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Nokia Oyj — Interim / Quarterly Report 2012
Jul 19, 2012
3231_rns_2012-07-19_5137ace7-4841-46b5-92f4-2a1d0b5ce772.html
Interim / Quarterly Report
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UK Regulatory | 19 July 2012 11:59
Nokia Corporation Q2 2012 Interim Report
Nokia / Half-yearly Results
19.07.2012 11:59
Dissemination of a UK Regulatory Announcement, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
Nokia Corporation
Interim report
July 19, 2012 at 13.00 (CET+1)
This is a summary of the second quarter 2012 interim report published today.
The complete second quarter 2012 interim report with tables is available at
http://www.results.nokia.com/results/Nokia_results2012Q2e.pdf. Investors should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
FINANCIAL AND OPERATING HIGHLIGHTS
Nokia net sales in Q2 2012 were EUR 7.5 billion, up from EUR 7.4 billion in Q1
2012
- Nokia Devices & Services Q2 net sales decreased 5% quarter-on-quarter.
- Lumia Q2 volumes increased quarter-on-quarter to 4 million units.
- Mobile Phones Q2 volumes increased quarter-on-quarter and year-on-year to 73
million units.
Nokia non-IFRS EPS in Q2 2012 of EUR -0.08, level with Q1 2012; reported EPS
EUR -0.38
- Reported EPS adversely affected by non-cash valuation allowances related to
deferred tax assets* of EUR 800 million, inventory-related allowances, and
restructuring related charges.
- Devices & Services Q2 non-IFRS operating margin negative 9.1%, adversely
affected by EUR 220 million of inventory-related allowances for our Lumia,
Symbian and MeeGo devices. Smart Devices Q2 gross margin and contribution
adversely affected by the inventory-related allowances. Q3 expected to be a
challenging quarter in Smart Devices due to product transitions.
- Nokia Siemens Networks returned to non-IFRS operating profitability in Q2;
restructuring progressing well and company seeing continued progress against
new strategy that focuses on key markets and product segments.
Both gross and net cash higher year-on-year
- Nokia ended Q2 with gross cash of EUR 9.4 billion and net cash of EUR 4.2
billion.
- Net cash lower quarter-on-quarter, after EUR 742 million annual dividend
payment to shareholders.
- Nokia Q2 net cash from operating activities of positive EUR 102 million,
including receipt of EUR 400 million pre-payments from existing IPR licenses.
*The majority of Devices & Services' Finnish deferred tax assets are indefinite
in nature and remain available for Nokia to use against any potential future
Finnish tax liabilities.
Commenting on the Q2 results, Stephen Elop, Nokia CEO, said:
'Nokia is taking action to manage through this transition period. While Q2 was
a difficult quarter, Nokia employees are demonstrating their determination to
strengthen our competitiveness, improve our operating model and carefully
manage our financial resources.
We shipped four million Lumia Smartphones in Q2, and we plan to provide updates
to current Lumia products over time, well beyond the launch of Windows Phone 8.
We believe the Windows Phone 8 launch will be an important catalyst for Lumia.
During the quarter, we demonstrated stability in our feature phone business,
and enhanced our competitiveness with the introduction of our first full touch
Asha devices. In Location & Commerce, our business with auto-industry customers
continued to grow, and we made good progress establishing our location-based
platform with businesses like Yahoo!, Flickr, and Bing. We continued to
strengthen our patent portfolio and filed more patents in the first half of
2012 than any previous six month period since 2007. And, we are encouraged that
Nokia Siemens Networks returned to underlying operating profitability through
strong execution of its focused strategy.
We are executing with urgency on our restructuring program. We are disposing
of non-core assets like Vertu. We are taking the necessary steps to restructure
the operations of the company, which included the announcement of a new program
on June 14. Faster than anticipated, we have already negotiated the closure of
the Ulm, Germany R&D site, and the negotiations about the planned closure of
our factory in Salo, Finland are proceeding in a collaborative spirit.
We held our net cash resources at a steady level after adjusting for the annual
dividend payment to our shareholders. While Q3 will remain difficult, it is a
critical priority to return our Devices & Services business to positive
operating cash flow as quickly as possible.'
