ESPOO, FINLAND--(Marketwire - Jan 26, 2012) -
- Accelerating investment in Lumia range of smartphones, having sold well
over 1 million Lumia devices to date
- Solid Q4 performance in mobile phones
- Strong balance sheet, with net cash and other liquid assets of EUR 5.6
billion at end of Q4 2011
- Nokia Board of Directors will propose a dividend of EUR 0.20 per share
for 2011 (EUR 0.40 per share for 2010)
Nokia Corporation
Interim report
January 26, 2012 at 13.00 (CET+1)
This is a summary of the fourth quarter and annual results 2011 interim
report
published today. The complete fourth quarter and annual results 2011
interim
report with tables is available at
http://www.results.nokia.com/results/Nokia_results2011Q4e.pdf. Investors
should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
+------------+-------------------------------------++---------------------+
| | Reported and Non-IFRS ||Reported and Non-IFRS|
| | fourth quarter 2011 results1 || full year 2011 |
| | || results1 |
| +-------+-------+------+-------+------++-------+------+------+
|EUR million |Q4/2011|Q4/2010| YoY|Q3/2011| QoQ|| 2011| 2010| YoY|
| | | |Change| |Change|| | |Change|
+------------+-------+-------+------+-------+------++-------+------+------+
|Nokia | | | | | || | | |
| | | | | | || | | |
|Net sales | 10 005| 12 651| -21%| 8 980| 11%|| 38 659|42 446| -9%|
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | -954| 884| | -71| || -1 073| 2 070| |
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | | | | | || | | |
| (non-IFRS) | 478| 1090| -56%| 252| 90%|| 1 825| 3 204| -43%|
| | | | | | || | | |
|EPS, EUR | | | | | || | | |
| diluted | -0.29| 0.20| | -0.02| || -0.31| 0.50| |
| | | | | | || | | |
|EPS, EUR | | | | | || | | |
| diluted | | | | | || | | |
| (non-IFRS)2| 0.06| 0.22| -73%| 0.03| 100%|| 0.29| 0.61| -52%|
| | | | | | || | | |
|Net cash | | | | | || | | |
| from | | | | | || | | |
| operating | | | | | || | | |
| activities | 644| 2436| -74%| 852| -25%|| 1 137| 4 774| -76%|
| | | | | | || | | |
|Net cash and| | | | | || | | |
|other liquid| | | | | || | | |
|assets3 | 5 581| 6 996| -20%| 5 067| 10%|| 5 581| 6 996| -20%|
+------------+-------+-------+------+-------+------++-------+------+------+
|Devices & | | | | | || | | |
|Services4 | | | | | || | | |
| | | | | | || | | |
|Net sales | 5 997| 8 499| -29%| 5 392| 11%|| 23 943|29 134| -18%|
| | | | | | || | | |
|Smart | | | | | || | | |
| Devices net| | | | | || | | |
| sales | 2 747| 4 396| -38%| 2 194| 25%|| 10 820|14 874| -27%|
| | | | | | || | | |
|Mobile | | | | | || | | |
| Phones net| | | | | || | | |
| sales | 3 040| 3 948| -23%| 2 915| 4%|| 11 930|13 696| -13%|
| | | | | | || | | |
|Mobile | | | | | || | | |
| device | | | | | || | | |
| volume | | | | | || | | |
| (nm units) | 113.5| 123.7| -8%| 106.6| 6%|| 417.1| 452.9| -8%|
| | | | | | || | | |
|Smart | | | | | || | | |
| Devices | | | | | || | | |
| volume | | | | | || | | |
| (mn units) | 19.6| 28.6| -31%| 16.8| 17%|| 77.3| 103.6| -25%|
| | | | | | || | | |
|Mobile | | | | | || | | |
| Phones | | | | | || | | |
| volume | | | | | || | | |
| (mn units) | 93.9| 95.0| -1%| 89.8| 5%|| 339.8| 349.2| -3%|
| | | | | | || | | |
|Mobile | | | | | || | | |
| device | | | | | || | | |
| ASP5 | 53| 69| -23%| 51| 4%|| 57| 64| -11%|
| | | | | | || | | |
|Smart | | | | | || | | |
| Devices | | | | | || | | |
| ASP5 | 140| 154| -9%| 131| 7%|| 140| 144| -3%|
| | | | | | || | | |
|Mobile | | | | | || | | |
| Phones | | | | | || | | |
| ASP5 | 32| 42| -24%| 32| 0%|| 35| 39| -10%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | 203| 1 082| -81%| 168| 22%|| 884| 3 540| -75%|
| | | | | | || | | |
|Operating | | | | | || | | |
|profit | | | | | || | | |
|(non-IFRS) | 292| 1 025| -72%| 258| 13%|| 1 683| 3 403| -51%|
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | 3.4%| 12.7%| | 3.1%| || 3.7%| 12.2%| |
| | | | | | || | | |
|Operating | | | | | || | | |
| margin % | | | | | || | | |
| (non-IFRS) | 4.9%| 12.1%| | 4.8%| || 7.0%| 11.7%| |
+------------+-------+-------+------+-------+------++-------+------+------+
|Location & | | | | | || | | |
|Commerce6 | | | | | || | | |
| | | | | | || | | |
|Net sales | 306| 265| 15%| 282| 9%|| 1 091| 869| 25%|
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | -1 205| -148| | -85| || -1 526| -663| |
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | | | | | || | | |
|(non-IFRS) | 29| -29| | 28| 4%|| 48| -173| -|
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | 393.8%| -55.8%| | -30.1%| ||-139.9%|-76.3%| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | | | | | || | | |
|(non-IFRS) | 9.5%| -10.9%| | 9.9%| || 4.4%|-19.9%| |
+------------+-------+-------+------+-------+------++-------+------+------+
|Nokia | | | | | || | | |
| Siemens | | | | | || | | |
| Networks7 | | | | | || | | |
| | | | | | || | | |
|Net sales | 3 815| 3 961| -4%| 3 413| 12%|| 14 041|12 661| 11%|
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | 67| 1| | -114| || -300| -686| |
| | | | | | || | | |
|Operating | | | | | || | | |
| profit | | | | | || | | |
|(non-IFRS) | 176| 145| 21%| 6| || 225| 95| 137%|
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | 1.8%| 0.0%| | -3.3%| || -2.1%| -5.4%| |
| | | | | | || | | |
|Operating | | | | | || | | |
|margin % | | | | | || | | |
|(non-IFRS) | 4.6%| 3.7%| | 0.2%| || 1.6%| 0.8%| |
+------------+-------+-------+------+-------+------++-------+------+------+
Note 1 relating to non-IFRS results:
Non-IFRS results exclude special items for
all periods. In addition, non-IFRS results exclude intangible asset
amortization, other purchase price accounting related items and inventory
value
adjustments arising from i) the formation of Nokia Siemens Networks and ii)
all
business acquisitions completed after June 30, 2008. More specific
information
about the exclusions from the non-IFRS results may be found in our complete
interim report with tables for Q4 2011 on pages 4-5, 20-22 and 24, and
pages
41-43 and 45 for the full years 2011 and 2010.
Nokia believes that these non-IFRS financial measures provide meaningful
supplemental information to both management and investors regarding Nokia's
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. A reconciliation of the non-IFRS results to our
reported results for Q4 2011 and Q4 2010 can be found in the tables on
pages 18
and 20-24 of our complete interim report with tables. A reconciliation of
our Q3
2011 non-IFRS results to our reported results can be found on pages 17 and
20-24 of our complete Q3 2011 interim report with tables which was
published on
October 20, 2011. A reconciliation of our 2011 and 2010 non-IFRS results to
our
reported results can be found on pages 40-45.
Note 2 relating to non-IFRS Nokia EPS:
Nokia taxes continued to be unfavorably
impacted by Nokia Siemens Networks taxes as no tax benefits are recognized
for
certain Nokia Siemens Networks deferred tax items. In Q4 2011, the Finnish
statutory tax rate change also had a one-quarter negative impact. If
Nokia's
estimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS
would
have been approximately 1.2 Euro cents higher in Q4 2011.
Note 3 relating to Nokia net cash and other liquid assets:
Calculated as total
cash and other liquid assets less interest-bearing liabilities.
Note 4 relating to Devices & Services reporting structure:
As of April 1, 2011,
our Devices & Services business has two operating and reportable segments -
Smart Devices, which focuses on smartphones, and Mobile Phones, which
focuses on
mass market mobile devices - as well as Devices & Services Other. Prior
period
results for each quarter and the full year 2010 and Q1 2011 have been
regrouped
(on an unaudited basis) for comparability purposes according to the new
reporting format that became effective on April 1, 2011.
Devices & Services prior period results for each quarter and the full year
2010
and Q1, Q2 and Q3 2011 have also been recasted (on an unaudited basis) for
comparability purposes according to the new reporting format that became
effective on October 1, 2011. See Note 6 below relating to Location &
Commerce.
Note 5 relating to average selling prices (ASP):
Mobile device ASP represents
total Devices & Services net sales (Smart Devices net sales, Mobile Phones
net
sales, and Devices & Services Other net sales) divided by total Devices &
Services volumes. Devices & Services Other net sales includes net sales of
Nokia's luxury phone business Vertu and spare parts, as well as
intellectual
property royalty 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.
Note 6 relating to Location & Commerce:
On June 22, 2011, we announced plans to
create a new Location & Commerce business which combines NAVTEQ and Nokia's
social location services operations from Devices & Services, which focuses
on
location based services and local commerce. The Location & Commerce
business is
an operating and reportable segment beginning October 1, 2011. From the
third
quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate
reportable segment of Nokia. Prior period results for each quarter and the
full
year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis)
for
comparability purposes according to the new reporting format that became
effective on October 1, 2011. Recasted reported financial information can
be
accessed at: http://www.nokia.com/investors.
Note 7 relating to Nokia Siemens Networks:
Nokia Siemens Networks completed the
acquisition of Motorola Solutions' networks assets on April 30, 2011.
Accordingly, the fourth quarter and full year 2011 results of Nokia Siemens
Networks are not directly comparable to their prior-year comparatives.
STEPHEN ELOP, NOKIA CEO:
The fourth quarter of 2011 marked a significant step in Nokia's
transformation.
Most notably, in Q4 we introduced new mobile phones and smartphones, which
resulted from the strategy shift in our Devices & Services business.
Overall, we are pleased with the performance of our mobile phones business,
which benefited in Q4 from sequential double-digit percentage growth in our
dual
SIM business, with particular strength in India, Middle East and Africa and
South East Asia. In October, we introduced the Asha 200, 201, 300 and 303,
which
brought new mobile phones into 76 markets around the world. We are
building on
this foundation with R&D investments as we continue our journey to connect
the
next billion to the Internet.
Also in October, just six months after signing an agreement with Microsoft,
we
introduced our first two devices based on the Windows Phones platform - the
Nokia Lumia 800 and the Nokia Lumia 710. We brought the new devices to
market
ahead of schedule, demonstrating that we are changing the clock speed of
Nokia.
To date, we have introduced Lumia to consumers in Europe, Hong Kong, India,
Russia, Singapore, South Korea and Taiwan.
We have also started our important re-entry into the North American market.
Earlier this month, T-Mobile started selling the Nokia Lumia 710 as a lead
device. We also announced the new Nokia Lumia 900 with AT&T, and
immediately
received a number of industry awards. The Nokia Lumia 900 is our third
Lumia
device, our first LTE device designed specifically for the North American
market, and AT&T is positioning the Lumia 900 as a lead LTE device.
In the war of ecosystems, clearly there are some strong contenders already
on
the field. And with Lumia, we have demonstrated that we belong on the
field.
Our specific intent has been to establish a beachhead in this war of
ecosystems,
and country by country that is what we are now accomplishing. To date we
have
sold well over 1 million Lumia devices. From this beachhead of more than 1
million Lumia devices, you will see us push forward with the sales,
marketing
and successive product introductions necessary to be successful. We also
plan
to bring the Lumia series to additional markets including China and Latin
America in the first half of 2012.
And, while we progressed in the right direction in 2011, we still have a
tremendous amount to accomplish in 2012, and thus, it is my assessment that
we
are in the heart of our transition.
Specifically, changing market conditions are putting increased pressure on
Symbian. In certain markets, there has been an acceleration of the
anticipated
trend towards lower-priced smartphones with specifications that are
different
from Symbian's traditional strengths. As a result of the changing market
conditions, combined with our increased focus on Lumia, we now believe that
we
will sell fewer Symbian devices than we previously anticipated.
