phone in China. With optical image stabilization, world class location and
navigation services, and built-in wireless charging, the Lumia 920T is the
world's most innovative smartphone with the world's largest mobile
operator.
- Nokia introduced the Nokia Lumia 620, the third and most affordable in
its
range of Windows Phone 8 smartphones. Alongside the flagship Nokia Lumia
920 and
mid-range Nokia Lumia 820, the Nokia Lumia 620 comes in a compact, colorful
design and brings Windows Phone 8 to a more youthful audience.
MOBILE PHONES
- Nokia introduced the Nokia Asha 205 and Nokia 206 in both single SIM and
dual
SIM versions. Both devices reflect Nokia's heritage by combining stylish
design
and long-lasting battery life. The Nokia Asha 205 and Nokia 206 are the
first
Mobile Phones devices to include Nokia's exclusive Slam feature, which
enables
consumers to share multimedia content such as photos and videos with nearby
friends almost instantly. Slam works with most Bluetooth-enabled mobile
phones
without the need to pair devices, and without the recipient needing to also
have
Slam.
- Nokia commenced shipments of the Nokia Asha 308 and Asha 309, models
offering
a fluid 'swipe' user interface and an open environment for third-party
application development.
LOCATION & COMMERCE OPERATING HIGHLIGHTS
- Location & Commerce introduced a new brand -HERE -for our location-based
products and services and has begun adopting the HERE brand in the
portfolio.
HERE is the first location cloud to deliver the world's best maps and
location
experiences across multiple screens and operating systems. With the new
brand,
HERE, Nokia aims to inspire a new generation of location services and
devices
that make the mobile experience more personally significant for people
everywhere. For financial reporting purposes, the Location & Commerce
business
will be renamed as the HERE business, starting with the first quarter 2013.
- To further extend its location services, Location & Commerce launched a
maps
application for iOS under the HERE brand. Based on HTML5, it includes
offline
capabilities, voice-guided walk navigation, and public transport
directions. The
application is available for free download from Apple's App Store.
- Nokia announced a strategic partnership with Mozilla to bring new
location
experiences to the Firefox OS. Nokia plans to debut a mobile Web version of
HERE
Maps for the new Firefox OS next year. The companies are working together
to
give people the best mapping experience on Firefox OS.
- Nokia acquired earthmine inc. earthmine's reality capture and processing
technologies will become integral parts of the 3D map making capabilities
of
HERE.
- Nokia introduced LiveSight, a technology based on a highly accurate, 3D
map of
the world. LiveSight enables a precise and intuitive augmented reality
experience. Nokia City Lens, which was developed exclusively for Nokia
Lumia
devices and uses a phone's camera viewfinder to make discovering the world
as
easy as lifting up a phone, is the first application providing a
LiveSight-enabled experience.
- Oracle developed a built-in link between Oracle Fusion Middleware
MapViewer
and the Nokia Location Platform (NLP). This link removes the barrier to
customized map integration and extends the benefits of global maps for
business
use to Oracle users.
- Nokia's Location & Commerce business continued to strengthen its
portfolio of
location-based offerings for both Windows Phone 8 and Windows Phone 7.5:
- Location & Commerce brought its signature applications to the Nokia Lumia
range on Windows Phone 8, including true offline maps for Nokia Maps and
Nokia
Drive+ (beta).
- Location & Commerce continued its support for Nokia's Lumia range on
Windows
Phone 7.5 with new releases of Nokia Transport and Nokia Drive, extending
the
availability of the My Commute feature in Nokia Drive from five to 26
countries.
In addition, Location & Commerce also released a beta update to Nokia City
Lens
for Lumia on Windows Phone 7.5, its LiveSight-based 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 the most intuitive way to find hidden gems.
- After announcing in early 2012 that it is teaming with Groupon to bring
local
and national deals to Nokia customers and integrating Groupon Now! deals
into
Nokia Maps for the Lumia range in the third quarter, Location & Commerce
now
also integrated Groupon Now! deals into its maps desktop offering on
here.com.
NOKIA SIEMENS NETWORKS OPERATING HIGHLIGHTS
- Nokia Siemens Networks continued its mobile broadband deal momentum,
adding
commercial LTE deals in the fourth quarter, including: delivering a large,
multi-city, TD-LTE deployment for China Mobile; preparing O2's network in
the UK
to deliver LTE services across London and the south-east of England, ahead
of an
anticipated rapid launch of 4G in early 2013; completing the first 4G
pilot
with TD-LTE technology in Southern Europe for COTA, a new player in Spanish
telecoms, and Wimax Online; and helping Vodacom become the first operator
to
introduce voice and SMS alongside LTE in South Africa.
- Nokia Siemens Networks provided GSM and 3G mobile broadband
infrastructure and
services in Central and East Java, Sumatra, and Kalimantan for Indosat in
Indonesia; and deployed Wide Band Adaptive Multi-Rate (WB-AMR) software for
Smart Communications 3G network in Mega Manila in the Philippines,
providing
high-definition (HD) voice services to subscribers.
- Nokia Siemens Networks combined three powerful WCDMA software features
with
the introduction of its Liquid Radio WCDMA software suite to deliver faster
data
uploads and extract the full benefit from network resources and smartphone
capabilities, helping operators improve customer satisfaction and cut churn
while increasing revenue from greater 3G availability. Nokia Siemens
Networks
also launched a new package of services to ensure operators have the most
profitable blend of macro and small cells for mobile broadband, as well as
a new
second-generation 3G femto access point that provides mobile coverage in
the
home or small office.
- Nokia Siemens Networks' Flexi Zone was awarded the 'Best of 4G award' at
4G
World in Chicago, in the Radio Access Network (RAN) and Small Cell
Technology
Product category for its RAN & small cell technology product, based on the
company's Liquid Radio architecture, recognizing mobile broadband
innovative
design, small cell technology and approach. In a recent proof of concept
project
based on Liquid Core architecture, Nokia Siemens Networks and a leading
global
operator jointly demonstrated that core virtualization and cloud management
are
viable technologies for deployment by operators.
- In Services, Nokia Siemens Networks launched an industry-first capability
center - Service Operations and Management solution - which combines
insights
related to service performance with operations functions to enable
operators to
manage mobile broadband services and tackle service degradation before
subscribers experience poor quality.
- Nokia Siemens Networks enhanced its award-winning Customer Experience
Management (CEM) on Demand portal by adding three new software content
packs and
related services to help operators pinpoint actionable problems on
internet-based maps in seconds and rank the individual customer perception
of any problem
they experience, in addition to providing trends in service use, network
performance and customer experience.