SUMMARY FINANCIAL INFORMATION
Reported and Non-IFRS second quarter 2012 results1,2,3
EUR million Q2/2012 Q2/2011 YoY Q1/2012 QoQ
Change Change
Nokia
Net sales 7 542 9 275 -19% 7 354 3%
Operating profit -826 -487 -1 340
Operating profit -327 391 -260
(non-IFRS)
EPS, EUR diluted -0.38 -0.10 -0.25
EPS, EUR diluted -0.08 0.06 -0.08
(non-IFRS)4
Net cash from 102 -176 -590
operating
activities
Net cash and 4 197 3 891 8% 4 872 -14%
other liquid
assets5
Devices &
Services6
Net sales 4 023 5 467 -26% 4 246 -5%
Smart Devices 1 541 2 351 -34% 1 704 -10%
net sales
Mobile Phones 2 291 2 568 -11% 2 311 -1%
net sales
Mobile device 83.7 88.5 -5% 82.7 1%
volume
(mn units)
Smart Devices 10.2 16.7 -39% 11.9 -14%
volume
(mn units)
Mobile Phones 73.5 71.8 2% 70.8 4%
volume
(mn units)
Mobile device 48 62 -23% 51 -6%
ASP7
Smart Devices 151 141 7% 143 6%
ASP7
Mobile Phones 31 36 -14% 33 -6%
ASP7
Operating -474 -216 -219
profit
Operating -365 400 -127
profit
(non-IFRS)
Operating -11.8% -4.0% -5.2%
margin %
Operating margin % -9.1% 7.3% -3.0%
(non-IFRS)
Location &
Commerce6
Net sales 283 271 4% 277 2%
Operating profit -95 -104 -9% -94 1%
Operating profit 41 7 486% 36 14%
(non-IFRS)
Operating -33.6% -38.4% -33.9%
margin %
Operating 14.5% 2.6% 12.9%
margin %
(non-IFRS)
Nokia Siemens
Networks6,8
Net sales 3 343 3 642 -8% 2 947 13%
Operating profit -227 -111 -1 005
Operating profit 27 40 -33% -147
(non-IFRS)
Operating -6.8% -3.0% -34.1%
margin %
Operating 0.8% 1.1% -5.0%
margin %
(non-IFRS)
Note 1 relating to January-June 2012 results: Nokia reported net sales were EUR
14 896 million and reported EPS(diluted) was EUR -0.63 for the period from
January 1 to June 30, 2012. Further information about the results for the
period from January 1 to June 30, 2012 can be found on pages 19, 26, 27 and 30
of the complete Q2 2012 interim report with tables.
Note 2 relating to non-IFRS results: Non-IFRS results exclude special items for
all periods. In addition, non-IFRS results exclude intangible asset
amortization, other purchase price accounting related items and inventory value
adjustments arising from (i) the formation of Nokia Siemens Networks and (ii)
all business acquisitions completed after June 30, 2008. Nokia believes that
our non-IFRS results provide meaningful supplemental information to both
management and investors regarding Nokia's underlying performance by excluding
the above-described items that may not be indicative of Nokia's business
operating results. These non-IFRS financial measures should not be viewed in
isolation or as substitutes to the equivalent IFRS measure(s), but should be
used in conjunction with the most directly comparable IFRS measure(s) in the
reported results. See note 3 below for information about the exclusions from
our non-IFRS results. More information, including a reconciliation of our Q2
2012 and Q2 2011 non-IFRS results to our reported results, can be found in our
complete Q2 2012 interim report with tables on pages 21-25. A reconciliation of
our Q1 2012 non-IFRS results to our reported results can be found in our
complete Q1 interim report with tables on pages 18 and 20-23 published on April
19, 2012.
Note 3 relating to non-IFRS exclusions:
Q2 2012 -- EUR 499 million consisting of:
- EUR 190 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 70 million of charges related to country and
contract exits based on new strategy that focuses on key markets and product
segments.
- EUR 10 million restructuring charge in Location & Commerce
- EUR 80 million restructuring charge and associated impairments EUR 28 million
in Devices & Services
- EUR 64 million of intangible asset amortization and other purchase price
accounting related items arising from the formation of Nokia Siemens Networks
and the acquisition of Motorola Solutions' networks assets
- EUR 126 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price
related items arising from the acquisition of Novarra, MetaCarta and Motally in
Devices & Services
Q2 2012 taxes -- EUR 800 million valuation allowances for Devices & Services
deferred tax assets adversely affecting Nokia taxes
Q1 2012 -- EUR 1 080 million consisting of:
- EUR 772 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 10 million restructuring charge in Location & Commerce
- EUR 91 million restructuring charge 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 120 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
Q1 2012 taxes -- EUR 135 million valuation allowances for Nokia Siemens Networks
deferred tax assets adversely affecting Nokia taxes.
Q2 2011 -- EUR 878 million consisting of:
- EUR 68 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 297 million restructuring charge in Devices & Services
- EUR 275 million accrued Accenture deal consideration in Devices & Services
- EUR 41 million impairment of shares in an associated company in Devices &
Services
- EUR 83 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 111 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
- EUR 3 million of intangible assets amortization and other purchase price
related items arising from the acquisition of OZ Communications, Novarra and
Motally in Devices & Services
Note 4 relating to non-IFRS Nokia EPS: Nokia taxes continued to be adversely
affected by Nokia Siemens Networks taxes as no tax benefits are recognized for
certain Nokia Siemens Networks deferred tax items. In Q2 2012, this impact was
smaller due to improved profitability and a favorable profit mix in Nokia
Siemens Networks taxes offset by an unfavorable profit mix in Devices &
Services taxes. If Nokia's earlier estimated long-term tax rate of 26% had been
applied, non-IFRS Nokia EPS would have been approximately 0.6 Euro cent higher
in Q2 2012.