During Q4, we also formed the Location & Commerce business to drive value
from
our leading mapping and location-based services platform. We conducted
annual
impairment testing in Q4 in the context of our new structure and plans for
the
future, and valued the Location & Commerce business at EUR 4.1 billion,
resulting in an impairment of goodwill of EUR 1.1 billion. The Location &
Commerce business is an important asset that is bringing differentiating
location-based services to Nokia, the Windows Phone ecosystem, and other
Microsoft products such as Bing. We believe this is the leading location-
based
services platform with an opportunity to become tremendously powerful as
computing goes more mobile, and location increasingly becomes a critical
organizing dimension for a person's experiences.
In summary, with a strong balance sheet, our performance in mobile phones
and
the new excitement around Lumia, we are confident that we are on the right
track
to build long-term value.
NOKIA OUTLOOK
- Nokia expects its non-IFRS Devices & Services operating margin in the
first
quarter 2012 to be around breakeven, ranging either above or below by
approximately 2 percentage points. This outlook is based on our
expectations
regarding a number of factors, including:
- competitive industry dynamics, particularly impacting our Smart Devices
business unit;
- a greater-than-normal seasonal decline in Devices & Services net sales;
- timing, ramp-up, and consumer demand related to our new products;
- the macroeconomic environment.
- Nokia continues to target to reduce Devices & Services non-IFRS operating
expenses by more than EUR 1 billion for the full year 2013, compared to the
recasted full year 2010 Devices & Services non-IFRS operating expenses of
EUR
5.35 billion.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin to be negative in the earlier part of 2012. In the first
quarter of 2012, Nokia Siemens Networks expects substantial charges related
to
its previously announced global restructuring program aimed at maintaining
long-term competitiveness and improving profitability. Due to the nature of
the
restructuring program as well as prevailing uncertain macroeconomic
conditions,
the timing of improvements in profitability is uncertain and therefore
Nokia
Siemens Networks' non-IFRS operating margin in 2012 is expected to be
volatile.
Thus, Nokia and Nokia Siemens Networks do not believe it is appropriate to
give
specific full year or quarterly guidance for Nokia Siemens Networks during
2012.
- Nokia Siemens Networks continues to target to reduce its non-IFRS
annualized
operating expenses and production overheads by EUR 1 billion by the end of
2013, compared to the end of 2011.
LONGER TERM OUTLOOK AND TARGETS
Nokia believes it is currently not appropriate to provide annual targets
for
2012 mainly for the following reasons:
- 2012 is expected to continue to be a year of transition, during which our
Devices & Services business will be subject to risks and uncertainties.
Those
risks and uncertainties include, among others, consumer demand for our
Symbian
devices; the timing, ramp-up, and consumer demand related to new products,
including our Lumia devices; and further pressure on margins as competitors
endeavor to capitalize on our platform and product transition;
- Nokia Siemens Networks has announced a new strategy which focuses its
business
on mobile broadband and services, and has launched an extensive global
restructuring program.
- Additionally, the macroeconomic environment is making it increasingly
difficult to estimate our outlook and provide reliable targets.
Longer-term, Nokia targets:
- Devices & Services net sales to grow faster than the market.
- Devices & Services non-IFRS operating margin to be 10% or more.
Longer-term, Nokia and Nokia Siemens Networks target:
- Nokia Siemens Networks' non-IFRS operating margin to be between 5% and
10%.
FOURTH QUARTER 2011 FINANCIAL HIGHLIGHTS
The non-IFRS results exclude:
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
Q4 2010 - EUR 206 million (net) consisting of:
- EUR 28 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 85 million restructuring charges in Devices & Services
- EUR 147 million gain on sale of wireless modem business in Devices &
Services
- EUR 116 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks
- EUR 119 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 5 million of intangible assets amortization and other purchase price
related items arising from the acquisition of OZ Communications, Novarra
and Motally in Devices & Services
Q4 2010 taxes - EUR 52 million non-cash tax benefit from reassessment of
recoverability deferred tax assets in Nokia Siemens Networks
Q3 2011 - EUR 323 million (net) consisting of:
- EUR 26 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 59 million restructuring charge and EUR 54 million associated
impairments in Devices & Services
- EUR 24 million positive Accenture deal closing adjustment in Devices &
Services
- EUR 94 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens
Networks and the acquisition of Motorola Solutions' networks assets
- EUR 113 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and
Motally in Devices & Services
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 Group
Nokia has three businesses that reflect its new operational structure
implemented during 2011 - Devices & Services, Location & Commerce and Nokia
Siemens Networks. As of April 1, 2011, Devices & Services has two
operating and
reportable segments - Smart Devices, which focuses on smartphones, and
Mobile
Phones, which focuses on mass market mobile devices - as well as Devices &
Services Other. As of October 1, 2011, a new operating and reportable
segment,
Location & Commerce, was formed by combining the NAVTEQ business with
Nokia's
social location services operations, which focuses on location based
services
and local commerce. From the third quarter of 2008 until the end of the
third
quarter of 2011, NAVTEQ was a separate reportable segment of Nokia.
Prior period results for each quarter and the full year 2010 and Q1, Q2 and
Q3
2011 have been recasted (on an unaudited basis) for comparability purposes
according to the new reporting format. Recasted reported financial
information
can be accessed at: http://www.nokia.com/investors
The following chart sets out 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 2011 NET SALES, |
| REPORTED & CONSTANT CURRENCY1 |
+--------------------------------------+------------+------------+
| | YoY Change | QoQ Change |
+--------------------------------------+------------+------------+
| Group net sales - reported | -21% | 11% |
| | | |
| Group net sales - constant currency1 | -19% | 11% |
| | | |
| Devices & Services | | |
| net sales - reported | -29% | 11% |
| | | |
| Devices & Services | | |
| net sales - constant currency1 | -26% | 12% |
| | | |
| Nokia Siemens Networks | | |
| net sales - reported | -4% | 12% |
| | | |
| Nokia Siemens Networks | | |
| net sales - constant currency1 | -5% | 10% |
+--------------------------------------+------------+------------+
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.
The following chart sets out Nokia Group's 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 |
+-----------------+---------+---------+------------+---------+------------+
| EUR million | Q4/2011 | Q4/2010 | YoY Change | Q3/2011 | QoQ Change |
+-----------------+---------+---------+------------+---------+------------+
| Net cash from | | | | | |
| operating | | | | | |
| activities | 634 | 2 436 | -74% | 852 | -26% |
+-----------------+---------+---------+------------+---------+------------+
| Total cash and | | | | | |
| other liquid | | | | | |
| assets | 10 902 | 12 275 | -11% | 10 809 | 1% |
+-----------------+---------+---------+------------+---------+------------+
| Net cash and | | | | | |
| other liquid | | | | | |
| assets1 | 5 581 | 6 996 | -20% | 5 067 | 10% |
+-----------------+---------+---------+------------+---------+------------+
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities.
Year-on-year, net cash and other liquid assets decreased by EUR 1.4 billion
primarily due to payment of the dividend, cash outflows related to the
acquisition of Motorola Solutions' networks assets, and capital
expenditures,
partially offset by positive overall net cash from operating activities and
a
EUR 500 million equity investment in Nokia Siemens Networks by Siemens.
Sequentially, net cash and other liquid assets increased by EUR 514 million
primarily due to underlying profitability, net working capital improvements
in
Nokia Siemens Networks, cash inflows related to IPR, positive foreign
exchange
impact on our cash balances, and the receipt of a platform support payment
from
Microsoft, partially offset by net cash outflows related to taxes, capital
expenditures, and hedging activities.
Our broad strategic 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 2011, we received the first quarterly platform
support
payment of USD 250 million (EUR 180 million). We have a competitive
software
royalty structure, which includes minimum software royalty commitments.
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.
Devices & Services
As of April 1, 2011, our Devices & Services business has two operating and
reportable segments - Smart Devices, which focuses on smartphones, and
Mobile
Phones, which focuses on mass market mobile devices - as well as Devices &
Services Other. Additionally, in 2011 we announced plans to create a new
Location & Commerce business which combines NAVTEQ and Nokia's social
location
services operations from Devices & Services. The Location & Commerce
business is
an operating and reportable segment beginning October 1, 2011. Prior period
results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have
been
recasted (on an unaudited basis) for comparability purposes according to
the new
reporting format. Recasted reported financial information can be accessed
at:
http://www.nokia.com/investors
The following chart sets out 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 |
+-------------------------+---------+---------+--------+---------+--------+
| | Q4/2011 | Q4/2010 | YoY | Q3/2011 | QoQ |
| | | | Change | | Change |
+-------------------------+---------+---------+--------+---------+--------+
| Net sales (EUR million)1| 5 997 | 8 499 | -29% | 5 392 | 11% |
+-------------------------+---------+---------+--------+---------+--------+
| Mobile device volume | | | | | |
| (million units) | 113.5 | 123.7 | -8% | 106.6 | 6% |
+-------------------------+---------+---------+--------+---------+--------+
| Mobile device ASP (EUR) | 53 | 69 | -23% | 51 | 4% |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS gross margin | | | | | |
| (%) | 25.8% | 29.0% | | 25.7% | |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| expenses (EUR million) | 1 262 | 1 431 | -12% | 1 126 | 12% |
+-------------------------+---------+---------+--------+---------+--------+
| Non-IFRS operating | | | | | |
| margin (%) | 4.9% | 12.1% | | 4.8% | |
+-------------------------+---------+---------+--------+---------+--------+
Note 1: Includes IPR royalty income recognized in Devices & Services Other
net sales.
Net Sales
The year-on-year decline and sequential increase in our Devices & Services
net
sales are discussed below in our operating analysis of our Smart Devices
and
Mobile Phones business units. No non-recurring IPR royalty income was
recognized
in the fourth quarter 2011, compared with approximately EUR 70 million
recognized in the third quarter 2011 and approximately EUR 30 million
recognized
in the fourth quarter 2010 in Devices & Services Other which benefited our
overall Devices & Services results in those quarters. At constant
currency,
Devices & Services net sales would have decreased 26% year-on-year and
increased
12% sequentially.
The following chart sets out 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. The IPR royalty income described in the
paragraph
above has been allocated to the geographic areas contained in this chart.
+----------------------------------------------------------------------+
| DEVICES & SERVICES NET SALES |
| BY GEOGRAPHIC AREA |
+----------------------+---------+---------+--------+---------+--------+
| EUR million | Q4/2011 | Q4/2010 | YoY | Q3/2011 | QoQ |
| | | | Change | | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 1 922 | 3 088 | -38% | 1 394 | 38% |
| | | | | | |
| Middle East & Africa | 1 065 | 1 177 | -10% | 957 | 11% |
| | | | | | |
| Greater China | 1 008 | 1 682 | -40% | 1 240 | -19% |
| | | | | | |
| Asia-Pacific | 1 297 | 1 603 | -19% | 1 197 | 8% |
| | | | | | |
| North America | 53 | 233 | -77% | 73 | -27% |
| | | | | | |
| Latin America | 652 | 715 | -9% | 531 | 23% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 5 997 | 8 499 | -29% | 5 392 | 11% |
+----------------------+---------+---------+--------+---------+--------+
Volume
The following chart sets out 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 |
+-----------------+---------+---------+------------+---------+------------+
| million units | Q4/2011 | Q4/2010 | YoY Change | Q3/2011 | QoQ Change |
+-----------------+---------+---------+------------+---------+------------+
| Europe | 25.3 | 33.5 | -24% | 20.7 | 22% |
| | | | | | |
| Middle East & | | | | | |
| Africa | 25.9 | 22.2 | 17% | 26.0 | 0% |
| | | | | | |
| Greater China | 14.7 | 21.9 | -33% | 15.9 | -8% |
| | | | | | |
| Asia-Pacific | 34.7 | 31.3 | 11% | 32.4 | 7% |
| | | | | | |
| North America | 0.5 | 2.6 | -81% | 0.7 | -29% |
| | | | | | |
| Latin America | 12.4 | 12.2 | 2% | 10.9 | 14% |
+-----------------+---------+---------+------------+---------+------------+
| Total | 113.5 | 123.7 | -8% | 106.6 | 6% |
+-----------------+---------+---------+------------+---------+------------+
On a year-on-year basis, the decline in our total Devices & Services
volumes in
the fourth quarter 2011 was driven by significantly lower Smart Devices
volumes.
Mobile Phones volumes were approximately flat year-on-year.
The sequential increase in our total Devices & Services volumes in the
fourth
quarter 2011 was driven by higher Mobile Phones and Smart Device volumes
supported by an increased seasonal demand for our devices.
During the fourth quarter 2011, our overall channel inventory increased on
a
sequential basis. We ended the fourth quarter 2011 with our sales channel
inventories within our normal range of 4-6 weeks.