- Guangdong Mobile, China Mobile's largest subsidiary, selected Nokia
Siemens
Networks' Customer Experience Management engine Serve at Once Intelligence
(SAI)
customer and business analysis suite to boost subscriber loyalty and
revenue
through analysis of real time customer insights. In December, Nokia Siemens
Networks provided a unified network and service management dashboard
solution as
part of its CEM portfolio, including a video wall bigger than a tennis
court,
for Bharti Airtel in Gurgaon, India, to give the operator a complete
network
view and ensure the best possible service quality and user experience.
- Nokia Siemens Networks continued to drive towards its strategic focus on
Mobile Broadband, announcing it had reached an agreement to sell its
Optical
Networks business to Marlin Equity Partners and its Business Support
Systems
business to Redknee. It also completed the divestment of the assets of the
non-core IPTV business to Belgacom and Accenture.
NOKIA IN JANUARY -DECEMBER 2012
The following discussion is of Nokia's reported results. Comparisons are
given
to 2011 results, unless otherwise indicated.
See note 5 to our Summary Financial Information table above concerning our
current operational and reporting structure which we adopted during 2011.
In 2012, our net sales decreased 22% to EUR 30.2 billion (EUR 38.7 billion
in
2011). Net sales of Devices & Services decreased 34% to EUR 15.7 billion
(EUR
23.9 billion). Net sales of Smart Devices decreased 50% to EUR 5 446
million
(EUR 10 820 million). Net sales of Mobile Phones decreased 21% to EUR 9 436
million (EUR 11 930 million). Net sales of Location & Commerce increased 1%
to
EUR 1 103 million (EUR 1 091 million). Net sales of Nokia Siemens Networks
decreased 2% to EUR 13.8 billion (EUR 14.0 billion).
In 2012, Europe accounted for 29% (31%) of our net sales, Asia-Pacific 27%
(23%), Greater China 10% (17%), Middle East & Africa 14% (14%), Latin
America
13% (11%) and North America 7% (4%). The 10 markets in which we generated
the
greatest net sales in 2012 were, in descending order of magnitude, China,
India,
Japan, the United States, Brazil, Germany, Russia, the United Kingdom,
Indonesia
and Italy together representing approximately 52% of total net sales in
2012. In
comparison, the 10 markets in which we generated the greatest net sales in
2011
were China, India, Brazil, Russia, Germany, Japan, the United States, the
United
Kingdom, Italy and Spain, together representing approximately 52% of total
net
sales in 2011.
Our gross margin in 2012 was 27.8%, compared to 29.4% in 2011. Gross profit
in
Devices & Services decreased to EUR 3 346 million (gross profit of EUR 6
640
million), representing a gross margin of 21.3% (27.7%). Gross profit of
Smart
Devices decreased to EUR 479 million (EUR 2 561 million), representing 8.8%
of
Smart Devices net sales (23.7%). Gross profit of Mobile Phones decreased
to EUR
2 211 million (EUR 3 117 million), representing 23.4% of Mobile Phones net
sales
(26.1%). Gross profit in Location & Commerce was EUR 875 million (gross
profit
of EUR 877 million), representing a gross margin of 79.3% (80.4%). Gross
profit
in Nokia Siemens Networks increased to EUR 4 169 million (gross profit EUR
3 842 million), representing a gross margin of 30.3% (27.4%).
Our 2012 operating loss was EUR 2.3 billion, compared with an operating
loss of
EUR 1.1 billion in 2011. Our 2012 operating margin was -7.6% (-2.8%). Our
operating loss in 2012 included purchase price accounting items and other
special items of net negative EUR 2.4 billion (net negative EUR 2.9
billion).
Operating loss in Devices & Services was EUR 1 100 million (operating
profit of
EUR 884 million), representing an operating margin of -7.0% (3.7%).
Devices &
Services operating profit in 2012 included purchase price accounting items
and
other special items of net negative EUR 397 million (net negative EUR 799
million). Contribution of Smart Devices decreased to EUR -1 560 million
(EUR
-411 million), representing -28.6% of Smart Devices net sales (-3.8%).
Contribution of Mobile Phones decreased to EUR 524 million (EUR 1 481
million),
representing 5.6% of Mobile Phones net sales (12.4%). Operating loss in
Location & Commerce was EUR 301 million (operating loss of EUR 1 526
million),
representing an operating margin of -27.3% (-139.9%). Location & Commerce
operating loss included purchase price accounting items and other special
items
of negative EUR 455 million (net negative EUR 1.6 billion). Operating loss
in
Nokia Siemens Networks was EUR 799 million (operating loss EUR 300
million),
representing an operating margin of -5.8% (-2.1%). Nokia Siemens Networks
operating loss in 2012 included purchase price accounting items and other
special items of net negative EUR 1.6 billion (net negative EUR 0.5
billion).
Group Common Functions expense totaled EUR 103 million in 2012, compared to
EUR
131 million in 2011.
Our research and development expenses were EUR 4.8 billion in 2012,
compared to
EUR 5.6 billion in 2011. Research and development costs represented 15.8%
of our
net sales in 2012 (14.4%). Research and development expenses included
purchase
price accounting items and other special items of EUR 378 million in 2012
(EUR
412 million).
In 2012, our selling and marketing expenses were EUR 3.2 billion, compared
to
EUR 3.8 billion in 2011. Selling and marketing expenses represented 10.6%
of our
net sales in 2012 (9.7%). Selling and marketing expenses included purchase
price
accounting items and other special items of EUR 314 million in 2012 (EUR
422
million).
Administrative and general expenses were EUR 1.0 billion in 2012, compared
to
EUR 1.1 billion in 2011. Administrative and general expenses were equal to
3.2%
of our net sales in 2012 (2.8%). Administrative and general expenses
included no
special items in 2012 (EUR 1 million in 2011).
Financial income and expenses, net, was an expense of EUR 340 million in
2012
(EUR 102 million). The higher net expense in 2012 was primarily driven by
higher
net costs related to hedging our cash balances and unfavorable fluctuations
in
certain foreign currency exchange rates.
Loss before tax was EUR 2.6 billion in 2012 (loss of EUR 1.2 billion). Loss
was
EUR 3.8 billion (loss of EUR 1.5 billion), based on a loss of EUR 3.1
billion
(loss of EUR 1.2 billion) attributable to equity holders of the parent and
a
loss of EUR 0.7 billion (loss of EUR 0.3 billion) attributable to
non-controlling interests. Earnings per share decreased to EUR -0.84
(diluted and
basic), compared to EUR -0.31 (diluted and basic).