Note 5 relating to Nokia net cash and other liquid assets: Calculated as total
cash and other liquid assets less interest-bearing liabilities. For selected
information on Nokia Group interest-bearing liabilities, please see the table
on page 32 of the complete Q2 2012 interim report with tables
Note 6 relating to operational and reporting structure: We adopted our current
operational structure during 2011 and have three businesses: Devices &
Services, Location & Commerce and Nokia Siemens Networks and four operating and
reportable segments: Smart Devices and Mobile Phones within Devices & Services,
Location & Commerce and Nokia Siemens Networks. Smart Devices focuses on
smartphones and Mobile Phones focuses on mass market feature phones. Devices &
Services also contains Devices & Services Other which includes net sales of our
luxury phone business Vertu, spare parts and related cost of sales and
operating expenses, as well as intellectual property related royalty income and
common research and development expenses. Location & Commerce focuses on the
development of location-based services and local commerce. Nokia Siemens
Networks is one of the leading global providers of telecommunications
infrastructure hardware, software and services.
Note 7 relating to average selling prices (ASP): Mobile device ASP represents
total Devices & Services net sales (Smart Devices net sales, Mobile Phones net
sales, and Devices & Services Other net sales) divided by total Devices &
Services volumes. Devices & Services Other net sales includes net sales of
Nokia's luxury phone business Vertu and spare parts, as well as intellectual
property 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 8 relating to 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 second quarter 2012
are not directly comparable to its results for the second quarter 2011.
NOKIA OUTLOOK
- Nokia expects its non-IFRS Devices & Services operating margin in the third
quarter 2012 to be similar to the second quarter 2012 level of negative 9.1%,
plus or minus four percentage points. This outlook is based on our expectations
regarding a number of factors, including: - competitive industry dynamics continuing to negatively affect the Smart
Devices and Mobile Phones business units; - consumer demand particularly related to our current Lumia products; and
-
the macroeconomic environment.
-
Nokia expects the third quarter 2012 to be a challenging quarter in Smart
Devices due to product transitions. - Nokia continues to target to reduce its Devices & Services non-IFRS operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the end
of 2013. - Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin in the third quarter 2012 to be above the second quarter 2012
level of 0.8%. - 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.
SECOND QUARTER 2012 FINANCIAL AND OPERATING DISCUSSION
NOKIA GROUP
We adopted our current operational structure during 2011 and have three
businesses: Devices & Services, Location & Commerce and Nokia Siemens Networks
and four operating and reportable segments: Smart Devices and Mobile Phones
within Devices & Services, Location & Commerce and Nokia Siemens Networks.
Smart Devices focuses on smartphones and Mobile Phones focuses on mass market
feature phones. Devices & Services also contains Devices & Services Other which
includes net sales of our luxury phone business Vertu, spare parts and related
cost of sales and operating expenses, as well as intellectual property related
royalty income and common research and development expenses. Location &
Commerce focuses on the development of location-based services and local
commerce. Nokia Siemens Networks is one of the leading global providers of
telecommunications infrastructure hardware, software and services.
The following discussion includes non-IFRS results information. Non-IFRS
results exclude special items for all periods. In addition, non-IFRS results
exclude intangible asset amortization, other purchase price accounting related
items and inventory value adjustments arising from (i) the formation of Nokia
Siemens Networks and (ii) all business acquisitions completed after June 30,
2008.
The following table sets forth the year-on-year and sequential growth rates in
our net sales on a reported basis and at constant currency for the periods
indicated.
SECOND QUARTER 2012 NET SALES,
REPORTED & CONSTANT CURRENCY1
YoY QoQ
Change Change
Group net sales - -19% 3%
reported
Group net sales - -20% 2%
constant currency1
Devices & Services -26% -5%
net sales - reported
Devices & Services -27% -6%
net sales - constant currency1
Nokia Siemens Networks -8% 13%
net sales - reported
Nokia Siemens Networks -11% 14%
net sales - constant currency1
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 table sets forth Nokia Group's reported cash flow for the periods
indicated and financial position at the end of the periods indicated, as well
as the year-on-year and sequential growth rates.
NOKIA GROUP CASH FLOW
AND FINANCIAL POSITION
EUR million Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net cash from 102 -176 -590
operating activities
Total cash and 9 418 9 358 1% 9 793 -4%
other liquid assets
Net cash and 4 197 3 891 8% 4 872 -14%
other liquid assets1
Note 1: Total cash and other liquid assets minus interest-bearing liabilities.
Year-on-year, net cash and other liquid assets increased by EUR 306 million in
the second quarter 2012, primarily due to cash flows related to IPR, including
a EUR 400 million receipt of pre-payments from existing IPR licenses, the
receipt of quarterly platform support payments from Microsoft (which commenced
in the fourth quarter 2011), a EUR 500 million equity investment in Nokia
Siemens Networks by Siemens (received in the third quarter of 2011) and
positive overall net cash from operating activities, partially offset by
payment of the annual dividend totaling EUR 742 million, capital expenditures
and cash outflows related to restructuring.
Sequentially, net cash and other liquid assets decreased by EUR 675 million in
the second quarter 2012, primarily due to the payment of the annual dividend
totaling EUR 742 million, Devices & Services operating losses, cash outflows
related to restructuring and capital expenditures, partially offset by cash
flows related to IPR (including a EUR 400 million receipt of pre-payments from
existing IPR licenses), a positive contribution from Nokia Siemens Networks and
the receipt of a USD 250 million (approximately EUR 196 million) quarterly
platform support payment from Microsoft.