Average Selling Price
On a year-on-year basis, the overall decrease in our Devices & Services ASP
in
the fourth quarter 2011 was driven primarily by the lower ASP in Mobile
Phones
and, to a lesser extent, Smart Devices, a higher proportion of Mobile
Phones
sales, the negative impact from foreign currency hedging and the
appreciation of
the Euro against certain currencies, partially offset by a positive impact
from
lower deferral of revenue related to services sold in combination with our
devices.
On a sequential basis, the overall increase in our Devices & Services ASP
in the
fourth quarter 2011 was driven primarily by a product mix shift towards
Smart
Devices, the depreciation of the Euro against certain currencies and a
lower
deferral of revenue related to services sold in combination with our
devices,
partially offset by a negative impact from foreign currency hedging,
pricing
pressure and lower IPR royalty income as the third quarter 2011 ASP
benefited
from the recognition of non-recurring IPR royalty income discussed above.
Gross Margin
On a year-on-year basis, the decline in our Devices & Services non-IFRS
gross
margin in the fourth quarter 2011 was driven by gross margin declines in
both
Smart Devices and Mobile Phones, partially offset by higher IPR royalty
income.
On a sequential basis, the slight increase in our Devices & Services non-
IFRS
gross margin in the fourth quarter 2011 was driven primarily by gross
margin
improvements in Mobile Phones, almost entirely offset by the gross margin
decline in Smart Devices and lower IPR royalty income.
Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 16%
year-on-year due to declines in Smart Devices and Devices & Services Other
research and development expenses, partially offset by a year-on-year
increase
in Mobile Phones research and development expenses. The decreases in Smart
Devices and Devices & Services Other research and development expenses were
due
primarily to a focus on priority projects and cost controls. The increase
in
Mobile Phones research and development expenses was primarily due to
investments
in product development to bring new innovations to the market in support of
our
strategy to bring internet to the next billion, partially offset by a focus
on
priority projects and cost controls.
On a sequential basis, Devices & Services non-IFRS research and development
expenses increased by 12% primarily due to an increase in Mobile Phones
research
and development expenses as we invested to support our Internet for the
next
billion strategy.
Devices & Services non-IFRS sales and marketing expenses decreased 5% year-
on-
year, primarily due to lower sales, and increased 19% sequentially. The
sequential increase was primarily driven by higher marketing expenses,
particularly relating to our new smartphone launches in Smart Devices.
Devices & Services non-IFRS administrative and general expenses decreased
28%
year-on-year and 22% sequentially. In the fourth quarter 2011, Devices &
Services non-IFRS other income and expense had a slight positive year-on-
year
and sequential impact on profitability. Reported other income and expense
was
significantly adversely impacted in the fourth quarter 2011 primarily as a
result of restructuring-related expenses discussed below, which were
recognized
in Devices & Services Other, partially offset by a benefit related to a
cartel
claim settlement.
Cost Reduction Activities and Planned Operational Adjustments
We are continuing to target to reduce our Devices & Services non-IFRS
operating
expenses by more than EUR 1 billion for the full year 2013, compared to the
recasted full year 2010 Devices & Services non-IFRS operating expenses of
EUR
5.35 billion. This reduction is expected to come from a variety of
different
sources and initiatives, including a planned reduction in the number of
employees and normal personnel attrition, a reduction in the use of
outsourced
professionals, reductions in facility costs, and various improvements in
efficiencies.
During the fourth quarter 2011, Devices & Services recognized net charges
of EUR
136 million related to restructuring activities, which included
restructuring
charges and associated impairments. As of the end of the fourth quarter
2011, we
had recognized cumulative charges of EUR 797 million related to
restructuring
activities in 2011. While the total extent of the restructuring activities
is
still to be determined, we currently anticipate cumulative charges in
Devices &
Services of around EUR 900 million before the end of 2012. We also believe
total
cash outflows related to our Devices & Services restructuring activities
will be
below the level of the cumulative charges related to these restructuring
activities.
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 and
sequential growth rates.
+-----------------------------------------------------------------------+
|SMART DEVICES |
|RESULTS SUMMARY |
+-------------------------+-------+-------+----------+-------+----------+
| |Q4/2011|Q4/2010|YoY Change|Q3/2011|QoQ Change|
+-------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR millions)1| 2 747| 4 396| -38%| 2 194| 25%|
+-------------------------+-------+-------+----------+-------+----------+
|Smart Devices volume | | | | | |
|(million units) | 19.6| 28.6| -31%| 16.8| 17%|
+-------------------------+-------+-------+----------+-------+----------+
|Smart Devices ASP (EUR) | 140| 154| -9%| 131| 7%|
+-------------------------+-------+-------+----------+-------+----------+
|Gross margin (%) | 19.9%| 28.7%| | 20.7%| |
+-------------------------+-------+-------+----------+-------+----------+
|Operating expenses | | | | | |
|(EUR millions) | 732| 899| -19%| 656| 12%|
+-------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%) | -7.0%| 11.6%| | -8.7%| |
+-------------------------+-------+-------+----------+-------+----------+
Note 1: Does not include IPR royalty income. IPR royalty income is
recognized in Devices & Services Other net sales.
Net Sales
The year-on-year decline in our Smart Devices net sales in the fourth
quarter
2011 was primarily due to significantly lower volumes. On a sequential
basis,
the increase in our Smart Devices net sales in the fourth quarter 2011 was
due
to the higher volumes and ASP.
Volume
The year-on-year decline in our Smart Devices volumes in the fourth quarter
2011 continued to be driven by the strong momentum of competing smartphone
platforms relative to our Symbian devices in all regions, particularly in
Europe.
On a sequential basis, the increase in our Smart Devices volumes in the
fourth
quarter 2011 was primarily driven by the broader availability throughout
the
quarter of the Nokia N9 and the shipments during the quarter of the Nokia
Lumia
800 and 710 in selected markets, as well as increased seasonal demand for
our
devices.
Average Selling Price
The year-on-year decline in our Smart Devices ASP in the fourth quarter
2011 was
driven primarily by a higher proportion of sales of lower priced Symbian
devices
and price erosion due to the competitive environment, as well as the
negative
impact from foreign currency hedging. Our ASP in the fourth quarter 2011
benefited from the sales of the higher priced Nokia N9 and Nokia Lumia
devices
and a lower deferral of revenue related to services sold in combination
with our
devices.
Sequentially, the increase in our Smart Devices ASP in the fourth quarter
2011
was driven primarily by a positive mix shift towards our newer higher
priced
smartphones, the depreciation of the Euro against certain currencies and
the
lower deferral of revenue related to services sold in combination with our
devices, partially offset by price erosion and the negative impact from
foreign
currency hedging.
Gross Margin
The year-on-year decline in our Smart Devices gross margin in the fourth
quarter
2011 was driven primarily by greater price erosion than cost erosion due to
the
competitive environment and the Symbian related allowances discussed below,
partially offset by the lower deferral of revenue related to services sold
in
combination with our devices and the positive impact from foreign currency
hedging.
On a sequential basis, the decline in our Smart Devices gross margin in the
fourth quarter 2011 was driven primarily by the Symbian related allowances
discussed below, greater price erosion than cost erosion, and the negative
impact from foreign currency hedging, which partially offset the positive
impact
from the lower deferral of revenue related to services sold in combination
with
our devices and lower fixed manufacturing costs.
Following the announcement of our strategic partnership with Microsoft in
February 2011, our strategy included the expectation to sell approximately
150
million more Symbian devices in the years to come. However, changing market
conditions are putting increased pressure on Symbian. In certain markets,
there
has been an acceleration of the anticipated trend towards lower-priced
smartphones with specifications that are different from Symbian's
traditional
strengths, which has contributed to a faster decline of our Symbian volumes
than
we anticipated. We expect this trend to continue in 2012. To maximize the
value
of the Symbian asset going forward, we expect to continue shipping Symbian
devices in specific regions and distribution channels, as well as to
continue to
provide software support to our Symbian customers through 2016. As a result
of
the changing market conditions, combined with our increased focus on Lumia,
we
now believe we will sell fewer Symbian devices than previously anticipated.
Thus, in the fourth quarter 2011, we recognized allowances for excess
component
inventory and future purchase commitments related to Symbian.
Mobile Phones
The following chart sets out 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 |
+---------------------------+-------+-------+----------+-------+----------+
| |Q4/2011|Q4/2010|YoY Change|Q3/2011|QoQ Change|
+---------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR millions)1 | 3 040| 3 948| -23%| 2 915| 4%|
+---------------------------+-------+-------+----------+-------+----------+
|Mobile Phones volume | | | | | |
|(million units) | 93.9| 95.0| -1%| 89.8| 5%|
+---------------------------+-------+-------+----------+-------+----------+
|Mobile Phones ASP (EUR) | 32| 42| -24%| 32| 0%|
+---------------------------+-------+-------+----------+-------+----------+
|Gross margin (%) | 27.7%| 28.5%| | 23.6%| |
+---------------------------+-------+-------+----------+-------+----------+
|Operating expenses | | | | | |
|(EUR million) | 429| 410| 5%| 404| 6%|
+---------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%) | 13.5%| 18.1%| | 10.1%| |
+---------------------------+-------+-------+----------+-------+----------+
Note 1: Does not include IPR royalty income. IPR royalty income is
recognized in Devices & Services Other net sales.
Net Sales
On a year-on-year basis, our Mobile Phones net sales in the fourth quarter
2011
decreased due to the lower ASP. On a sequential basis, the increase in our
Mobile Phones net sales in the fourth quarter 2011 was due to higher
volumes.
Volume
Mobile Phones volumes in the fourth quarter 2011 were approximately flat
year-
on-year. This was primarily driven by our reduced portfolio of higher
priced
mobile phones compared to the fourth quarter 2010, almost entirely offset
by a
portfolio renewal, such as the broad availability of dual SIM devices, and
higher volumes at lower price points in the fourth quarter 2011.
On a sequential basis, the increase in our Mobile Phones volumes in the
fourth
quarter 2011 was primarily driven by the broader availability of our dual
SIM
devices as well as the ongoing product renewal across the mobile phones
portfolio, and to a lesser extent from higher seasonal demand for our
mobile
products.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the fourth quarter
2011 was
primarily driven by an increased proportion of sales of lower priced
devices,
the negative impact from foreign currency hedging and the appreciation of
the
Euro against certain currencies.
On a sequential basis, our Mobile Phones ASP was unchanged with relatively
stable prices across the portfolio. The negative impact from foreign
currency
hedging in the fourth quarter 2011 was offset by the deprecation of the
Euro
compared to certain currencies and the lower deferral of revenue related to
services sold in combination with our devices.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in the fourth
quarter
2011 was primarily due to greater price erosion than cost erosion and the
appreciation of the Euro against certain currencies partially offset by a
positive mix shift towards higher margin mobile phones, the positive impact
from
foreign currency hedging, and the lower deferral of revenue related to
services
sold in combination with our devices.
The sequential increase in our Mobile Phones gross margin in the fourth
quarter
2011 primarily reflected the positive impact from foreign currency hedging,
greater cost erosion than price erosion, the lower deferral of revenue
related
to services sold in combination with our devices, lower warranty costs and
more
efficient utilization of manufacturing capacity, partially offset by the
depreciation of the Euro against certain currencies.
Location & Commerce
On June 22, 2011, we announced plans to create a new Location & Commerce
business which combines NAVTEQ and Nokia's social location services
operations
from Devices & Services. The Location & Commerce business is an operating
and
reportable segment beginning October 1, 2011. In addition to a broad
portfolio
of products and services for the wider internet ecosystem, the Location &
Commerce business is creating integrated social location offerings in
support of
Nokia's strategic goal in smartphones, including the Nokia experience with
Windows Phone, as well as support for bringing the internet to the next
billion.
From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ
was
a separate reportable segment of Nokia. Prior period results for each
quarter
and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an
unaudited basis) for comparability purposes according to the new reporting
format that became effective on October 1, 2011. Recasted reported
financial
information can be accessed at: http://www.nokia.com/investors.
The following chart sets out 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 |
+-------------------------+-------+-------+----------+-------+----------+
| |Q4/2011|Q4/2010|YoY Change|Q3/2011|QoQ Change|
+-------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR millions) | 306| 265| 15%| 282| 9%|
+-------------------------+-------+-------+----------+-------+----------+
|Non-IFRS gross margin (%)| 77.8%| 82.6%| | 81.6%| |
+-------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating | | | | | |
|expenses (EUR millions) | 206| 246| -16%| 201| 2%|
+-------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating | | | | | |
|margin (%) | 9.5%| -10.9%| | 9.9%| |
+-------------------------+-------+-------+----------+-------+----------+
Net Sales
The year-on-year increase in Location & Commerce net sales in the fourth
quarter
2011 was primarily driven by higher recognition of deferred revenue related
to
sales of map platform licenses to Smart Devices and, to a lesser extent, by
higher sales of map content licenses to vehicle customers due to higher
consumer
uptake of vehicle navigation systems, partially offset by lower sales to
portable navigation devices (PND) customers.