The following chart sets out Nokia Group's cash flow for the fiscal years
2012
and 2011 and financial position at the end of each of those years, as well
as
the year-on-year growth rates.
+------------------------------------------------+
| NOKIA GROUP CASH FLOW AND FINANCIAL POSITION |
+----------------------+-------+--------+--------+
| | | | YoY |
| EUR million | 2012 | 2011 | Change |
+----------------------+-------+--------+--------+
| Net cash from | | | |
| operating activities | -354 | 1 137 | -131% |
+----------------------+-------+--------+--------+
| Total cash and | | | |
| other liquid assets | 9 909 | 10 902 | -9% |
+----------------------+-------+--------+--------+
| Net cash and | | | |
| other liquid assets1 | 4 360 | 5 581 | -22% |
+----------------------+-------+--------+--------+
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities.
Year-on-year, net cash and other liquid assets decreased by EUR 1.2 billion
in
2012, primarily due to cash outflows related to restructuring of
approximately
EUR 1.5 billion, the payment of the dividend of approximately EUR 750
million in
2012 and cash outflows related to net financial expenses and taxes as well
as
capital expenditures. This was partially offset by positive overall net
cash
from operating activities, excluding cash outflows related to
restructuring, net
financial expenses and taxes, as well as cash flows related to the receipt
of
quarterly platform support payments from Microsoft (which commenced in the
fourth quarter 2011).
In 2012, Nokia Siemens Networks' contribution to net cash from operating
activities was approximately EUR 1.6 billion, primarily due to net working
capital changes. At the end of 2012, Nokia Siemens Networks' contribution
to the
Nokia gross cash was EUR 2.4 billion and contribution to Nokia's net cash
was
EUR 1.3 billion.
The following discussion of Nokia's three businesses -Devices & Services,
Location & Commerce and Nokia Siemens Networks -includes information on a
non-IFRS, or underlying business performance, basis. 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. See note 1 to
our
Summary Financial Information table above for information about our
underlying
non-IFRS results.
Devices & Services
The following chart sets out a summary of the results for our Devices &
Services
business and the year-on-year growth rates for the fiscal years 2012 and
2011.
+------------------------------------------------------+
| DEVICES & SERVICES |
| RESULTS SUMMARY |
+---------------------------+--------+--------+--------+
| | | | YoY |
| | 2012 | 2011 | Change |
+---------------------------+--------+--------+--------+
| Net sales (EUR million)1 | 15 686 | 23 943 | -34% |
+---------------------------+--------+--------+--------+
| Mobile device volume | | | |
| (million units) | 335.6 | 417.1 | -20% |
+---------------------------+--------+--------+--------+
| Mobile device ASP (EUR) | 47 | 57 | -18% |
+---------------------------+--------+--------+--------+
| Reported gross margin (%) | 21.3% | 27.7% | |
+---------------------------+--------+--------+--------+
| Non-IFRS gross margin (%) | 21.3% | 27.7% | |
+---------------------------+--------+--------+--------+
| Reported operating | | | |
| expenses (EUR million) | 4 001 | 4 983 | -20% |
+---------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| expenses (EUR million) | 3 997 | 4 974 | -20% |
+---------------------------+--------+--------+--------+
| Reported operating | | | |
| margin (%) | -7.0% | 3.7% | |
+---------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| margin (%) | -4.5% | 7.0% | |
+---------------------------+--------+--------+--------+
Note 1: Includes IPR income recognized in Devices & Services Other net
sales.
Net Sales
The following chart sets out the net sales for our Devices & Services
business
and year-on-year growth rates by geographic area for the fiscal years 2012
and
2011. The IPR income referred to in the paragraph above has been allocated
to
the geographic areas contained in this chart.
+-------------------------------------------------+
| DEVICES & SERVICES NET SALES |
| BY GEOGRAPHIC AREA |
+----------------------+--------+--------+--------+
| | | | YoY |
| EUR million | 2012 | 2011 | Change |
+----------------------+--------+--------+--------+
| Europe | 4 643 | 7 064 | -34% |
| | | | |
| Middle East & Africa | 2 827 | 4 098 | -31% |
| | | | |
| Greater China | 1 610 | 5 063 | -68% |
| | | | |
| Asia-Pacific | 3 811 | 4 896 | -22% |
| | | | |
| North America | 453 | 354 | 28% |
| | | | |
| Latin America | 2 342 | 2 468 | -5% |
+----------------------+--------+--------+--------+
| Total | 15 686 | 23 943 | -34% |
+----------------------+--------+--------+--------+
The decline in Devices & Services net sales in 2012 resulted from lower
volumes
in both Smart Devices and Mobile Phones as well as a lower ASP in Mobile
Phones,
partially offset by a higher ASP in Smart Devices. Devices & Services Other
net
sales decreased in 2012 due to lower non-recurring IPR income, the
divestment of
Vertu during the fourth quarter 2012 and lower spare parts sales.
At a constant currency, Devices & Services net sales would have decreased
36%
compared to 2011.
Smart Devices continued to transition as Symbian volumes decreased
sequentially
every quarter in 2012. Lumia device volumes grew in the first half of 2012
by
expanding geographical distribution as well as new product launches, but
were
negatively affected in the third quarter 2012 by product transitions. In
the
fourth quarter 2012, Smart Devices net sales grew sequentially as Nokia
started
shipping new Lumia devices, although volumes were adversely affected by
supply
constraints as we ramped up our production capacity, particularly related
to the
Lumia 920. Smart Devices shipped a total of 13.4 million Lumia devices in
2012.
During the first half of 2012, Mobile Phones was negatively affected by
aggressive price competition and the lack of affordable full touch devices.
Towards the end of the second quarter 2012 Mobile Phones introduced
affordable
Asha full touch smartphones and sold 15.8 million units in the second half
2012.
Our overall Devices & Services net sales in 2012 benefited from the
recognition
in Devices & Services Other of approximately EUR 50 million (EUR 450
million in
2011) of non-recurring IPR income. During the last two decades, we have
invested
approximately EUR 50 billion in research and development and built one of
the
wireless industry's strongest and broadest IPR portfolios, with
approximately
10 000 patent families. Nokia is a world leader in the development of
handheld
device and mobile communications technologies, which is also demonstrated
by our
strong patent position. Within Devices & Services Other, we estimate that
our
current annual IPR income run-rate is approximately EUR 0.5 billion.