In the second quarter 2012, Nokia Siemens Networks' contribution to net cash
from operating activities was approximately EUR 160 million. This was primarily
due to working capital improvements. In the second quarter 2012, Nokia Siemens
Networks' working capital performance improved sequentially by approximately
EUR 135 million, primarily related to improved accounts payable management and
accounts receivables collection, offset by cash outflows related to
restructuring.
Our agreement with Microsoft includes platform support payments from Microsoft
to us as well as software royalty payments from us to Microsoft. In the second
quarter 2012, we received a quarterly platform support payment of USD 250
million (approximately EUR 196 million). Under the terms of the agreement
governing the platform support payments, the amount of each quarterly platform
support payment is USD 250 million. We have a competitive software royalty
structure, which includes annual minimum software royalty commitments. Minimum
software royalty commitments are paid quarterly. Over the life of the
agreement, both the platform support payments and the minimum software royalty
commitments are expected to measure in the billions of US dollars. The total
amount of the platform support payments is expected to slightly exceed the
total amount of the minimum software royalty commitments. In accordance with
the contract terms, the platform support payments and annual minimum software
royalty commitment payments continue for a corresponding period of time.
During the second quarter 2012, based on a combination of factors, including
the decline in our market capitalization, credit rating downgrades as well as
our operating results, we concluded that there were sufficient indicators to
require Nokia Group to perform an interim goodwill impairment analysis as of
June 30, 2012. The methodology and models used for our interim impairment
assessment are consistent with those used in the annual assessment performed
during the fourth quarter of 2011 and the inputs to the model, such as cash
flows, discount rates and growth rates, have been updated to reflect our most
recent projections. Given that the indicators were primarily related to
operating factors within Smart Devices, Mobile Phones and Location & Commerce,
no interim analysis for Nokia Siemens Networks was conducted.
As of June 30, 2012, goodwill of EUR 874 million, EUR 535 million, EUR 3 389
million and EUR 190 million was allocated to Smart Devices, Mobile Phones,
Location & Commerce and Nokia Siemens Networks, respectively. There was no
goodwill impairment charge recorded during the second quarter 2012 as a result
of the goodwill impairment analysis, however a change in any of the key
assumptions used in measuring the recoverable value of our Location & Commerce
business could have resulted in additional goodwill impairment. While we
believe the estimated recoverable values are reasonable, actual performance in
the short-term and long-term could be materially different from our forecasts,
which could impact future estimates of recoverable value of our reporting units
and may result in impairment charges.
In the second quarter 2012, Nokia recognized EUR 800 million in valuation
allowances related to its Finnish deferred tax assets in accordance with
accounting standards. During the second quarter 2012, Nokia's Finnish taxable
results over the past three years moved from a cumulative profit position to a
cumulative loss position. When an entity has a history of recent losses in a
taxable jurisdiction, the entity recognizes a deferred tax asset arising from
unused losses or tax credits only to the extent the entity has sufficient
taxable temporary differences or there is convincing other evidence that
sufficient tax profit will be available against which the unused tax losses or
unused tax credits can be utilized in the future. Positive evidence of future
taxable profits may be assigned lesser weight in assessing the appropriateness
of recording a deferred tax asset when there is other unfavorable evidence such
as cumulative losses, which are considered strong evidence that future taxable
profits may not be available. Regardless of the accounting treatment for
reporting purposes, the majority of Nokia's Finnish deferred tax assets are
indefinite in nature and available against future Finnish tax liabilities.
Thus, if Nokia is able to reestablish a pattern of sufficient tax profitability
in Finland, the allowances may be reversed.
Going forward on a non-IFRS basis, until a pattern of tax profitability is
reestablished in Finland, Nokia expects to record quarterly tax expense of
approximately EUR 50 million related to its Devices & Services business and
approximately EUR 50 million related to its Nokia Siemens Networks business.
Nokia expects to continue to record taxes related to its Location & Commerce
business at a 26% rate.
DEVICES & SERVICES
The following table sets forth a summary of the results for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates.
DEVICES & SERVICES RESULTS SUMMARY
Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net sales (EUR million)1 4 023 5 467 -26% 4 246 -5%
Mobile device volume 83.7 88.5 -5% 82.7 1%
(million units)
Mobile device ASP (EUR) 48 62 -23% 51 -6%
Non-IFRS gross margin (%) 18.1% 30.5% 24.4%
Non-IFRS operating 1 090 1 264 -14% 1 123 -3%
expenses (EUR million)
Non-IFRS operating -9.1% 7.3% -3.0%
margin (%)
Note 1: Includes IPR royalty income recognized in Devices & Services Other net
sales.
The year-on-year and sequential changes in our Devices & Services net sales,
volumes, average selling prices and gross margin are discussed below under our
Smart Devices and Mobile Phones business units. On a year-on-year basis, the
decline in Devices & Services Other net sales was primarily due to the
recognition in the second quarter 2011 of approximately EUR 430 million of IPR
royalty income from new contracts related to the second quarter 2011 and
earlier periods. We estimate that our current annual IPR royalty income
run-rate is approximately EUR 0.5 billion.