Sequentially, the increase in Location & Commerce net sales in the fourth
quarter 2011 was primarily due to seasonally strong sales of map content
licenses in the vehicle segment due to higher consumer uptake of vehicle
navigation systems and increased sales of updates.
Gross Margin
On a sequential basis, the decline in Location & Commerce non-IFRS gross
margin
in the fourth quarter 2011 was primarily due to an increased proportion of
lower
gross margin sales and a shift of research and development operating
expenses to
cost of sales as a result of the divestiture of the media advertising
business.
On a year-on-year basis, the decline in Location & Commerce non-IFRS gross
margin in the fourth quarter 2011 was primarily due to a shift of research
and
development operating expenses to cost of sales as a result of the
divestiture
of the media advertising business.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased
16%
year-on-year reflecting a shift in expenses from research and development
to
costs of sales related to the divestiture of the media advertising
business.
Location & Commerce non-IFRS research and development expenses increased 1%
sequentially primarily driven by the timing of projects related to product
development.
Location & Commerce non-IFRS sales and marketing expenses decreased 22%
year-on-
year primarily driven by lower spending on product marketing. Location &
Commerce non-IFRS sales and marketing expenses increased 6% sequentially,
primarily driven by seasonal increases in marketing expenses related to map
update marketing campaigns.
Location & Commerce non-IFRS administrative and general expenses decreased
5%
year-on-year primarily driven by a focus on cost controls. Location &
Commerce
non-IFRS administrative and general expenses increased 13 % sequentially
primarily driven by increased depreciation related to the closure of
offices.
In the fourth quarter 2011, we conducted our annual impairment testing to
assess
if events or changes in circumstances indicated that the carrying amount of
our
goodwill may not be recoverable. As a result, we recorded a charge to
operating
profit of EUR 1 090 million for the impairment of goodwill in our Location
&
Commerce business. The impairment charge is based on our estimate that the
recoverable amount of Location & Commerce is EUR 4.1 billion. After the
impairment charge, the carrying amount of goodwill for Location & Commerce
is
EUR 3.3 billion. The impairment negatively impacted our reported EPS by EUR
0.29.
The impairment charge is the result of an evaluation of the projected
financial
performance of our Location & Commerce business. This takes into
consideration
the market dynamics in digital map data and related location-based content
markets, including our estimate of the market moving long-term from fee-
based
towards advertising-based models especially in some more mature markets. It
also
reflects recently announced results and related competitive factors in the
local
search and advertising market resulting in lower estimated growth prospects
from
our location-based assets integrated with different advertising platforms.
After
consideration of all relevant factors, we reduced the net sales projections
for
Location & Commerce which, in turn, reduced projected profitability and
cash
flows.
The Location & Commerce business is an important asset that is bringing
differentiating location-based services to Nokia, the Windows Phone
ecosystem,
and other Microsoft products such as Bing. We believe this is the leading
location-based services platform with an opportunity to become tremendously
powerful as computing goes more mobile.
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
the fourth quarter 2011 are not directly comparable to its results for the
fourth quarter 2010.
The following chart sets out 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 |
+-----------------------+---------+---------+---------+---------+---------+
| | Q4/2011 | Q4/2010 | YoY | Q3/2011 | QoQ |
| | | | Change | | Change |
+-----------------------+---------+---------+---------+---------+---------+
| Net sales | | | | | |
| (EUR million) | 3 815 | 3 961 | -4% | 3 413 | 12% |
+-----------------------+---------+---------+---------+---------+---------+
| Non-IFRS gross | | | | | |
| margin (%) | 29.2% | 26.4% | | 26.8% | |
+-----------------------+---------+---------+---------+---------+---------+
| Non-IFRS operating | | | | | |
| expenses (EUR million)| 943 | 881 | 7% | 936 | 1% |
+-----------------------+---------+---------+---------+---------+---------+
| Non-IFRS operating | | | | | |
| margin (%) | 4.6% | 3.7% | | 0.2% | |
+-----------------------+---------+---------+---------+---------+---------+
Net Sales
The following chart sets out 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 |
+----------------------+---------+---------+--------+---------+--------+
| EUR millions | Q4/2011 | Q4/2010 | YoY | Q3/2011 | QoQ |
| | | | Change | | Change |
+----------------------+---------+---------+--------+---------+--------+
| Europe | 1 272 | 1 357 | -6% | 1 074 | 18% |
| | | | | | |
| Middle East & Africa | 394 | 423 | -7% | 301 | 31% |
| | | | | | |
| Greater China | 438 | 508 | -14% | 302 | 45% |
| | | | | | |
| Asia-Pacific | 909 | 978 | -7% | 978 | -7% |
| | | | | | |
| North America | 293 | 226 | 30% | 304 | -4% |
| | | | | | |
| Latin America | 509 | 469 | 9% | 454 | 12% |
+----------------------+---------+---------+--------+---------+--------+
| Total | 3 815 | 3 961 | -4% | 3 413 | 12% |
+----------------------+---------+---------+--------+---------+--------+
The year-on-year decrease in Nokia Siemens Networks' net sales in the
fourth
quarter 2011 was driven primarily by a decline in sales of infrastructure
equipment, which more than offset the contribution from the acquired
Motorola
Solutions networks assets and a slight increase in sales of services.
Excluding
the acquired Motorola Solutions networks assets, net sales would have
decreased
by 11% year-on-year. The sequential increase in Nokia Siemens Networks' net
sales in the fourth quarter 2011 was driven primarily by industry
seasonality.
Services represented slightly over 50% of Nokia Siemens Networks' net sales
in
the fourth quarter 2011.
At constant currency, Nokia Siemens Networks' net sales would have
decreased 5%
year-on-year and increased 10% sequentially.
Gross Margin
The higher year-on-year and sequential Nokia Siemens Networks' non-IFRS
gross
margin in the fourth quarter 2011 was primarily due to higher software
sales,
improved performance in services and the contribution from the acquired
Motorola
assets.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses
increased
10% year-on-year primarily due to the addition of research and development
operations relating to the acquired Motorola Solutions networks assets as
well
as investments in strategic initiatives. On a sequential basis, Nokia
Siemens
Networks' non-IFRS research and development expenses increased 2% driven by
higher seasonal revenues, largely offset by cost control initiatives and
focus
on strategic investments.
Nokia Siemens Networks' non-IFRS sales and marketing expenses increased 1%
year-
on-year primarily due to the addition of sales and marketing operations
relating
to the acquired Motorola Solutions networks assets, partially offset by
cost
control initiatives. On a sequential basis, Nokia Siemens Networks non-IFRS
sales and marketing expenses decreased 1% reflecting cost control
initiatives.
Nokia Siemens Networks' non-IFRS administrative and general expenses
increased
8% year-on-year, reflecting the higher net sales and the addition of
Motorola
Solutions' network assets. Sequentially, Nokia Siemens Networks non-IFRS
administrative and general expenses decreased 1%.
The year-on-year improvement in Nokia Siemens Networks' non-IFRS other
income
for the fourth quarter 2011 primarily reflected lower indirect tax
provisions as
well as lower allowances for doubtful accounts. Sequentially, Nokia Siemens
Networks' non-IFRS other income decreased primarily due to higher indirect
tax
provisions and some write-offs.
Operating Margin
The higher year-on-year Nokia Siemens Networks non-IFRS operating margin in
the
fourth quarter 2011 primarily reflected the higher gross margin, partially
offset by increased operating expenses.
The sequential increase in Nokia Siemens Networks' non-IFRS operating
margin in
the fourth quarter 2011 primarily reflected the high net sales and gross
margin,
as well strong operating expense control.
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.
Nokia Siemens Networks plans to realign its business to focus on mobile
broadband (including optical), customer experience management and services.
Nokia Siemens Networks' services organization will further strengthen its
global
delivery system. Business areas not consistent with the new strategy are
planned
to be divested or managed for value. Quality and innovation will continue
to be
priorities for the company, with ongoing investment in both areas.
Nokia Siemens Networks targets 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.
Nokia Siemens Networks plans to reduce its global workforce by
approximately
17 000 by the end of 2013. These planned reductions are expected to be
driven by
aligning the company's workforce with its new strategy as well as through a
range of productivity and efficiency measures. These planned measures are
expected to include elimination of the company's matrix organizational
structure, site consolidation, transfer of activities to global delivery
centers, consolidation of certain central functions, cost synergies from
the
integration of Motorola's wireless assets, efficiencies in service
operations,
and company-wide process simplification.
Nokia Siemens Networks will begin the process of engaging with employee
representatives in accordance with country-specific legal requirements to
find
socially responsible means to address these reduction needs. More
information
will be shared in impacted countries as the process proceeds. In order to
reduce
the impact of the planned reductions, Nokia Siemens Networks intends to
launch
locally led programs at the most affected sites to provide re-training and
re-
employment support.
In the first quarter of 2012, Nokia Siemens Network expects substantial
charges
related to this restructuring program.
FOURTH QUARTER 2011 OPERATING HIGHLIGHTS
Devices & Services
- Nokia announced the Nokia Lumia 800 and Nokia Lumia 710, the first two
Nokia
smartphones based on Windows Phone. The Lumia range is designed to bring
consumers attractive industrial design, a fast social and Internet
experience,
leading imaging capabilities as well as signature Nokia experiences
optimized
for Windows Phone, such as Nokia Drive and Mix Radio. By the end of the
quarter,
the Nokia Lumia 800, which features a 3.7 inch AMOLED ClearBlack curved
display,
was on sale in France, Germany, Hong Kong, India, Italy, the Netherlands,
Russia, Singapore, Spain, Taiwan and the United Kingdom. Since the end of
the
year, the Lumia 800 has also gone on sale in Denmark, South Korea, Sweden
and
Switzerland. By the end of the fourth quarter, the Lumia 710 was on sale in
Hong
Kong, India, Italy, Russia, Singapore and Taiwan. Since the end of the
year, the
Lumia 710 has also gone on sale in Germany, Spain and the United States,
where
it is being offered exclusively through T-Mobile.
- Since the end of the quarter, Nokia has announced the Nokia Lumia 900,
the
first of Nokia's Windows Phone-based range to feature high-speed LTE
connectivity, and which will go on sale in early 2012 in the United States
exclusively through AT&T.
- Nokia announced four new Series 40-based mobile phones: the Nokia Asha
300,
Asha 303, Asha 200 and Asha 201. Each phone supports Nokia's aim to connect
the
next billion consumers with devices which offer high-quality, stylish
designs,
with the best access to social networks and the Internet. The Nokia Asha
300,
Asha 303 and Asha 200 - also Nokia's latest dual SIM device - started
shipping
during the fourth quarter of 2011, while the Nokia Asha 201 is expected to
begin
shipping in the first quarter of 2012.
- Nokia announced and started shipments of the Nokia 603, an affordable no-
compromise smartphone featuring simple pairing, sharing and tag reading
with NFC
and running on the latest Symbian Belle platform. Nokia also launched the
Nokia
Luna Bluetooth Headset designed as an in-ear device with NFC pairing
capabilities.
- Nokia announced and began shipments of two high performance audio
headsets,
the Nokia Purity HD Stereo Headset by Monster and the in-ear Nokia Purity
Stereo
Headset by Monster.
Location & Commerce
- Location & Commerce made available Nokia Maps and Nokia Drive for Nokia's
new
Lumia smartphones. Nokia Maps is a mobile application that gives people new
ways
to discover and explore the world around them, as well as enabling them to
search for addresses and places of interest. Nokia Drive is a dedicated in-
car
navigation application, equivalent to a fully-fledged PND, including voice-
guided navigation in multiple languages for more than 100 countries, 2D and
3D
map views and day and night modes.
- Location & Commerce launched Nokia Pulse, an application that enables
people
to instantly share their location or other information with family, friends
or
any other pre-defined group.
- Location & Commerce commercially released Nokia Maps 3.08 for Symbian,
providing better and faster ways to find places and the best way to get
there.
- Location & Commerce launched Nokia Maps 3D at maps.nokia.com/3D with
search,
routing and sharing functionality.
- Location & Commerce began powering Yahoo! Maps.
- NAVTEQ was selected by Ford Motor Company to be its exclusive map
supplier for
the SYNC MyFord Touch navigation system. The agreement positions NAVTEQ as
the
map data provider for the system in North America, Latin America, the
Middle
East, Russia and Europe.