Volume
The following chart sets out the mobile device volumes for our Devices &
Services business and year-on-year growth rates by geographic area for the
fiscal years 2012 and 2011.
+-----------------------------------------------+
| DEVICES & SERVICES MOBILE DEVICE |
| VOLUMES BY GEOGRAPHIC AREA |
+----------------------+-------+-------+--------+
| | | | YoY |
| million units | 2012 | 2011 | Change |
+----------------------+-------+-------+--------+
| Europe | 67.3 | 87.8 | -23% |
| | | | |
| Middle East & Africa | 81.7 | 94.6 | -14% |
| | | | |
| Greater China | 27.5 | 65.8 | -58% |
| | | | |
| Asia-Pacific | 113.5 | 118.9 | -5% |
| | | | |
| North America | 2.2 | 3.9 | -44% |
| | | | |
| Latin America | 43.4 | 46.1 | -6% |
+----------------------+-------+-------+--------+
| Total | 335.6 | 417.1 | -20% |
+----------------------+-------+-------+--------+
On a year-on-year basis, the decline in our total Devices & Services
volumes in
2012 was due to lower volumes in both Smart Devices and Mobile Phones
discussed
below.
Average Selling Price
On a year-on-year basis, the overall decrease in our Devices & Services ASP
was
due to higher proportion of Mobile Phones volumes and lower Mobile Phones
ASPs,
partially offset by higher Smart Devices ASPs.
Gross Margin
On a year-on-year basis, the decline in our Devices & Services non-IFRS
gross
margin in 2012 was due to gross margin declines in Smart Devices and to a
lesser
degree in Mobile Phones and Devices & Services Other.
Operating Expenses
Devices & Services non-IFRS operating expenses decreased 20% year-on-year
in
2012. On a year-on-year basis, operating expenses related to Smart Devices
decreased 32% in 2012, where Mobile Phones remained approximately on the
same
level. In addition to the factors described below, the year-on-year changes
were
affected by 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.
Devices & Services non-IFRS research and development expenses decreased 24%
year-on-year in 2012 due to declines in Smart Devices and Devices &
Services
Other research and development expenses. The decreases in research and
development expenses were due primarily to a focus on priority projects and
cost
controls as well as business divestments.
Devices & Services non-IFRS sales and marketing expenses decreased 15%
year-on-year in 2012 primarily due to lower overall business activity,
improved
efficiency in general marketing activities and business divestments.
Devices & Services non-IFRS administrative and general expenses decreased
19%
year-on-year in 2012, primarily due structural cost savings as well as
business
divestments.
In 2012, Devices & Services non-IFRS other income and expense had a
negative
year-on-year impact on profitability. Reported other income and expense was
significantly less negative in 2012. Restructuring charges of EUR 550
million
and related impairments of EUR 30 million, a benefit from cartel claim
settlements of EUR 56 million, a net gain from the sale of a real estate of
EUR
79 million and a net gain from the divestment of the Vertu business of EUR
52
million were recognized in Devices & Services Other in 2012. Restructuring
charges of EUR 456 million, impairment of assets of EUR 90 million,
Accenture
deal consideration of EUR 251 million, impairment of shares in an
associated
company of EUR 41 million and a benefit from a cartel claim settlement of
EUR
49 million were recognized in Devices & Services Other in 2011.
Cost Reduction Activities and Planned Operational Adjustments
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.
On June 14, 2012, we announced targeted investments in key growth areas,
operational changes and significantly increased our cost reduction target.
The
measures included the closure of Nokia's manufacturing facility in Salo,
Finland
as well as the closure of Nokia's research and development facility in Ulm,
Germany. In addition, Nokia also focused its sales and marketing activities
and
streamlined its IT, corporate and support functions to align with the
sharpened
strategy.
As of December 31, 2012, we had recognized cumulative net charges in
Devices &
Services of approximately EUR 1.4 billion related to restructuring
activities,
which included restructuring charges and associated impairments. While the
total
extent of the restructuring activities is still to be determined, we
currently
anticipate cumulative charges in Devices & Services of approximately EUR
1.6
billion before the end of 2013. We also expect the total cash outflows
related
to our Devices & Services restructuring activities to be approximately EUR
1.4
billion.
Smart Devices
The following chart sets out a summary of the results for our Smart Devices
business unit for the periods indicated, as well as the year-on-year growth
rates.
+-----------------------------------------------------+
| SMART DEVICES |
| RESULTS SUMMARY |
+--------------------------+--------+--------+--------+
| | | | YoY |
| | 2012 | 2011 | Change |
+--------------------------+--------+--------+--------+
| Net sales (EUR million)1 | 5 446 | 10 820 | -50% |
+--------------------------+--------+--------+--------+
| Smart Devices volume | | | |
| (million units) | 35.1 | 77.3 | -55% |
+--------------------------+--------+--------+--------+
| Smart Devices ASP (EUR) | 155 | 140 | 11% |
+--------------------------+--------+--------+--------+
| Gross margin (%) | 8.8% | 23.7% | |
+--------------------------+--------+--------+--------+
| Operating expenses | | | |
| (EUR million)2 | 2 018 | 2 974 | -32% |
+--------------------------+--------+--------+--------+
| Contribution margin (%)2 | -28.6% | -3.8% | |
+--------------------------+--------+--------+--------+
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 was affected by 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 2012.
Accordingly, 2012 operating expenses are not directly comparable to 2011
operating expenses.
Net Sales
The year-on-year decline in our Smart Devices net sales in 2012 was
primarily
due to significantly lower volumes, partially offset by higher ASPs.
Volume
The year-on-year decrease in our Smart Device volumes in 2012 was driven by
the
strong momentum of competing smartphone platforms relative to our Symbian
devices. On a geographical basis, the decrease in volumes was due to lower
volumes in Greater China, Europe, Asia Pacific, Middle East &Africa and
Latin
America, partially offset by slightly higher volumes in North America.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in 2012 was primarily
due to
a positive mix shift towards sales of our Lumia devices which had a higher
ASP,
a positive impact related to deferred revenue on services sold in
combination
with our devices as well as the net positive impact related to foreign
currency
fluctuations, partially offset by general price erosion and our pricing
actions.