At the end of the second quarter 2012, our overall channel inventory was
approximately on the same level as at the end of the first quarter 2012. We
ended the second quarter 2012 around the high end of our normal 4 to 6 week
channel inventory range, but on an absolute unit basis, channel inventories
declined slightly sequentially.
Net Sales and Volumes by Geographic Area
The following table sets forth the net sales for our Devices & Services
business for the periods indicated, as well as the year-on-year and sequential
growth rates, by geographic area. IPR royalty income is allocated to the
geographic areas contained in this chart.
DEVICES & SERVICES NET SALES
BY GEOGRAPHIC AREA
EUR million Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Europe 1 096 1 666 -34% 1 352 -19%
Middle East & Africa 663 988 -33% 737 -10%
Greater China 542 913 -41% 577 -6%
Asia-Pacific 948 1 085 -13% 945 0%
North America 128 88 45% 93 38%
Latin America 646 727 -11% 542 19%
Total 4023 5467 -26% 4246 -5%
The following table sets forth the mobile device volumes for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates, by geographic area.
DEVICES & SERVICES MOBILE DEVICE VOLUMES
BY GEOGRAPHIC AREA
million units Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Europe 15.3 18.4 -17% 15.8 -3%
Middle East & Africa 19.4 20.5 -5% 21.4 -9%
Greater China 7.9 11.3 -30% 9.2 -14%
Asia-Pacific 28.6 24.5 17% 26.1 10%
North America 0.6 1.5 -60% 0.6 0%
Latin America 11.9 12.3 -3% 9.6 24%
Total 83.7 88.5 -5% 82.7 1%
Operating Expenses
Devices & Services non-IFRS operating expenses decreased 14% year-on-year and
3% sequentially in the second quarter 2012. On a year-on-year basis, operating
expenses related to Mobile Phones increased 7%, whereas operating expenses
related to Smart Devices decreased 28%, in the second quarter 2012. On a
sequential basis, operating expenses related to Mobile Phones and Smart Devices
decreased by 5% and 3%, respectively, in the second quarter 2012. In addition
to the factors described below, the year-on-year changes resulted from the
proportionate allocation of operating expenses being affected by the relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices. This resulted in higher and lower relative allocations to Mobile
Phones and Smart Devices, respectively.
Devices & Services non-IFRS research and development expenses decreased 19%
year-on-year in the second quarter 2012. On a sequential basis, Devices &
Services non-IFRS research and development expenses decreased 7% in the second
quarter 2012. Both the year-on-year and sequential declines were primarily due
to a reduction in Symbian and MeeGo related costs as well as cost controls.
Devices & Services non-IFRS sales and marketing expenses decreased 6%
year-on-year in the second quarter 2012. On a sequential basis, Devices &
Services non-IFRS sales and marketing expenses increased 8% in the second
quarter 2012. Year-on-year, marketing expenses declined primarily due to lower
marketing expenditure on Symbian as well as cost controls, partially offset by
higher marketing expenditure on Lumia and feature phone devices. Sequentially,
marketing expenses increased primarily due to higher expenditure on Lumia
devices as well as expanded regional distribution of Lumia devices, partially
offset by cost controls.
Devices & Services non-IFRS administrative and general expenses decreased 30%
year-on-year in the second quarter 2012 primarily related to cost savings in
support functions, particularly in IT and real estate management and shared
function cost categorization. On a sequential basis, Devices & Services
non-IFRS administrative and general expenses decreased 35% in the second
quarter 2012 primarily due to shared function cost categorization and cost
savings in support functions.
In the second quarter 2012, Devices & Services non-IFRS other income and
expense had a negative year-on-year and positive sequential impact on
profitability. On a reported basis, other income and expense was significantly
adversely affected in the second quarter 2012 primarily as a result of
restructuring-related expenses discussed below, which were recognized in
Devices & Services Other.
Operating Margin
The lower year-on-year and sequential Devices & Services non-IFRS operating
margin in the second quarter 2012 was primarily due to lower net sales and
gross margins, which was adversely affected by EUR 220 million of
inventory-related allowances in Smart Devices, partially offset by lower
operating expenses.
Cost Reduction Activities and Planned Operational Adjustments
Nokia continues to target to reduce its Devices & Services non-IFRS operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the end
of 2013.
In connection with the implementation of our strategy announced in February
2011, we have announced and made a number of changes to our operations. In the
second quarter of 2012, we recognized restructuring charges and other
associated items of EUR 108 million related to our restructuring activities in
Devices & Services. By the end of the second quarter 2012, we had recorded
cumulative Devices & Services restructuring charges of approximately EUR 1.0
billion. In total, we expect cumulative Devices & Services restructuring
charges of approximately EUR 1.8 billion before the end of 2013. By the end of
the second quarter 2012, Devices & Services had cumulative restructuring
related cash outflows of approximately EUR 600 million. From the third quarter
2012 onwards, we expect Devices & Services restructuring related cash outflows
to be approximately EUR 500 million in 2012 and approximately EUR 500 million
in 2013. Of the total expected charges relating to restructuring activities of
EUR 1.8 billion, we expect Devices & Services non-cash charges to be
approximately EUR 200 million.