- NAVTEQ divested its media advertising business to Matchbin, a provider of
content management, advertising and local marketplace solutions for media
companies.
Nokia Siemens Networks
- On November 22, 2011, Nokia Siemens Networks announced a new strategy,
including changes to its organizational structure and a significant
restructuring program aimed at making the company a leader in mobile
broadband
and services and improving the company's competitiveness and profitability.
- As part of its new strategy, Nokia Siemens Networks is focusing on mobile
broadband and services, and as such has announced a number of planned
divestments, with the sale of its Microwave Transport business to
DragonWave,
its fixed line Broadband Access business to ADTRAN and its WiMAX unit to
NewNet
Communications Technologies.
- Nokia Siemens Networks announced a number of mobile broadband deals,
including: working with SKY in Brazil to launch 4G TD-LTE wireless networks
for
the first time in Latin America; developing the GSM network and expanding
3G/HSPA+ for Polkomtel in Poland; and upgrading the GSM network in the
Moscow
region for Russian operator Megafon, paving the way for transition to LTE.
- Nokia Siemens Networks continued to conduct a number of LTE trials,
including
collaborating with 02 in the UK to provide LTE services on a trial basis to
select users in London, working with Saudi Telecom Company to ensure
network
availability for the upsurge in traffic during the holy Hajj pilgrimage,
and
successfully completing Indonesia's first 1800 MHz LTE trial for Indosat.
In
Japan, Nokia Siemens Networks implemented its Circuit Switched Fallback
(CSFB)
technology to enable CDMA and LTE technologies to work together in KDDI's
network.
- In optical, Nokia Siemens Networks worked with Italy's Fastweb using
Liquid
Transport architecture to deploy the country's first 100G optical fiber
network
between Milan and Rome. The company also announced a deal to deliver the
world's
longest 40G link, without intermediate amplifiers, in the 354 kilometre
under-
sea link upgrade for PT Telkom in Indonesia.
- In services, Nokia Siemens Networks opened a new Service Delivery Center
in
Mexico, the company's fifth worldwide, to provide network planning and
optimization services for operators in Latin America, with the intention of
extending these capabilities to other regions in due course.
- Nokia Siemens Networks was selected by Bharti Airtel to implement a pan-
Indian
Customer Experience Management platform to enrich data services experience;
and
to deliver a superior mobile broadband experience to Bharti customers in 16
African countries. In Egypt, Nokia Siemens Networks is upgrading Vodafone's
subscriber data management system, enabling the operator to offer a range
of
customized services.
For more information, please refer to related press announcements at the
following links: www.nokia.com/press and www.nokiasiemensnetworks.com/press
NOKIA IN JANUARY - DECEMBER 2011
(The following discussion is of Nokia's reported results. Comparisons are
given
to 2010 results, unless otherwise indicated.)
Effective from October 1, 2011, Nokia had three businesses that reflect its
new
operational structure - Devices & Services, Location & Commerce and Nokia
Siemens Networks. Devices & Services includes two operating and reportable
segments - Smart Devices, which focuses on smartphones, and Mobile Phones,
which
focuses on mass market mobile devices - as well as Devices & Services
Other. As
of October 1, 2011 a new operating and reportable segment, Location &
Commerce,
was formed by integrating the NAVTEQ business with Nokia's social location
services operations, which focuses on location based services and local
commerce. From the third quarter 2008 until the fourth quarter 2011, NAVTEQ
was
a separate reportable segment of Nokia.
Prior period results for each quarter and the full year 2010 and Q1, Q2 and
Q3
2011 have been recasted (on an unaudited basis) for comparability purposes
according to the new reporting format. Recasted reported financial
information
can be accessed at: http://www.nokia.com/investors
In 2011, our net sales decreased 9% to EUR 38.7 billion (EUR 42.4 billion
in
2010). Net sales of Devices & Services decreased 18% to EUR 23.9 billion
(EUR
29.1 billion). Net sales of Smart Devices decreased 27% to EUR 10 820
million
(EUR 14 874 million). Net sales of Mobile Phones decreased 13% to EUR 11
930
million (EUR 13 696 million). Net sales of Location & Commerce increased
25% to
EUR 1 091 million (EUR 869 million). Net sales of Nokia Siemens Networks
increased 11% to EUR 14.0 billion (EUR 12.7 billion).
In 2011, Europe accounted for 31% (34%) of our net sales, Asia-Pacific 23%
(21%), Greater China 17% (18%), Middle East & Africa 14% (13%), Latin
America
11% (9%) and North America 4% (5%). The 10 markets in which we generated
the
greatest net sales in 2011 were, in descending order of magnitude, 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.
In
comparison, the 10 markets in which we generated the greatest net sales in
2010
were China, India, Germany, Russia, the United States, Brazil, the United
Kingdom, Spain, Italy and Indonesia, together representing approximately
52% of
total net sales in 2010.
Our gross margin in 2011 was 29.3%, compared to 30.2% in 2010. Gross profit
in
Devices & Services decreased to EUR 6 640 million (gross profit of EUR 8
722
million), representing a gross margin of 27.7% (29.9%). Gross profit of
Smart
Devices decreased to EUR 2 561 million (EUR 4 587 million), representing
23.7%
of Smart Devices net sales (30.8%). Gross profit of Mobile Phones
decreased to
EUR 3 117 million (EUR 3 830 million), representing 26.1% of Mobile Phones
net
sales (28.0%). Gross profit in Location & Commerce increased to EUR 877
million
(gross profit of EUR 700 million), representing a gross margin of 80.4%
(80.5%).
Gross profit in Nokia Siemens Networks increased to EUR 3 802 million
(gross
profit EUR 3 395 million), representing a gross margin of 27.1% (26.8%).
Our 2011 operating loss was EUR 1.1 billion, compared with an operating
profit
of EUR 2.1 billion in 2010. Our 2011 operating margin was -2.8% (4.9%). Our
operating profit in 2011 included purchase price accounting items and other
special items of net negative EUR 2.9 billion (net negative EUR 1.1
billion).
Operating profit in Devices & Services decreased to EUR 884 million
(operating
profit of EUR 3 540 million), representing an operating margin of 3.7%
(12.2%).
Devices & Services operating profit in 2011 included purchase price
accounting
items and other special items of net negative EUR 799 million (net positive
EUR
137 million).Contribution of Smart Devices decreased to EUR -411 million
(EUR
1 376 million), representing -3.8% of Smart Devices net sales (9.3%).
Contribution of Mobile Phones decreased to EUR 1 481 million (EUR 2 327
million), representing 12.4% of Mobile Phones net sales (17.0%). Operating
loss
in Location & Commerce was EUR 1 526 million (operating loss of EUR 663
million), representing an operating margin of -139.9% (-76.3%). Location &
Commerce operating loss included purchase price accounting items and other
special items of negative EUR 1.6 billion (net negative EUR 490 million).
Operating loss in Nokia Siemens Networks was EUR 300 million (operating
loss EUR
686 million), representing an operating margin of -2.1% (-5.4%). Nokia
Siemens
Networks operating loss in 2011 included purchase price accounting items
and
other special items of net negative EUR 0.5 billion (net negative EUR 0.8
billion).Group Common Functions expense totaled EUR 131 million in 2011,
compared to EUR 113 million in 2010.
Although the mobile device industry continued to see volume growth in 2011,
our
net sales and profitability were negatively impacted by the increasing
momentum
of competing smartphone platforms relative to our Symbian smartphones in
all
regions as we embarked on our platform transition to Windows Phone, as well
as
our pricing actions due to the competitive environment in both the
smartphone
and mobile phone markets. In addition, during the first half of 2011 our
net
sales and profitability were adversely impacted by our lack of dual SIM
products, which continued to be a growing part of the market. For Nokia
Siemens
Networks, net sales growth was driven primarily by the contribution from
the
acquired Motorola Solutions networks assets, which was completed on April
29, 2011. On a year-on-year basis the movement of the Euro relative to
relevant
currencies had almost no impact on our overall net sales.
Our research and development expenses were EUR 5.6 billion in 2011,
compared to
EUR 5.9 billion in 2010. Research and development costs represented 14.5%
of our
net sales in 2011 (13.8%). Research and development expenses included
purchase
price accounting items and other special items of EUR 440 million in 2011
(EUR
575 million).
In 2011, our selling and marketing expenses were EUR 3.8 billion, compared
to
EUR 3.9 billion in 2010. Selling and marketing expenses represented 9.8% of
our
net sales in 2011 (9.1%). Selling and marketing expenses included purchase
price
accounting items and other special items of EUR 444 million in 2011 (EUR
429
million).
Administrative and general expenses were EUR 1.1 billion in 2011, compared
to
EUR 1.1 billion in 2010. Administrative and general expenses were equal to
2.9%
of our net sales in 2011 (2.6%). Administrative and general expenses
included
special items of EUR 37 million in 2011 (EUR 77 million).
Financial income and expenses, net, was an expense of EUR 102 million in
2011
(EUR 285 million). The lower net expense in 2011 was primarily driven by
lower
net costs related to hedging our cash balances and favorable fluctuations
in
certain foreign currency exchange rates. Nokia expects financial income and
expenses, net, in 2012 to be an expense of approximately EUR 300 million
primarily due to higher expected net costs related to hedging our cash
balances
as well as higher costs related to Nokia Siemens Networks' financing.
Loss before tax was EUR 1.2 billion in 2011 (profit EUR 1.8 billion). Loss
was
EUR 1.5 billion (profit of EUR 1.3 billion), based on a loss of EUR 1.2
billion
(profit of EUR 1.8 billion) attributable to equity holders of the parent
and a
loss of EUR 0.3 billion (loss of EUR 0.5 billion) attributable to non-
controlling interests. Earnings per share decreased to EUR -0.31 (diluted
and
basic), compared to EUR 0.50 (diluted and basic).
The following chart sets out Nokia Group's cash flow for the fiscal years
2011
and 2010 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 |
+-----------------------+--------+--------+--------+
| EUR million | 2011 | 2010 | YoY |
| | | | Change |
+-----------------------+--------+--------+--------+
| Net cash from | | | |
| operating activities. | 1 137 | 4 774 | -76% |
+-----------------------+--------+--------+--------+
| Total cash and | | | |
| other liquid assets | 10 902 | 12 275 | -11% |
+-----------------------+--------+--------+--------+
| Net cash and | | | |
| other liquid assets1 | 5 581 | 6 996 | -20% |
+-----------------------+--------+--------+--------+
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities.
Net cash and other liquid assets decreased by EUR 1.4 billion primarily due
to
payment of the dividend, cash outflows related to the acquisition of
Motorola
Solutions' networks assets, and capital expenditures, partially offset by
positive overall net cash from operating activities and a EUR 500 million
equity
investment in Nokia Siemens Networks by Siemens. In 2011, capital
expenditure
amounted to EUR 597 million (EUR 679 million).
The following discussion of Nokia's three businesses - Devices & Services,
Location & Commerce and Nokia Siemens Networks - contains non-IFRS results
which
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.
Devices & Services
As of April 1, 2011, our Devices & Services business includes two operating
and
reportable segments - Smart Devices, which focuses on smartphones, and
Mobile
Phones, which focuses on mass market mobile devices - as well as Devices &
Services Other. Additionally, in 2011 we announced plans to create a new
Location & Commerce business which combines NAVTEQ and Nokia's social
location
services operations from Devices & Services. The Location & Commerce
business is
an operating and reportable segment beginning October 1, 2011. Prior period
results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have
been
recasted (on an unaudited basis) for comparability purposes according to
the new
reporting format. Recasted reported financial information can be accessed
at:
http://www.nokia.com/investors
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 2011 and
2010.
+----------------------------------------------------+
| DEVICES & SERVICES |
| RESULTS SUMMARY |
+-------------------------+--------+--------+--------+
| | 2011 | 2010 | YoY |
| | | | Change |
+-------------------------+--------+--------+--------+
| Net sales | | | |
| (EUR millions)1 | 23 943 | 29 134 | -18% |
+-------------------------+--------+--------+--------+
| Mobile device volume | | | |
| (million units) | 417.1 | 452.9 | -8% |
+-------------------------+--------+--------+--------+
| Mobile device | | | |
| ASP (EUR) | 57 | 64 | -11% |
+-------------------------+--------+--------+--------+
| Non-IFRS | | | |
| gross margin (%) | 27.7% | 29.9% | |
+-------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| expenses (EUR millions) | 4 974 | 5 341 | -7% |
+-------------------------+--------+--------+--------+
| Non-IFRS operating | | | |
| margin (%) | 7.0% | 11.7% | |
+-------------------------+--------+--------+--------+
Note 1: Includes IPR royalty income recognized in Devices &
Services Other net sales.