Gross Margin
The year-on-year decline in our Smart Devices gross margin in 2012 was
primarily
due to greater price erosion than cost erosion due to the competitive
environment, inventory related allowances of EUR 220 million in the second
quarter 2012 and EUR 120 million in the third quarter 2012, higher fixed
costs
per unit because of lower sales volumes, and a negative product mix shift
towards lower gross margin devices.
Mobile Phones
The following chart sets out a summary of the results for our Mobile Phones
business unit and year-on-year growth rates for the fiscal years 2012 and
2011.
+----------------------------------------------------------------+
| MOBILE PHONES |
| RESULTS SUMMARY |
+--------------------------------------+-------+--------+--------+
| | | | YoY |
| | 2012 | 2011 | Change |
+--------------------------------------+-------+--------+--------+
| Net sales (EUR million)1 | 9 436 | 11 930 | -21% |
+--------------------------------------+-------+--------+--------+
| Mobile Phones volume (million units) | 300 | 340 | -12% |
+--------------------------------------+-------+--------+--------+
| Mobile Phones ASP (EUR) | 31 | 35 | -11% |
+--------------------------------------+-------+--------+--------+
| Gross margin (%) | 23.4% | 26.1% | |
+--------------------------------------+-------+--------+--------+
| Operating expenses (EUR million)2 | 1 661 | 1 640 | 1% |
+--------------------------------------+-------+--------+--------+
| Contribution margin (%)2 | 5.6% | 12.4% | |
+--------------------------------------+-------+--------+--------+
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 was affected by 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 2012.
Accordingly, 2012 operating expenses are not directly comparable to 2011
operating expenses.
Net Sales
On a year-on-year basis, our Mobile Phones net sales decreased in 2012 due
to
lower volumes and ASPs.
Volume
The year-on-year decline in our Mobile Phones volumes in 2012 was due to
the
challenging competitive environment and market environment, which
negatively
affected our volumes across the Mobile Phones portfolio. In particular, low
end
smartphones powered by the Android operating system proliferated at lower
price
points throughout 2012. During the second half of 2012, Mobile Phones
started
shipping Asha full touch smartphones, which improved the competitiveness of
our
higher end Mobile Phones product portfolio. During the second half of 2012
Mobile Phones shipped 15.8 million Asha full touch smartphones.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in 2012 was primarily due
to a
higher proportion of sales of lower priced devices and general price
erosion.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in 2012 was
primarily
due to a higher proportion of sales of lower gross margin devices as well
as the
net negative impact related to foreign currency fluctuations.
Location & Commerce
On November 13, 2012, Nokia introduced HERE, the new brand for its location
and
mapping service. For financial reporting purposes, the Location & Commerce
business will be renamed as the HERE business, starting with the first
quarter
2013.
The following chart sets out a summary of the results for Location &
Commerce
and year-on-year growth rates for the fiscal years 2012 and 2011.
+-----------------------------------------------------------------------+
| LOCATION & COMMERCE |
| RESULTS SUMMARY |
+-------------------------------------------+--------+---------+--------+
| | | | YoY |
| | 2012 | 2011 | Change |
+-------------------------------------------+--------+---------+--------+
| Net sales (EUR millions) | 1 103 | 1 091 | 1% |
+-------------------------------------------+--------+---------+--------+
| External net sales (EUR million) | 729 | 698 | 4% |
+-------------------------------------------+--------+---------+--------+
| Internal net sales (EUR million) | 374 | 393 | -5% |
+-------------------------------------------+--------+---------+--------+
| Reported gross margin (%) | 79.3% | 80.4% | |
+-------------------------------------------+--------+---------+--------+
| Non-IFRS gross margin (%) | 79.3% | 80.4% | |
+-------------------------------------------+--------+---------+--------+
| Reported operating expenses (EUR million) | 1 146 | 1 285 | -11% |
+-------------------------------------------+--------+---------+--------+
| Non-IFRS operating | | | |
| expenses (EUR millions) | 723 | 827 | -13% |
+-------------------------------------------+--------+---------+--------+
| Reported operating margin (%) | -27.3% | -139.9% | |
+-------------------------------------------+--------+---------+--------+
| Non-IFRS operating | | | |
| margin (%) | 13.9% | 4.4% | |
+-------------------------------------------+--------+---------+--------+
Net Sales
The year-on-year increase in Location & Commerce external net sales in 2012
was
primarily driven by higher sales of map content licenses to vehicle
customers,
partially offset by lower sales to personal navigation devices customers.
The year-on-year decline in Location & Commerce internal net sales was
primarily
due to lower sales related to the large decline in Symbian volumes
experienced
since 2010.
Gross Margin
On a year-on-year basis, the decrease in Location & Commerce non-IFRS gross
margin in 2012 was primarily due to lower personal navigation device sales
which
carry a higher gross margin, partially offset by higher gross margin in the
vehicle segment.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased
14%
primarily driven by a focus on cost controls, lower project spending and a
shift
of research and development operating expenses to cost of sales as a result
of
the divestiture of the media advertising business.
Location & Commerce non-IFRS sales and marketing expenses decreased 18%
primarily driven by a focus on cost controls and lower marketing spending.
Location & Commerce non-IFRS administrative and general expenses increased
13%
primarily driven by higher use of services provided by shared support
functions.
Nokia Siemens Networks
Nokia Siemens Networks completed the acquisition of Motorola Solutions'
networks
assets on April 30, 2011. Accordingly, the results of Nokia Siemens
Networks for
2012 are not directly comparable to 2011.
The following chart sets out a summary of the results for Nokia Siemens
Networks
and year-on-year growth rates for fiscal years 2012 and 2011.
+----------------------------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| RESULTS SUMMARY |
+-------------------------------------------+--------+--------+--------+
| | | | YoY |
| | 2012 | 2011 | Change |
+-------------------------------------------+--------+--------+--------+
| Net sales (EUR million) | 13 779 | 14 041 | -2% |
+-------------------------------------------+--------+--------+--------+
| Reported gross margin (%) | 30.3% | 27.4% | |
+-------------------------------------------+--------+--------+--------+
| Non-IFRS gross margin (%) | 30.7% | 27.4% | |
+-------------------------------------------+--------+--------+--------+
| Reported operating expenses (EUR million) | 3 678 | 4 030 | -9% |
+-------------------------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| expenses (EUR million) | 3 413 | 3 662 | -7% |
+-------------------------------------------+--------+--------+--------+
| Reported operating margin (%) | -5.8% | -2.1% | |
+-------------------------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| margin (%) | 5.6% | 1.6% | |
+-------------------------------------------+--------+--------+--------+
Net Sales
The following chart sets out Nokia Siemens Networks net sales and
year-on-year growth rates, by geographic area for fiscal years 2012 and
2011.