SMART DEVICES
The following table sets forth a summary of the results for our Smart Devices
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
SMART DEVICES
RESULTS SUMMARY
Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net sales (EUR millions)1 1 541 2 351 -34% 1 704 -10%
Smart Devices volume 10.2 16.7 -39% 11.9 -14%
(million units)
Smart Devices ASP (EUR) 151 141 7% 143 6%
Gross margin (%) 1.7% 23.0% 15.6%
Operating expenses 540 752 -28% 556 -3%
(EUR millions)2
Contribution margin (%)2 -32.9% -9.2% -18.3%
Note 1: Does not include IPR royalty income. IPR royalty income is recognized
in Devices & Services Other net sales.
Note 2: The year-on-year decrease in operating expenses resulted from the
proportionate allocation of operating expenses being affected by the relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices, resulting in lower relative allocations to Smart Devices in the first
and second quarters 2012.
Net Sales
On a year-on-year basis, the decline in our Smart Devices net sales in the
second quarter 2012 was primarily due to lower Symbian volumes, partially
offset by sales of Nokia Lumia devices. In addition, Symbian ASPs decreased on
a year-on-year basis.
On a sequential basis, the decline in our Smart Devices net sales in the second
quarter 2012 was primarily due to lower Symbian volumes, partially offset by
higher volumes of Nokia Lumia devices. In addition, Symbian ASPs increased and
Lumia ASPs decreased on a sequential basis.
Volume
The year-on-year decline in our Smart Devices volumes in the second quarter
2012 continued to be driven by the strong momentum of competing smartphone
platforms relative to our Symbian devices, partially offset by sales of 4
million Lumia devices. All regions showed a significant year-on-year decline in
the second quarter 2012 except for North America, where the sharp decline in
sales of Symbian devices was more than offset by sales of our Lumia devices
including the Lumia 900 with AT&T and the Lumia 710 with T-Mobile.
On a sequential basis, the decline in our Smart Devices volumes in the second
quarter 2012 was primarily driven by lower Symbian volumes in all regions. This
more than offset the sequential increase in Nokia Lumia device volumes, which
was driven by sales of the Lumia 610 and the Lumia 900 as well as expanded
regional distribution, particularly into China and Latin America.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in the second quarter 2012
was primarily due to a positive mix shift towards sales of Nokia Lumia devices
which carry a higher ASP than Symbian devices, as well as a positive impact
related to deferred revenue on services sold in combination with our devices.
Sequentially, the increase in our Smart Devices ASP in the second quarter 2012
was primarily due to a positive mix shift towards sales of Nokia Lumia devices.
The ASP of our Lumia devices in the second quarter 2012 was EUR 186, compared
to EUR 220 in the first quarter 2012.
Gross Margin
The significant year-on-year and sequential decline in our Smart Devices gross
margin in the second quarter 2012 was primarily due to the recognition of
approximately EUR 220 million of allowances related to excess component
inventory, future purchase commitments and an inventory revaluation related to
our Lumia, Symbian and MeeGo devices. Increases or decreases to Smart Devices
allowances may be required in the future depending on several factors,
including future sales performance.
In addition, the year-on-year gross margin decline in the second quarter 2012
was due to price reductions across our Symbian portfolio as well as higher
fixed costs per unit, such as certain royalties, because of lower sales
volumes.
MOBILE PHONES
The following table sets forth a summary of the results for our Mobile Phones
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
MOBILE PHONES
RESULTS SUMMARY
Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net sales (EUR millions)1 2 291 2 568 -11% 2 311 -1%
Mobile Phones volume 73.5 71.8 2% 70.8 4%
(million units)
Mobile Phones ASP (EUR) 31 36 -14% 33 -6%
Gross margin (%) 24.1% 24.7% 25.9%
Operating expenses 450 420 7% 472 -5%
(EUR million)2
Contribution margin (%)2 4.3% 8.3% 4.6%
Note 1: Does not include IPR royalty income. IPR royalty income is recognized
in Devices & Services Other net sales.
Note 2: The year-on-year increase in operating expenses resulted from the
proportionate allocation of operating expenses being affected by the relative
mix of sales and gross profit performance between Mobile Phones and Smart
Devices, resulting in higher relative allocations to Mobile Phones in the first
and second quarters 2012.
Net Sales
Both on a year-on-year and sequential basis, our Mobile Phones net sales in the
second quarter 2012 decreased due to the lower ASP.
Volume
On a year-on-year basis, the increase in our Mobile Phones volumes in the
second quarter 2012 was primarily due to the continued ramp up of our latest
generation of feature phones, such as the Nokia 100 and 101, which we sell to
our customers for below EUR 50. However, volumes of our higher priced feature
phone portfolio were adversely affected by competition from more affordable
smartphones and from competitors with broader portfolios of feature phones with
more smartphone-like experiences, such as full touch devices.
On a sequential basis, the increase in our Mobile Phones volumes in the second
quarter 2012 was also primarily due to the continued ramp up of our latest
generation of feature phones which we sell to our customers for below EUR 50.