Net Sales
The decline in Devices & Services net sales in 2011 resulted from lower
volumes
and ASPs in both Smart Devices and Mobile Phones discussed below, partially
offset by higher IPR royalty income discussed below. At a constant
currency,
Devices & Services net sales would have decreased 17% compared to 2010.
During the second quarter of 2011, Devices & Services net sales were
negatively
impacted by unexpected sales and inventory patterns, resulting in
distributors
and operators purchasing fewer of our devices across our portfolio as they
reduced their inventories of Nokia devices. Devices & Services net sales
were
also impacted during the second quarter of 2011 by a negative mix shift
towards
devices with lower average selling prices and lower gross margins. Our
immediate
actions enabled us to create healthier sales channel dynamics during the
latter
weeks of the second quarter 2011. Devices & Services net sales increased
sequentially in the fourth quarter 2011, supported by broader product
renewal in
both Mobile Phones, for example dual SIM devices, and Smart Devices as well
as
overall industry seasonality.
Our overall Devices & Services net sales in 2011 benefited from the
recognition
in Devices & Services Other of approximately EUR 450 million (approximately
EUR
70 million in 2010) of non-recurring IPR royalty income, as well as strong
growth in the underlying recurring IPR royalty income. We believe these
developments underline Nokia's industry leading patent portfolio. During
the
last two decades, we have invested more than EUR 45 billion in research and
development and built one of the wireless industry's strongest and broadest
IPR
portfolios, with over 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.
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 2011
and
2010. The IPR royalty 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 |
+----------------------+--------+--------+--------+
| EUR million | 2011 | 2010 | YoY |
| | | | Change |
+----------------------+--------+--------+--------+
| Europe | 7 064 | 9 736 | -27% |
| | | | |
| Middle East & Africa | 4 098 | 4 046 | 1% |
| | | | |
| Greater China | 5 063 | 6 167 | -18% |
| | | | |
| Asia-Pacific | 4 896 | 6 014 | -19% |
| | | | |
| North America | 354 | 901 | -61% |
| | | | |
| Latin America | 2 468 | 2 270 | 9% |
+----------------------+--------+--------+--------+
| Total | 23 943 | 29 134 | -18% |
+----------------------+--------+--------+--------+
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 2011 and 2010.
+-----------------------------------------------+
| DEVICES & SERVICES MOBILE DEVICE |
| VOLUMES BY GEOGRAPHIC AREA |
+----------------------+-------+-------+--------+
| million units | 2011 | 2010 | YoY |
| | | | Change |
+----------------------+-------+-------+--------+
| Europe | 87.8 | 112.7 | -22% |
| | | | |
| Middle East & Africa | 94.6 | 83.8 | 13% |
| | | | |
| Greater China | 65.8 | 82.5 | -20% |
| | | | |
| Asia-Pacific | 118.9 | 119.1 | 0% |
| | | | |
| North America | 3.9 | 11.1 | -65% |
| | | | |
| Latin America | 46.1 | 43.7 | 5% |
+----------------------+-------+-------+--------+
| Total | 417.1 | 452.9 | -8% |
+----------------------+-------+-------+--------+
On a year-on-year basis, the decline in our total Devices & Services
volumes in
2011 was driven by 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
in
2011 was driven primarily by the higher proportion of Mobile Phone sales,
partially offset by the positive impact from higher IPR royalty income and
the
lower deferral of revenue related to services sold in combination with our
devices. On a year-on-year basis, the impact from the appreciation of the
Euro
against certain currencies had a slightly negative impact, almost entirely
offset by the positive impact from foreign currency hedging.
Gross Margin
On a year-on-year basis, the decline in our Devices & Services non-IFRS
gross
margin in 2011 was driven by gross margin declines in both Smart Devices
and to
a lesser extent in Mobile Phones discussed below, partially offset by
higher IPR
royalty income.
Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 9%
year-
on-year in 2011 due to declines in Smart Devices and Devices & Services
Other
research and development expenses, partially offset by an increase in
Mobile
Phones research and development expenses. The decreases in Smart Devices
and
Devices & Services Other research and development expenses were due
primarily to
a focus on priority projects and cost controls. The increase in Mobile
Phones
research and development expenses was due primarily to investments to
accelerate
product development to bring new innovations to the market faster and at
lower
price-points, consistent with Mobile Phones "internet for the next billion"
strategy, partially offset by a focus on priority projects and cost
controls.
Devices & Services non-IFRS sales and marketing expenses decreased 4% year-
on-
year in 2011 primarily driven by lower Smart Devices sales and marketing
expenditure.
Devices & Services non-IFRS administrative and general expenses decreased
7%
year-on-year in 2011, primarily driven by lower Smart Devices
administrative and
general expenses which more than offset an increase in Devices & Services
Other
administrative and general expenses.
In 2011, Devices & Services non-IFRS other income and expense was virtually
unchanged year-on-year. Reported other income and expense was significantly
adversely impacted in 2011 primarily as a result of restructuring related
expenses discussed below, which were recognized in Devices & Services
Other.
Cost Reduction Activities and Planned Operational Adjustments
We are targeting to reduce our Devices & Services non-IFRS operating
expenses by
more than EUR 1 billion for the full year 2013, compared to the recasted
full
year 2010 Devices & Services non-IFRS operating expenses of EUR 5.35
billion.
This reduction is expected to come from a variety of different sources and
initiatives, including a planned reduction in the number of employees and
normal
personnel attrition, a reduction in the use of outsourced professionals,
reductions in facility costs, and various improvements in efficiencies.
Our cost reduction activities include a strategic collaboration with
Accenture
to outsource Nokia's Symbian software development and support activities to
Accenture. Approximately 2 300 Nokia employees were transferred to
Accenture as
part of the transaction which was completed on September 30, 2011.
At the end of the third quarter 2011, we announced plans to take additional
actions to align our workforce and operations. The measures include the
closure
of Nokia's manufacturing facility in Cluj, Romania, which - together with
adjustments to supply chain operations - has impacted approximately 2 200
employees; a plan to shift the focus of Nokia's manufacturing operations in
Salo
in Finland, Komarom in Hungary, and Reynosa in Mexico towards customer and
market-specific software and sales package customization; and a plan to
concentrate the development efforts of Location & Commerce in Berlin in
Germany,
Boston and Chicago in the U.S., and other supporting sites. The planned
changes
in Location & Commerce, which include the closure of its operations in Bonn
in
Germany and Malvern in the U.S., are estimated to impact approximately 1
300
employees.
The planned measures support the execution of our strategy and also target
to
bring efficiencies and speed to the organization. In line with the company
values, Nokia is offering employees affected by the planned reductions a
comprehensive support program. We remain committed to supporting employees
and
the local communities through this difficult change.
As of December 31, 2011, we had recognized cumulative net charges in
Devices &
Services of EUR 797 million related to restructuring activities in 2011,
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 around EUR 900
million
before the end of 2012. We also believe total cash outflows related to our
Devices & Services restructuring activities will be below the level of the
cumulative charges related to these restructuring activities.
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 |
+---------------------------+--------+--------+--------+
| | 2011 | 2010 | YoY |
| | | | Change |
+---------------------------+--------+--------+--------+
| Net sales (EUR millions)1 | 10 820 | 14 874 | -27% |
+---------------------------+--------+--------+--------+
| Smart Devices volume | | | |
| (million units) | 77.3 | 103.6 | -25% |
+---------------------------+--------+--------+--------+
| Smart Devices ASP (EUR) | 140 | 144 | -3% |
+---------------------------+--------+--------+--------+
| Gross margin (%) | 23.7% | 30.8% | |
+---------------------------+--------+--------+--------+
| Operating expenses | | | |
| (EUR millions) | 2 974 | 3 392 | -12% |
+---------------------------+--------+--------+--------+
| Contribution margin (%) | -3.8% | 9.3% | |
+---------------------------+--------+--------+--------+
Note 1: Does not include IPR royalty income. IPR royalty income is
recognized in Devices & Services Other net sales.
Net Sales
The year-on-year decline in our Smart Devices net sales in 2011 was
primarily
due to significantly lower volumes and, to a lesser extent, lower ASPs.
Volume
The year-on-year decrease in our Smart Device volumes in 2011 was driven by
the
strong momentum of competing smartphone platforms relative to our higher
priced
Symbian devices, particularly in Europe and Asia Pacific, as well as
pricing
tactics by certain competitors. During the second quarter 2011, our Smart
Device
volumes were also negatively impacted by distributors and operators
purchasing
fewer of our smartphones as they reduced their inventories of those devices
which were slightly above normal levels at the end of the first quarter
2011,
particularly in China. During the second half of 2011, our Symbian
competitiveness continued to be challenged across the portfolio driving the
significant year-on-year volume decline.
Average Selling Price
The year-on-year decline in our Smart Devices ASP in 2011 was driven
primarily
by price actions due to the competitive environment and the negative impact
from
foreign currency hedging, partially offset by a positive mix shift towards
higher priced smartphones, such as the Nokia N8, Nokia N9 and Lumia
devices, and
the lower deferral of revenue related to services sold in combination with
our
devices, particularly in the second half of 2011.
Although Smart Devices ASP declined progressively during the first three
quarters of 2011, Smart Devices ASP increased sequentially in the fourth
quarter
2011, supported by sales of the higher priced Nokia N9 and Nokia Lumia
devices.
Gross Margin
The year-on-year decline in our Smart Devices gross margin in 2011 was
driven
primarily by greater price erosion than cost erosion due to the competitive
environment, our tactical pricing actions during the second and third
quarters
of 2011 and an increase in Symbian-related allowances during the fourth
quarter
2011, as previously discussed in the fourth quarter 2011 Smart Devices
gross
margin section.
Following the announcement of our strategic partnership with Microsoft in
February 2011, our strategy included the expectation to sell approximately
150
million more Symbian devices in the years to come. To maximize the value of
the
Symbian asset going forward, we expect to continue shipping Symbian devices
in
specific geographies and channels as well as to continue to provide
software
support to our Symbian customers through 2016. As a result of the changing
market conditions, combined with our increased focus on Lumia, we now
believe we
will sell fewer Symbian devices than previously anticipated. Thus, in the
fourth
quarter 2011, we recognized allowances related to excess component
inventory and
future purchase commitments.
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 2011 and
2010.
+----------------------------------------------------+
| MOBILE PHONES |
| RESULTS SUMMARY |
+-------------------------+--------+--------+--------+
| | 2011 | 2010 | YoY |
| | | | Change |
+-------------------------+--------+--------+--------+
| Net sales | | | |
| (EUR millions)1 | 11 930 | 13 696 | -13% |
+-------------------------+--------+--------+--------+
| Mobile Phones volume | | | |
| (million units) | 339.8 | 349.2 | -3% |
+-------------------------+--------+--------+--------+
| Mobile Phones | | | |
| ASP (EUR) | 35 | 39 | -10% |
+-------------------------+--------+--------+--------+
| Gross margin (%) | 26.1% | 28.0% | |
+-------------------------+--------+--------+--------+
| Operating expenses | | | |
| (EUR million) | 1 640 | 1 508 | 9% |
+-------------------------+--------+--------+--------+
| Contribution margin (%) | 12.4% | 17.0% | |
+-------------------------+--------+--------+--------+
Note 1: Does not include IPR royalty income. IPR royalty income is
recognized in Devices & Services Other net sales.
Net Sales
On a year-on-year basis, our Mobile Phones net sales decreased in 2011 due
to
lower ASPs and, to a lesser extent, lower volumes.
Volume
The year-on-year decline in our Mobile Phones volumes in 2011 was driven by
the
challenging competitive environment, especially during the first half of
the
year due to our lack of dual SIM phones, which continued to be a growing
part of
the market and pressure from a variety of price aggressive competitors
which
adversely impacted our Mobile Phones volumes. During 2011, Mobile Phones
volumes
were also negatively impacted by our reduced portfolio of higher priced
mobile
phones, as well as by distributors and operators purchasing fewer of our
mobile
phones during the second quarter 2011 as they reduced their inventories of
those
devices which were slightly above normal levels at the end of the first
quarter
2011.
During the second half of 2011, our Mobile Phones volumes increased year-
on-year
driven by the introduction and broader availability of our first dual SIM
devices and the ongoing product renewal across the mobile phones portfolio,
which more than offset our reduced portfolio of higher priced mobile
phones.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in 2011 was primarily due
to a
higher proportion of sales of lower priced devices driven by a reduced
portfolio
of higher priced mobile phones and our tactical pricing actions across the
portfolio taken which partially impacted the second quarter 2011 and fully
impacted the third quarter 2011. In addition, the appreciation of the Euro
against certain currencies contributed to the decline which was partially
offset
by the positive impact from foreign currency hedging.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in 2011 was due
primarily to greater price erosion than cost erosion due to the competitive
environment and our tactical pricing actions across the portfolio partially
impacting the second quarter 2011 and fully impacting the third quarter
2011, a
negative impact from foreign currency hedging and the appreciation of the
Euro
against certain currencies, partially offset by a product mix shift towards
higher margin mobile phones.