+-------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| NET SALES BY GEOGRAPHIC AREA |
+----------------------+--------+--------+--------+
| | | | YoY |
| EUR millions | 2012 | 2011 | Change |
+----------------------+--------+--------+--------+
| Europe | 3 896 | 4 469 | -13% |
| | | | |
| Middle East & Africa | 1 287 | 1 391 | -7% |
| | | | |
| Greater China | 1 278 | 1 465 | -13% |
| | | | |
| Asia-Pacific | 4 347 | 3 848 | 13% |
| | | | |
| North America | 1 294 | 1077 | 20% |
| | | | |
| Latin America | 1 677 | 1 791 | -6% |
+----------------------+--------+--------+--------+
| Total | 13 779 | 14 041 | -2% |
+----------------------+--------+--------+--------+
The year-on-year decline in Nokia Siemens Networks' net sales was primarily
due
to the decline in sales of business areas not consistent with Nokia Siemens
Networks' strategic focus and lower infrastructure equipment sales,
partially
offset by higher services net sales. On a full year basis, services
represented
slightly more than 50% of Nokia Siemens Networks' net sales.
At constant currency, Nokia Siemens Networks' net sales would have
decreased 5%
year-on-year in 2012.
Gross Margin
The increase in Nokia Siemens Networks non-IFRS gross margin in 2012 was
primarily due to the better gross margin in both infrastructure equipment
and
services. Within infrastructure equipment the increase was primarily due to
favorable region and product mix consistent with Nokia Siemens Networks'
strategy to focus on mobile broadband. Within services, the increase was
primarily due to structural cost actions and efforts to align the services
business with the focused strategy.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses
decreased 5%
year-on-year in 2012 primarily due to structural cost saving actions and
overall
research and development efficiency.
Nokia Siemens Networks' non-IFRS sales and marketing expenses decreased 11%
year-on-year in 2012 primarily due to structural cost saving actions.
Nokia Siemens Networks' non-IFRS administrative and general expenses
decreased
8% year-on-year in 2012 primarily due to structural cost saving actions.
Nokia Siemens Networks' non-IFRS other income decreased to an expense
year-on-year in 2012 due primarily to due to changes in the doubtful
account allowances.
Reported other income and expense for 2012 was an expense of EUR 1 290
million.
The year-on-year increase of the expense was mainly driven by increased
restructuring and associated charges.
Operating Margin
The higher year-on-year Nokia Siemens Networks non-IFRS operating margin in
2012 primarily reflected the higher gross margin and lower operating
expenses.
Strategy Update and Global Restructuring Program
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 2012, Nokia Siemens Networks had approximately 58 400
employees, a
reduction of approximately 15 300 compared to end of 2011.
Nokia Siemens Networks now targets to reduce its non-IFRS annualized
operating
expenses and production overheads by more than EUR 1 billion by the end of
2013, compared to the end of 2011. Nokia Siemens Networks previous target
was 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.
During 2012, Nokia Siemens Networks recognized restructuring charges and
other
associated items of EUR 1.3 billion related to this restructuring program,
resulting in cumulative charges of approximately EUR 1.3 billion. In total
we
now expect cumulative Nokia Siemens Networks restructuring charges of
approximately EUR 1.3 billion by the end of 2013, virtually all of which
have
now been recognized. By the end of 2012, Nokia Siemens Networks had
cumulative
restructuring related cash outflows of approximately EUR 650 million
related to
this restructuring program. Nokia Siemens Networks expects
restructuring-related cash outflows to be approximately EUR 450 million for
the full year 2013, and
approximately EUR 200 million for the full year 2014 related to this
restructuring program.
Nokia Siemens Networks is focused on maintaining a strong financial
position and
liquidity profile. Cash generation is a clear priority at Nokia Siemens
Networks, and the company intends to be self-funding in all aspects of its
operations.
FULL YEAR 2012 OPERATING HIGHLIGHTS
NOKIA OPERATING HIGHLIGHTS
- Nokia outlined a range of actions -planned or since completed -aimed at
sharpening its strategy, improving its operating model and returning the
company
to profitable growth. The measures included:
- Reductions within certain research and development projects, resulting in
the
closure of Nokia's facilities in Ulm, Germany and Burnaby, Canada;
- The transfer of device assembly from our production facilities in Komarom
in
Hungary and Reynosa in Mexico to Nokia facilities in Asia, where the
majority of
component suppliers are based. The Komarom and Reynosa facilities are now
focusing on smartphone product customization.
- The consolidation of certain manufacturing operations, resulting in the
closure of its manufacturing facility in Salo, Finland;
- Nokia, and De' Longhi SpA, a global leader in household appliances,
agreed
terms for De' Longhi to acquire Nokia's production facility in Cluj,
Romania.
- Focusing of marketing and sales activities, including prioritizing key
markets;
- Streamlining of corporate and support functions.
Since the end of 2012, Nokia has also announced a range of planned changes
to
streamline its IT organization. Nokia believes these changes will increase
operational efficiency and reduce operating costs, creating an IT
organization
appropriate for Nokia's current size and scope. As part of the planned
changes,
Nokia plans to transfer certain activities and up to 820 employees to HCL
Technologies and TATA Consultancy Services.
- There were various changes in the Nokia Leadership Team during 2012.
Changes
included:
- Marko Ahtisaari was appointed Executive Vice President of Design and
member of
the Nokia Leadership Team as from February 1, 2012.
- Juha Putkiranta was appointed Executive Vice President of Operations and
member of the Nokia Leadership Team as from July 1, 2012.
- Timo Toikkanen was appointed Executive Vice President of Mobile Phones
and
member of the Nokia Leadership Team as from July 1, 2012.
- Chris Weber was appointed Executive Vice President of Sales and Marketing
and
member of the Nokia Leadership Team as from July 1, 2012.
Further, during 2012, the following members resigned from the Nokia
Leadership
Team:
- Jerri DeVard, formerly Executive Vice President and Chief Marketing
Officer,
resigned from the Nokia Leadership Team effective as from July 1, 2012.
- Colin Giles, formerly Executive Vice President of Sales, resigned from
the
Nokia Leadership Team effective as from July 1, 2012.
- Mary T. McDowell, formerly Executive Vice President of Mobile Phones
resigned
from the Nokia Leadership Team effective as from July 1, 2012.