Volumes of our higher priced feature phone portfolio stayed at approximately
the same level sequentially.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the second quarter 2012
was primarily due to an increased proportion of sales of lower priced devices
and price erosion.
On a sequential basis, the decline in our Mobile Phones ASP in the second
quarter 2012 was also primarily due to an increased proportion of sales of
lower priced devices. Sequentially, however, the prices of our feature phones
remained approximately at the same level.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in the second
quarter 2012 was primarily due to a negative product mix shift towards lower
gross margin feature phones, partially offset by greater cost erosion than
price erosion.
The sequential decrease in our Mobile Phones gross margin in the second quarter
2012 was primarily due to higher warranty expense, partially offset by greater
cost erosion than price erosion. In the first quarter 2012, our gross margin
was positively impacted by a warranty provision release benefit as our claims
rates and repair costs declined.
LOCATION & COMMERCE
The following table sets forth a summary of the results for Location & Commerce
for the periods indicated, as well as the year-on-year and sequential growth
rates.
LOCATION & COMMERCE
RESULTS SUMMARY
Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net sales (EUR millions) 283 271 4% 277 2%
Non-IFRS gross margin (%) 77.4% 81.6% 77.7%
Non-IFRS operating 185 215 -14% 174 6%
expenses (EUR millions)
Non-IFRS operating 14.5% 2.6% 12.9%
margin (%)
Net Sales
The year-on-year increase in Location & Commerce net sales in the second
quarter 2012 was primarily due to the higher recognition of deferred revenue
related to sales of map platform licenses to Nokia's Smart Devices business
unit and higher sales of map content licenses to vehicle customers due to
higher consumer uptake of vehicle navigation systems. This was partially offset
by a negative sales adjustment related to historical license fees in the normal
course of business for a particular customer.
Sequentially, the increase in Location & Commerce net sales in the second
quarter 2012 was primarily due to higher sales of map content licenses to
vehicle customers due to higher vehicle sales as well as higher map update
sales. This was partially offset by a negative sales adjustment related to
historical license fees in the normal course of business for a particular
customer.
Gross Margin
On a year-on-year basis, the decline in Location & Commerce non-IFRS gross
margin in the second quarter 2012 was primarily due to a negative sales
adjustment related to historical license fees in the normal course of business
for a particular customer as well as a shift of research and development
operating expenses to cost of sales as a result of the divestment of the media
advertising business.
On a sequential basis, Location & Commerce non-IFRS gross margin in the second
quarter 2012 was approximately flat. This was primarily due to an improved
revenue mix from higher margin vehicle map license sales, offset by a negative
sales adjustment related to historical license fees in the normal course of
business for a particular customer.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased 14%
year-on-year in the second quarter 2012 primarily due to cost reductions as
well as a shift in expenses from research and development to costs of sales
related to the divestment of the media advertising business. Location &
Commerce non-IFRS research and development expenses increased 10% sequentially
in the second quarter 2012 primarily due to project spending relating to
software development and map creation.
Location & Commerce non-IFRS sales and marketing expenses decreased 28%
year-on-year and 7% sequentially in the second quarter 2012. On a year-on-year
basis, the decrease was primarily due to cost reduction actions.
Location & Commerce non-IFRS administrative and general expenses increased 17%
year-on-year and 5% sequentially in the second quarter 2012. On a year-on-year
basis, the increase was primarily due to the higher use of services provided by
shared support functions.
Location & Commerce non-IFRS other income and expense for the second quarter
2012 was income of EUR 7 million, compared to zero in the second quarter 2011
and an expense of EUR 6 million in the first quarter 2012. On both a
year-on-year and sequential basis, this was primarily due to changes in
provisions.
Operating Margin
The higher year-on-year Location & Commerce non-IFRS operating margin in the
second quarter 2012 was primarily due to lower operating expenses and higher
net sales, partially offset by lower gross margin.
The sequential increase in Location & Commerce non-IFRS operating margin in the
second quarter 2012 was primarily due to higher net sales.
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 second quarter 2012 are not directly comparable to its results
for the second quarter 2011.
The following table sets forth a summary of the results for Nokia Siemens
Networks for the periods indicated, as well as the year-on-year and sequential
growth rates.
NOKIA SIEMENS NETWORKS
RESULTS SUMMARY
Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Net sales (EUR millions) 3 343 3 642 -8% 2 947 13%
Non-IFRS gross margin (%) 26.6% 26.6% 26.6%
Non-IFRS operating 836 931 -10% 937 -11%
expenses (EUR millions)
Non-IFRS operating 0.8% 1.1% -5.0%
margin (%)
Net Sales
The following table sets forth Nokia Siemens Networks net sales for the periods
indicated, as well as the year-on-year and sequential growth rates, by
geographic area.