Location & Commerce
On June 22, 2011, we announced plans to create a new Location & Commerce
business which combines NAVTEQ and Nokia's social location services
operations
from Devices & Services. The Location & Commerce business is an operating
and
reportable segment beginning October 1, 2011. In addition to a broad
portfolio
of products and services for the wider internet ecosystem, the Location &
Commerce business is creating integrated social location offerings in
support of
Nokia's strategic goal in smartphones, including the Nokia experience with
Windows Phone, as well as support for bringing the internet to the next
billion.
From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ
was
a separate reportable segment of Nokia. Prior period results for each
quarter
and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an
unaudited basis) for comparability purposes according to the new reporting
format that became effective on October 1, 2011. Recasted reported
financial
information can be accessed at: http://www.nokia.com/investors.
The following chart sets out a summary of the results for Location &
Commerce
and year-on-year growth rates for the fiscal years 2011 and 2010.
+------------------------------------------------+
| LOCATION & COMMERCE |
| RESULTS SUMMARY |
+----------------------+-------+--------+--------+
| | 2011 | 2010 | YoY |
| | | | Change |
+----------------------+-------+--------+--------+
| Net sales | | | |
| (EUR millions) | 1 091 | 869 | 26% |
+----------------------+-------+--------+--------+
| Non-IFRS | | | |
| gross margin (%) | 80.4% | 80.6% | |
+----------------------+-------+--------+--------+
| Non-IFRS | | | |
| operating expenses | | | |
| (EUR millions) | 827 | 871 | -5% |
+----------------------+-------+--------+--------+
| Non-IFRS | | | |
| operating margin (%) | 4.4% | -19.9% | |
+----------------------+-------+--------+--------+
Net Sales
The year-on-year increase in net sales in 2011 was primarily driven by
higher
sales of map content licenses to vehicle customers due to increased
consumer
uptake of navigation systems and higher recognition of deferred revenue
related
to sales of map platform licenses to Smart Devices.
Gross Margin
On a year-on-year basis the non-IFRS gross margin in Location & Commerce
was
virtually unchanged. In 2011, the non-IFRS gross margin benefited from an
increased proportion of higher gross margin sales compared to 2010, which
were
offset by a reclassification of certain data related charges from operating
expenditure to cost of sales in the fourth quarter of 2011.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased 5%
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 5%
primarily
driven by a focus on cost controls and lower product marketing spending.
Location & Commerce non-IFRS administrative and general expenses decreased
8%
primarily driven by a focus on cost controls, partially offset by increased
depreciation costs related to closure of offices.
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
2011 are not directly comparable to 2010.
The following chart sets out a summary of the results for Nokia Siemens
Networks
and year-on-year growth rates for fiscal years 2011 and 2010.
+-------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| RESULTS SUMMARY |
+----------------------+--------+--------+--------+
| | 2011 | 2010 | YoY |
| | | | Change |
+----------------------+--------+--------+--------+
| Net sales | | | |
| (EUR millions) | 14 041 | 12 661 | 11% |
+----------------------+--------+--------+--------+
| Non-IFRS | | | |
| gross margin (%) | 27.4% | 28.2% | |
+----------------------+--------+--------+--------+
| Non-IFRS | | | |
| operating expenses | | | |
| (EUR millions) | 3 662 | 3 456 | 6% |
+----------------------+--------+--------+--------+
| Non-IFRS | | | |
| operating margin (%) | 1.6% | 0.8% | |
+----------------------+--------+--------+--------+
Net Sales
The following chart sets out Nokia Siemens Networks net sales and year-on-
year
growth rates, by geographic area for fiscal years 2011 and 2010.
+-------------------------------------------------+
| NOKIA SIEMENS NETWORKS |
| NET SALES BY GEOGRAPHIC AREA |
+----------------------+--------+--------+--------+
| EUR millions | 2011 | 2010 | YoY |
| | | | Change |
+----------------------+--------+--------+--------+
| Europe | 4 469 | 4 628 | -3% |
| | | | |
| Middle East & Africa | 1 391 | 1 451 | -4% |
| | | | |
| Greater China | 1 465 | 1 451 | 1% |
| | | | |
| Asia-Pacific | 3 848 | 2 915 | 32% |
| | | | |
| North America | 1 077 | 735 | 47% |
| | | | |
| Latin America | 1 791 | 1 481 | 21% |
+----------------------+--------+--------+--------+
| Total | 14 041 | 12 661 | 11% |
+----------------------+--------+--------+--------+
The year-on-year increase in Nokia Siemens Networks' net sales in 2011 was
driven primarily by the contribution from the acquired Motorola Solutions
networks assets, which was completed on April 29, 2011. Excluding the
acquired
Motorola Solutions networks assets, net sales would have increased 4% year-
on-
year, primarily driven by growth in services, which represented
approximately
50% of Nokia Siemens Networks' net sales in 2011.
At constant currency, Nokia Siemens Networks' net sales would have
increased
11% year-on-year in 2011.
Nokia and Nokia Siemens Networks targeted that Nokia Siemens Networks net
sales
would grow faster than the market in 2011. Based on insufficient full year
data, we believe that it is not yet possible to determine if this target
was
achieved.
Gross Margin
The slight decline in Nokia Siemens Networks non-IFRS gross margin in 2011
was
primarily due to the competitive industry environment and an unfavorable
sales
mix towards lower gross margin revenues, partially offset by the positive
impact
from the acquired Motorola Solutions networks assets.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses
increased 9%
year-on-year in 2011 primarily due to the addition of R&D operations
relating to
the acquired Motorola Solutions networks assets as well as investments in
strategic initiatives.
Nokia Siemens Networks' non-IFRS sales and marketing expenses were
virtually
flat year-on-year in 2011 as the increase from the acquired Motorola
Solutions
networks was offset by ongoing cost control initiatives.
Nokia Siemens Networks' non-IFRS administrative and general expenses
increased
8% year-on-year in 2011, reflecting the higher net sales and the addition
of
Motorola Solutions' network assets.
Nokia Siemens Networks' non-IFRS other income increased year-on-year in
2011 due
primarily to improvements in customer collections.
Based on our estimates, Nokia and Nokia Siemens Networks believe that Nokia
Siemens Networks was able to materially achieve its target to reduce its
non-
IFRS annualized operating expenses and production overheads by EUR 500
million
by the end of 2011, compared to the end of 2009.
Operating Margin
The higher year-on-year Nokia Siemens Networks non-IFRS operating margin in
2011 primarily reflected the higher net sales and lower operating expense
intensity, partially offset by the lower gross margin.
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.
Nokia Siemens Networks plans to realign its business to focus on mobile
broadband (including optical), customer experience management and services.
Nokia Siemens Networks' services organization will further strengthen its
global
delivery system. Business areas not consistent with the new strategy are
planned
to be divested or managed for value. Quality and innovation will continue
to be
priorities for the company, with ongoing investment in both areas.
Nokia Siemens Networks targets 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.
Nokia Siemens Networks plans to reduce its global workforce by
approximately
17 000 by the end of 2013. These planned reductions are expected to be
driven by
aligning the company's workforce with its new strategy as well as through a
range of productivity and efficiency measures. These planned measures are
expected to include elimination of the company's matrix organizational
structure, site consolidation, transfer of activities to global delivery
centers, consolidation of certain central functions, cost synergies from
the
integration of Motorola's wireless assets, efficiencies in service
operations,
and company-wide process simplification.
Nokia Siemens Networks will begin the process of engaging with employee
representatives in accordance with country-specific legal requirements to
find
socially responsible means to address these reduction needs. More
information
will be shared in impacted countries as the process proceeds. In order to
reduce
the impact of the planned reductions, Nokia Siemens Networks intends to
launch
locally led programs at the most affected sites to provide re-training and
re-
employment support.
FULL YEAR 2011 OPERATING HIGHLIGHTS
Nokia
- Nokia announced a new strategy for its mobile products business, with
three
core elements: i) to win in smartphones; ii) to connect the "next billion"
consumers to the Internet and information; and iii) to continue to invest
in
long-term exploratory research into the future of mobility and computing.
Nokia
outlined this new strategy in conjunction with an announcement of changes
to its
leadership team and operational structure designed to accelerate the
company's
speed of execution. Nokia switched to a structure featuring two distinct
business units within our Devices & Services business - Smart Devices and
Mobile
Phones - and formed a new business, Location & Commerce.
- Location & Commerce was formed by the combination of Nokia's NAVTEQ
business
with Nokia's social location services operations and is focusing on the
development of integrated social location products and services for
consumers,
as well as platform services and local commerce services for device
manufacturers, application developers, Internet services providers,
merchants,
and advertisers. Nokia also announced plans for changes to its R&D
operations,
including personnel reductions, to support the execution of our new
strategy.
- In February 2011, Nokia announced the new Nokia Leadership Team (formerly
the
Group Executive Board) composed of the following members: Stephen Elop
(Chief
Executive Officer), Esko Aho (Corporate Relations and Responsibility), Juha
Akras (Human Resources), Jerri DeVard (Chief Marketing Officer), Colin
Giles
(Sales), Richard Green (Chief Technology Officer), Jo Harlow (Smart
Devices),
Timo Ihamuotila (Chief Financial Officer), Mary McDowell (Mobile Phones),
Kai
Oistamo (Chief Development Officer), Tero Ojanpera (Services & Developer
Experience, acting), Louise Pentland (Chief Legal Officer) and Niklas
Savander
(Markets). Michael Halbherr, who was appointed as Executive Vice President
to
lead the new Location & Commerce business, also became a member of the
Nokia
Leadership Team, effective July 1, 2011. Henry Tirri was appointed
Executive
Vice President and Chief Technology Officer, effective September 22, 2011,
replacing Richard Green. Tero Ojanpera left the Nokia Leadership Team at
the end
of his contract on September 30, 2011.
- Nokia received approval from the Management Board of the Frankfurt Stock
Exchange for its request to delist Nokia shares from the exchange. In
accordance
with the decision, the final day of trading of Nokia shares on the
Frankfurt
Stock Exchange will be March 16, 2012.
- Nokia and Siemens announced the appointment of Jesper Ovesen as Executive
Chairman of the Board of Nokia Siemens Networks. As Executive Chairman,
Ovesen
assumes a full-time role with a special emphasis on overseeing the
strategic
direction of Nokia Siemens Networks as it seeks to strengthen its position
as a
leader in the industry and become a more independent entity.
- Nokia and Siemens announced that they each provided capital of EUR 500
million
to Nokia Siemens Networks to further strengthen the company's financial
position.
- Nokia was again selected as a component of the Dow Jones Sustainability
World
Index (DJSI) and Dow Jones Sustainability Europe Index in the DJSI 2011
Review.
- Nokia announced that it has signed a patent license agreement with Apple.
The
agreement resulted in settlement of all patent litigation between the
companies,
including the withdrawal by Nokia and Apple of their respective complaints
to
the US International Trade Commission.
Devices & Services
- Nokia announced plans to establish a new manufacturing site near Hanoi in
northern Vietnam.
- To focus feature phone production in locations closest to suppliers and
key
markets, Nokia ended production at its manufacturing facility in Cluj,
Romania.
Since the end of the quarter, Nokia and De' Longhi, a global leader in
household
appliances, have announced that they have agreed terms for De' Longhi to
acquire
the facility, subject to approvals by the relevant authorities.
Smart Devices
- To support its effort to win in smartphones, Nokia announced in February
2011
plans to form a broad strategic partnership with Microsoft to combine their
respective complementary assets and expertise to build a new global mobile
ecosystem. Under the strategic partnership, which was formalized in April
2011,
Nokia is adopting and licensing from Microsoft Windows Phone as its primary
smartphone platform, and has subsequently begun a transition away from
Symbian.
In October 2011, Nokia launched the Nokia Lumia 800 and Nokia Lumia 710,
its
first products based on the Windows Phone platform. The Lumia range is
designed
to bring consumers attractive industrial design, a fast social and Internet
experience, leading imaging capabilities as well as signature Nokia
experiences
optimized for Windows Phone, such as Nokia Drive and Mix Radio.
- Nokia's new strategy for smartphones also included personnel reductions
as
well as the transfer of approximately 2 300 employees to Accenture as part
of an
agreement in which Accenture is providing Symbian software development and
support activities to Nokia through 2016. Nokia has continued to bring new
Symbian smartphones to market, including seven devices during 2011, of
which
three are powered by Belle, the latest version of the Symbian software,
which
brings a major improvement to the user experience.