- Niklas Savander, formerly Executive Vice President of Markets resigned
from
the Nokia Leadership Team effective as from July 1, 2012.
- Esko Aho, formerly Executive Vice President of Corporate Relations and
Responsibility resigned from the Nokia Leadership Team.
- 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 divested Vertu, its luxury mobile phones business to EQT VI, a
European
private equity firm.
- Nokia started development of a new manufacturing facility in Vietnam to
serve
the feature phone market.
- 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.
DEVICES & SERVICES OPERATING HIGHLIGHTS
SMART DEVICES
- Nokia continued to expand the breadth and depth of its Nokia Lumia range
of
Windows Phone 7-based smartphones and brought the range to new markets,
including China and the United States.
- In September 2012, Nokia launched its first products on Windows Phone 8,
the
latest generation of the Windows Phone platform. Nokia started selling the
first
products running Windows Phone 8 -the flagship Nokia Lumia 920 and the
mid-range
Nokia Lumia 820 - in select markets including China, Germany, the United
Kingdom
and the United States Nokia has also launched in markets such as India as
well
as introduced the Nokia 620 in select markets, with Lumia smartphones now
available in more than 90 markets around the world. Nokia's first Windows
Phone
8 products showcase the best of Windows Phone 8, which for the first time
shares
many core technologies with the wider Windows ecosystem. Windows Phone 8
also
introduced multi-core processor support, NFC (near field communication)
technology, and support for higher screen resolutions, as well as increased
language support and new capabilities in imaging and application.
- Nokia continued to support the growth of the Windows Phone ecosystem. The
number of applications in the Windows Phone Marketplace grew to more than
125 000 by the end of 2012, up from more than 50 000 at the start of the
year.
- During our transition to Windows Phone through 2012, we continued to ship
devices based on Symbian. The Nokia 808 PureView, a device which showcases
our
imaging capabilities and which came to market in mid-2012, was the last
Symbian
device from Nokia.
- 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
and
the JBL PlayUp for high quality portable audio. Nokia also agreed with
Virgin
Atlantic to put wireless charging stations in its London Heathrow Clubhouse
lounge and with Coffee Bean & Tea Leaf to put charging plates on tables in
some
of their cafés.
- Nokia announced the launch of Nokia Music in the United States, further
expanding the number of markets in which the free music streaming service
is now
available. 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.
MOBILE PHONES
- Mobile Phones continued to expand Nokia's Asha range of products with
technological and design innovations, including launching full touch models
such
as the Asha 308 and Asha 309. These two models offer a fluid 'swipe' user
interface and an open environment for third-party application development
-characteristics which helped earn the complete Asha touch range full
smartphone
classification from global market research companies and analysts such as
GfK.
- Nokia introduced the Nokia 206 in both a single and dual SIM version. The
Nokia 206 includes Nokia's exclusive Slam feature, which enables consumers
to
share multimedia content like photos and videos with nearby friends almost
instantly. Slam works with most Bluetooth-enabled mobile phones without the
need
to pair devices, and without the recipient needing to also have Slam.
- 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.
- The Nokia Xpress browser, Nokia's cloud-accelerated browser for Series 40
devices, continued to grow rapidly with support for 38 devices in 87
languages
and more than 200 countries. The Nokia Xpress browser is the first of its
kind
to support web apps, and since the release of the SDK in 2011, developer
support
has continued to grow.
LOCATION & COMMERCE OPERATING HIGHLIGHTS
- Nokia introduced a new brand -HERE -for our location-based products and
services and has begun adopting the HERE brand in the portfolio. HERE is
the
first location cloud to deliver the world's best maps and location
experiences
across multiple screens and operating systems.
- To further extend its location services, Nokia launched a maps
application for
iOS under the HERE brand.
- Nokia announced a strategic partnership with Mozilla to bring new
location
experiences to the Firefox OS.
- Nokia acquired earthmine inc. earthmine's reality capture and processing
technologies will become integral parts of the 3D map making capabilities
of
HERE,
- Nokia introduced LiveSight, a technology based on a highly accurate, 3D
map of
the world. LiveSight provides a precise and intuitive augmented reality
experience.
- Location & Commerce continued to grow the Nokia Location Platform (NLP),
an
advanced location platform which offers numerous opportunities upon which
third
parties can build. During the year, among others, Amazon became an NLP
licensee
for maps and geocoding and Ford's research organization selected the NLP to
leverage Nokia's high-quality global location content as well as scalable
cloud
services and APIs.
- As part of its commitment to strengthen the Windows Phone ecosystem,
Nokia
integrated the NLP into Windows Phone 8 OS to power location-based
experiences
built for Windows Phone 8, including access to offline maps
- Location & Commerce agreed a partnership with Groupon to bring local and
national deals to Nokia customer and released a new version of Nokia Maps
for
the Lumia range that integrates Groupon Now! deals into the app.
- Location & Commerce introduced My Commute, a new feature of Nokia Drive
that
learns people's driving preferences and uses information about the latest
traffic conditions to help people choose between the different routes they
usually take to get to the places they travel most.
- Location & Commerce brought Nokia City Lens, an augmented reality
application,
to the Nokia Lumia smartphone range and continued to update it throughout
the
year.
- Location & Commerce released 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, and further
updated
the application during the year.
- Location & Commerce continued to build partnerships with a number of
major
industry players, particularly in the area of automotive-grade maps content
and
solutions. We are providing content to partners including Audi, BMW
Chrysler,
Dacia, ESRI, Ford, Garmin, Hyundai, Kia, Mercedes, Nikon, Pioneer, Scania,
Toyota and Volkswagen.
- 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 added significant commercial LTE deals during
2012,
including; a major contract with SOFTBANK MOBILE Corp. in Japan to upgrade
its
mobile broadband capacity across the country, supplying, deploying and
integrating its HSPA+ (3G) and FDD LTE (4G) networks; deploying the
world's
first multi-technology, multi-vendor self-organizing 3G and 4G mobile
networks
for KDDI, also in Japan; and supporting T-Mobile's 4G network evolution
plan
with the modernization of its GSM, HSPA+ core and radio access
infrastructure in
key markets in the USA to improve existing voice and data coverage.
- Nokia Siemens Networks had a total of 77 LTE deals by the 2012 year end,
with
other mobile broadband deals including with: Bharti Airtel in India;
Telkomsel
in Indonesia; KT in Korea; Singapore's StarHub; Tele2 in Estonia, Latvia
and
Lithuania; Hrvatski Telekom in Croatia; T-Mobile and Orange in Poland;
Polkomtel in Poland; Si.mobil in Slovenia; COTA and Wimax Online in Spain;
Zain
KSA in Saudi Arabia; TOT in Thailand; Optus in Australia; Mobile
TeleSystems in
Russia; O2 in the UK; Vodacom in South Africa; Saudi Telecom Company; and
China
Mobile.
- Nokia Siemens Networks demonstrated its commitment to staying at the
forefront
of mobile broadband innovation with the opening of a mobile broadband
testing
and development facility which opened in Silicon Valley in the United
States.
In other LTE technology developments, Nokia Siemens Networks: launched its
"FlexiZone" approach to mobile broadband coverage, which will deliver
faster and
more flexible 4G across areas with a very high user density more
efficiently and
cost effectively; and expanded 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 also launched a new CDMA base station, bringing
the
benefits of its globally recognized Flexi Multiradio Base Station platform
to
CDMA operators whilst reducing base station operating costs by up to 70%,
and
with 4G upgrade capability underlining Nokia Siemens Networks' commitment
to
mobile broadband technology evolution.
- Nokia Siemens Networks unveiled its 'Intelligent IP Edge', the world's
most
advanced network gateway that enables operators to deliver a better mobile
broadband experience and reduce running costs using Nokia Siemens Networks'
Liquid Net approach. Nokia Siemens Networks and Juniper Networks announced
the
launch of the "Integrated Packet Transport Network", addressing the need
for
service providers to simplify network architecture and giving operators
more
flexibility in their transport networks in a cost effective way, reflecting
Nokia Siemens Networks Liquid Net approach to transforming networks to cope
with
unpredictability and increasing network demand.
- Nokia Siemens Networks extended its comprehensive small cells portfolio
with
the launch of an enhanced range of picocell base stations and 3G Femto
access
points, and announced a US-based trial of its Hot Zone approach for
increasing
network capacity in the Chicago area.
- The launch of the Customer Experience Management (CEM) on Demand portal
in the
first quarter allowed Nokia Siemens Networks to showcase a new way of
handling
relationships with the world's six billion mobile users. Nokia Siemens
Networks
was recognized for its advances in CEM at the Global Telecoms Business
(GTB)
Innovation Awards 2012 in the wireless infrastructure category where it won
a
joint award with Telkomsel for its use of Nokia Siemens Networks' CEM on
Demand
portfolio. Guangdong MCC in China has signed up to Nokia Siemens Networks'
CEM
software and services, enabling it to improve customer experience by
providing a
unified view of its customer data and continuous reporting of usage trends.
- During the year, Nokia Siemens Networks completed the sale of its
microwave
transport business to DragonWave, the sale of its fixed line Broadband
Access
business to ADTRAN and the divestment of the assets of the non-core IPTV
business to Belgacom and Accenture. It also announced it had reached an
agreement to sell its Optical Networks business to Marlin Equity Partners
and
its Business Support Systems business to Redknee.
PERSONNEL
+-------------------------------------------------------------------------+
|PERSONNEL END OF QUARTER |
+-----------------------------------+-------+-------+------+-------+------+
| | | | YoY| | QoQ|
| |Q4/2012|Q4/2011|Change|Q3/2012|Change|
+-----------------------------------+-------+-------+------+-------+------+
|Devices & Services and corporate | |
|common | 33 201| 49 705| -33%| 38 264| -13%|
+-----------------------------------+-------+-------+------+-------+------+
|Location & Commerce | 6 186| 6 659| -7%| 6 366| -3%|
+-----------------------------------+-------+-------+------+-------+------+
|Nokia Siemens Networks | 58 411| 73 686| -21%| 60 635| -4%|
+-----------------------------------+-------+-------+------+-------+------+
|Nokia Group | 97 798|130 050| -25%|105 265| -7%|
+-----------------------------------+-------+-------+------+-------+------+
The average number of Nokia Group employees during the period from January
to
December 2012 was 112 256, of which the average number of employees at
Location
& Commerce and Nokia Siemens Networks was 6 441 and 64 052 respectively. At
December 31, 2012, Nokia Group employed a total of 97 798 people (130 050
people
at December 31, 2011), of which 6 186 were employed by Location & Commerce
(6
659 people at December 31, 2011) and 58 411 were employed by Nokia Siemens
Networks (73 686 people at December 31, 2011).
SHARES
The total number of Nokia shares at December 31, 2012, was 3 744 956 052.
At
December 31, 2012, Nokia and its subsidiary companies owned 33 971 118
Nokia
shares, representing approximately 0.9% of the total number of Nokia shares
and
the total voting rights.
DIVIDEND
To ensure strategic flexibility, the Nokia Board of Directors will propose
that
no dividend payment will be made for 2012 (EUR 0.20 per share for 2011).
Nokia's
fourth quarter 2012 financial performance combined with this dividend
proposal
further solidifies the company's strong liquidity position.
The distributable funds on the balance sheet of the parent company as per
December 31, 2012 amount to EUR 5 213 million.
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its business is exposed to various risks
and
uncertainties and 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 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 and regulatory proceedings; 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,
including risks and uncertainties, 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 Lumia products
that
operate on the Windows Phone 7 operating system as a result of increasing
availability of Nokia Lumia products with the new Windows Phone 8 operating
system; 4) the expected continuing decline of sales of Symbian devices and
the
significantly diminishing viability of the Symbian smartphone platform; 5)
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; 6)
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; 7) 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; 8) our ability to realize
a
return on our investment in next generation devices, platforms and user
experiences; 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, extend our location-based services
across
devices and operating systems, 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 and our ability to
maintain the existing sources of intellectual property related income or
establish new such sources; 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,
particularly as we ramp our new Lumia smartphone devices; 21) our ability
to
manage our inventory and timely adapt our supply to meet changing demands
for
our products, particularly as we ramp our new Lumia smartphone devices; 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, which may be for instance caused by
our
inability to successfully and smoothly implement our plans to streamline
our IT
organization including the transfer of some activities and employees to
strategic partners; 31) unfavorable outcome of litigations and regulatory
proceedings; 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 mobile broadband and 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 - January 24, 2013
Planned publication dates for interim reports in 2013
- first quarter 2013 interim report: April 18, 2013
- second quarter 2013 interim report: July 18, 2013
- third quarter 2013 interim report: October 17, 2013
Publication of "Nokia in 2012"
Nokia plans to publish its "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
Nokia's Annual General Meeting 2013 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#1672898]