- Nokia launched the Nokia N9, the outcome of efforts in Nokia's MeeGo
program.
The Nokia N9 is a pure touch smartphone which introduces an innovative new
design where the home key - typically located at the bottom of the device -
is
replaced by a simple gesture: a swipe. Under Nokia's new strategy for
smartphones, MeeGo will place increased emphasis on longer-term market
exploration of next-generation devices, platforms and user experiences.
Mobile Phones
- To support its effort to connect the "next billion", Nokia renewed its
strategy to focus on capturing volume and value growth by leveraging our
innovation and strength in developing growth markets to provide people with
an
affordable Internet experience on their mobile device - in many cases,
their
first ever Internet experience with any computing device. In the fourth
quarter
of 2011, Nokia launched the Nokia Asha range of Nokia mobile phones, which
offer
access to the Internet, integrated social networking, messaging and access
to
applications from Nokia Store.
- Nokia's dual SIM technology was among several new innovations during 2011
aimed at increasing affordability for the consumer not just at the point of
sale, but in terms of the total cost of ownership of the device. During
2011,
Nokia brought to market its first seven dual SIM mobile phones. Mobile
Phones
also developed applications and services specifically with affordability in
mind. During 2011, some of Nokia's new mobile phones - including the Nokia
Asha
range - shipped with a powerful new browser, which compresses data and can
thus
reduce the cost of browsing the web. Additionally, some new models shipped
with
our new maps software which provides an advanced, cost-efficient maps
experience. Nokia Maps for Series 40 is similar to that available on our
smartphones in that people can view maps and plan routes when the phone is
in
offline mode.
Location & Commerce
- During 2011, Location & Commerce continued to develop integrated
location-
based products and services for consumers, as well as platform services for
the
wider ecosystem. For consumers, these included:
- Nokia Maps, a mobile application that gives people new ways to discover
and
explore the world around them, as well as enabling them to search for and
navigate to addresses and places of interest;
- Nokia Drive, a dedicated in-car navigation application, equivalent to a
fully-
fledged PND, including voice-guided navigation in multiple languages for
more
than 100 countries, 2D and 3D map views and day and night modes;
- Nokia Public Transport, a dedicated public transport application which
provides smart public transportation routing for more than 231 cities
worldwide
on mobile, including timetable routing for bus and train routes for 77
cities;
- Nokia Pulse, an application that enables people to instantly share their
location or other information with family, friends or any other pre-defined
group;
- Nokia Live View, an augmented reality application that enables people to
see
information about points of interest - such as a restaurant, hotel or shop
- in
their camera viewfinder;
- Nokia Maps HTML5 - a mobile web version of Nokia Maps providing access to
Nokia's rich mapping experience to owners of non-Nokia smartphones and
tablets;
- maps.nokia.com, Nokia's mapping offering on the web, enabling people to
discover the world easy and comfortably with City Pages, heat maps,
stunning 3D
maps for more than 20 cities, a rich places directory, superior content
from
leading guides, and local insights from Nokia users.
- Location & Commerce continued to build the "Where" ecosystem with
partners
from Internet companies as well as the car and mobile industry, including
Yahoo!
whose maps.yahoo.com offering is now being powered by the Nokia Location
Platform, benefiting from the latest maps with up-to-date location
data/addresses, new routing options enabling users to avoid tolls and
freeway,
updated road networks and points of interest.
- Location & Commerce began powering Yahoo! Maps.
- NAVTEQ was selected by Ford Motor Company to be its exclusive map
supplier for
the SYNC MyFord Touch navigation system. The agreement positions NAVTEQ as
the
map data provider for the system in North America, Latin America, the
Middle
East, Russia and Europe.
- NAVTEQ announced that it is supplying map data and content to Daimler AG
for
the Mercedes E Class range plus the CLS-Class model. As a result, almost
all
Daimler passenger vehicle navigation platforms in Europe will be powered by
NAVTEQ.
Nokia Siemens Networks
- In November 2011, Nokia Siemens Networks announced a new strategy,
including
changes to its organizational structure and a significant restructuring
program
aimed at making the company an undisputed leader in mobile broadband and
services and improving the company's competitiveness and profitability.
- As part of its new strategy, Nokia Siemens Networks is focusing on mobile
broadband and services, and as such has announced a number of planned
divestments, with the sale of its Microwave Transport business to
DragonWave,
its fixed line Broadband Access business to ADTRAN and its WiMAX unit to
NewNet
Communications Technologies.
- Throughout 2011, Nokia Siemens Networks announced a number of contracts
in the
key area of mobile broadband, including LTE deals with STC in Saudi Arabia,
Latvijas Mobilais Telefons in Latvia; with TeliaSonera in Finland, Bell in
Canada, LG U+ and SK Telecom in Korea, Telecom Italia and Telefonica O2 in
Germany.
- To further support its focus on mobile broadband, Nokia Siemens Networks
also
outlined its vision for how broadband must be delivered in the future via
Liquid
Net; unveiled three new TD-LTE devices to supply communications service
providers and enable the market for TD-LTE; agreed to establish a mobile
broadband focused SmartLab with the Skolkovo Foundation in Russia; and set-
up a
joint venture to build 4G LTE equipment with Micran in Tomsk, Russia.
SIGNIFICANT ACQUISITIONS AND DIVESTMENTS IN 2011
- During the second quarter 2011, Nokia Siemens Networks completed the
acquisition of certain wireless network infrastructure assets of Motorola
Solutions, including products and services in relation to GSM, CDMA, WCDMA,
WiMAX and LTE. The acquisition is designed to strengthen the company's
position
in North America and Japan, adding approximately 6 900 employees across 52
countries.
- During the fourth quarter 2011, as part of its new strategy, Nokia
Siemens
Networks is focusing on mobile broadband and services, and as such has
announced
a number of planned divestments, with the sale of its Microwave Transport
business to DragonWave, its fixed line Broadband Access business to ADTRAN
and
its WiMAX unit to NewNet Communications Technologies.
PERSONNEL
The average number of employees during the period from January to December
2011
was 134 171, of which the average number of employees at Location &
Commerce and
Nokia Siemens Networks was 7 187 and 71 825 respectively. At December 31,
2011,
Nokia employed a total of 130 050 people (132 427 people at December 31,
2010),
of which 6 659 were employed by Location & Commerce (7 232 people at
December
31, 2010) and 73 686 were employed by Nokia Siemens Networks (66 160 people
at
December 31, 2010).
SHARES
The total number of Nokia shares at December 30, 2011 was 3 744 956 052. At
December 31, 2011, Nokia and its subsidiary companies owned 34 767 046
Nokia
shares, representing approximately 0.9 % of the total number of Nokia
shares and
the total voting rights.
DIVIDEND
Nokia's Board of Directors will propose a dividend of EUR 0.20 for 2011.
The
distributable funds on the balance sheet of the parent company as per
December
31, 2011 amount to EUR 6 153 million.
FORWARD-LOOKING STATEMENTS
It should be noted that certain statements herein which are not historical
facts
are forward-looking statements, including, without limitation, those
regarding:
A) the expected plans and benefits of our strategic partnership with
Microsoft
to combine complementary assets and expertise to form a global mobile
ecosystem
and to adopt Windows Phone as our primary smartphone platform; B) the
timing and
expected benefits of our new strategy, 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 products and services; G)
expectations and targets regarding our operational priorities and results
of
operations; H) expectations and targets regarding collaboration and
partnering
arrangements; I) the outcome of pending and threatened litigation; J)
expectations regarding the successful completion of acquisitions or
restructurings on a timely basis and our ability to achieve the financial
and
operational targets set in connection with any such acquisition or
restructuring; and K) statements preceded by "believe," "expect,"
"anticipate,"
"foresee," "target," "estimate," "designed," "plans," "will" or similar
expressions. These statements are based on management's best assumptions
and
beliefs in light of the information currently available to it. Because they
involve risks and uncertainties, actual results may differ materially from
the
results that we currently expect. Factors that could cause these
differences
include, but are not limited to: 1) our ability to succeed in creating a
competitive smartphone platform for high-quality differentiated winning
smartphones or in creating new sources of revenue through our partnership
with
Microsoft; 2) the expected timing of the planned transition to Windows
Phone as
our primary smartphone platform and the introduction of mobile products
based on
that platform; 3) our ability to maintain the viability of our current
Symbian
smartphone platform during the transition to Windows Phone as our primary
smartphone platform; 4) our ability to realize a return on our investment
in
MeeGo and next generation devices, platforms and user experiences; 5) our
ability to build a competitive and profitable global ecosystem of
sufficient
scale, attractiveness and value to all participants and to bring winning
smartphones to the market in a timely manner; 6) our ability to produce
mobile
phones in a timely and cost efficient manner with differentiated hardware,
localized services and applications; 7) our ability to increase our speed
of
innovation, product development and execution to bring new competitive
smartphones and mobile phones to the market in a timely manner; 8) our
ability
to retain, motivate, develop and recruit appropriately skilled employees;
9) our
ability to implement our strategies, particularly our new mobile product
strategy; 10) 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; 11) 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 new
strategy or
other factors; 12) our success in collaboration and partnering arrangements
with
third parties, including Microsoft; 13) the success, financial condition
and
performance of our suppliers, collaboration partners and customers; 14) our
ability to source sufficient quantities of fully functional quality
components,
subassemblies and software on a timely basis without interruption and on
favorable terms, including the disruption of production and/or deliveries
from
any of our suppliers as a result of adverse conditions in the geographic
areas
where they are located; 15) our ability to manage efficiently our
manufacturing,
service creation, delivery and logistics without interruption; 16) our
ability
to ensure the timely delivery of sufficient volumes of products that meet
our
and our customers' and consumers' requirements and manage our inventory and
timely adapt our supply to meet changing demands for our products; 17) any
actual or even alleged defects or other quality, safety and security issues
in
our products; 18) any actual or alleged loss, improper disclosure or
leakage of
any personal or consumer data collected or made available to us or stored
in or
through our products; 19) our ability to successfully manage costs,
including
our ability to achieve targeted costs reductions and to effectively and
timely
execute related restructuring measures, including personnel reductions; 20)
our
ability to effectively and smoothly implement the new operational structure
for
our businesses; 21) the development of the mobile and fixed communications
industry and general economic conditions globally and regionally; 22)
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; 23) 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; 24) 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;
25) the impact of changes in government policies, trade policies, laws or
regulations and economic or political turmoil in countries where our assets
are
located and we do business; 26) any disruption to information technology
systems
and networks that our operations rely on; 27) unfavorable outcome of
litigations; 28) allegations of possible health risks from electromagnetic
fields generated by base stations and mobile products and lawsuits related
to
them, regardless of merit; 29) our ability to achieve targeted costs
reductions
and increase profitability in Nokia Siemens Networks and to effectively and
timely execute related restructuring measures; 30) Nokia Siemens Networks'
ability to maintain or improve its market position or respond successfully
to
changes in the competitive environment; 31) Nokia Siemens Networks'
liquidity
and its ability to meet its working capital requirements; 32) whether Nokia
Siemens Networks is able to successfully integrate the acquired assets of
Motorola Solutions' networks business, retain existing customers of the
acquired
business, cross-sell Nokia Siemens Networks' products and services to
customers
of the acquired business and otherwise realize the expected synergies and
benefits of the acquisition; 33) Nokia Siemens Networks' ability to timely
introduce new products, services, upgrades and technologies; 34) Nokia
Siemens
Networks' success in the telecommunications infrastructure services market
and
Nokia Siemens Networks' ability to effectively and profitably adapt its
business
and operations in a timely manner to the increasingly diverse service needs
of
its customers; 35) developments under large, multi-year contracts or in
relation
to major customers in the networks infrastructure and related services
business;
36) the management of our customer financing exposure, particularly in the
networks infrastructure and related services business; 37) whether ongoing
or
any additional governmental investigations into alleged violations of law
by
some former employees of Siemens AG may involve and affect the carrier-
related
assets and employees transferred by Siemens AG to Nokia Siemens Networks;
38)
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 12-39 of Nokia's annual report Form 20-F
for the
year ended December 31, 2010 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 26, 2012
- Nokia plans to publish its quarterly results in 2012 on the following
dates:
Q1 on April 19, Q2 on July 19 and Q3 on October 18, 2012.
- Nokia plans to publish its annual report, Nokia in 2011, in week 13 of
2012.
- Nokia's Annual General Meeting is scheduled to be held on May 3, 2012.
www.nokia.com
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Source: NOKIA via Thomson Reuters ONE
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