NOKIA SIEMENS NETWORKS
NET SALES BY GEOGRAPHIC AREA
EUR millions Q2/2012 Q2/2011 YoY Change Q1/2012 QoQ Change
Europe 990 1 122 -12% 930 6%
Middle East & Africa 304 389 -22% 270 13%
Greater China 340 403 -16% 209 63%
Asia-Pacific 1 028 973 6% 877 17%
North America 300 311 -4% 283 6%
Latin America 381 444 -14% 378 1%
Total 3 343 3 642 -8% 2 947 13%
The year-on-year decrease in Nokia Siemens Networks' net sales in the second
quarter 2012 was primarily due to Nokia Siemens Networks' strategy to focus on
mobile broadband, customer experience management and services. Business areas
not consistent with the new strategy are in the process of being divested or
managed for value. On a year-on-year basis, Nokia Siemens Networks experienced
a decline in sales of infrastructure equipment as well as a slower operator
investment environment in certain markets, including Europe. This was partially
offset by a slight increase in sales of services.
The sequential increase in Nokia Siemens Networks' net sales in the second
quarter 2012 was primarily due to industry seasonality, partially offset by
Nokia Siemens Networks' strategy to focus on mobile broadband, customer
experience management and services. On a sequential basis, Nokia Siemens
Networks experienced similar rates of growth in infrastructure equipment and
services.
Gross Margin
On a year-on-year basis Nokia Siemens Networks' non-IFRS gross margin in the
second quarter 2012 was flat, primarily due to efforts to structurally improve
the overall gross margin profile of Nokia Siemens Networks' portfolio of
contracts, with improved pricing processes and a focus on priority markets
including Japan, Korea, and North America, offset by negative mix shift towards
lower gross margin services revenue.
On a sequential basis Nokia Siemens Networks' non-IFRS gross margin in the
second quarter 2012 was flat, primarily due to similar rates of growth in
infrastructure equipment and services, combined with higher services gross
margins and lower infrastructure equipment gross margins.
Operating Expenses
By the end of the second quarter 2012, Nokia Siemens Networks reduced its
number of employees by approximately 10 000 compared to the end of 2011,
resulting in significant structural savings in non-IFRS research and
development, sales and marketing, and administrative and general expenses.
Nokia Siemens Networks' non-IFRS research and development expenses decreased 6%
year-on-year in the second quarter 2012 primarily due to structural cost
savings. This was partially offset by the addition of the research and
development operations related 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 decreased
10% in the second quarter 2012 due to structural cost savings.
Year-on-year, Nokia Siemens Networks' non-IFRS sales and marketing expenses
decreased 14% in the second quarter 2012 primarily due to the lower net sales
and structural cost savings. This was partially offset by the addition of the
sales and marketing operations related to the acquired Motorola Solutions
networks assets. On a sequential basis, Nokia Siemens Networks non-IFRS sales
and marketing expenses decreased 5% in the second quarter 2012 primarily due to
structural cost savings, partially offset by the higher net sales.
Nokia Siemens Networks' non-IFRS administrative and general expenses decreased
20% year-on-year in the second quarter 2012 primarily due to structural cost
savings. This was partially offset by the addition of Motorola Solutions'
network assets. On a sequential basis, Nokia Siemens Networks non-IFRS
administrative and general expenses decreased 24% in the second quarter 2012
primarily due to structural cost savings.
Nokia Siemens Networks' non-IFRS other income and expense for the second
quarter 2012 was an expense of EUR 25 million, compared to income of EUR 1
million in the second quarter 2011 and income of EUR 6 million in the first
quarter 2012. On both a year-on-year and sequential basis, this was primarily
due to changes in provisions, asset retirements, and divestments.
Operating Margin
The lower year-on-year Nokia Siemens Networks non-IFRS operating margin in the
second quarter 2012 was primarily due to lower net sales, partially offset by
lower operating expenses.
The sequential increase in Nokia Siemens Networks' non-IFRS operating margin in
the second quarter 2012 was primarily due to higher net sales combined with
lower operating expenses.
Strategy Update and Global Restructuring Program
On November 23, 2011 Nokia Siemens Networks announced its strategy to focus on
mobile broadband and services and the launch of an extensive global
restructuring program.
Nokia Siemens Networks continues to target to reduce its non-IFRS annualized
operating expenses and production overheads by EUR 1 billion by the end of
2013, compared to the end of 2011. While these savings are expected to come
largely from organizational streamlining, the company will also target areas
such as real estate, information technology, product and service procurement
costs, overall general and administrative expenses, and a significant reduction
of suppliers in order to further lower costs and improve quality.
In the second quarter of 2012, Nokia Siemens Networks recognized restructuring
charges and other associated items of EUR 190 million related to this
restructuring program, resulting in cumulative charges of EUR 1 billion. In
total, Nokia Siemens Networks expects cumulative restructuring charges of
approximately EUR 1.2 billion related to this restructuring program before the
end of 2012. By the end of the second quarter 2012, Nokia Siemens Networks had
cumulative restructuring related cash outflows of approximately EUR 250 million
related to this restructuring program. From the third quarter 2012 onwards,
Nokia Siemens Networks expects restructuring-related cash outflows to be
approximately EUR 350 million in 2012, approximately EUR 400 million in 2013,
and approximately EUR 200 million in 2014 related to this restructuring
program.
Cash preservation is a clear priority at Nokia Siemens Networks, and the
company intends to be self-funding in all aspects of its operations. Nokia
Siemens Networks' restructuring program, combined with the company's focus on
improving its financial performance, is designed to enable the company to end
2012 with higher net cash than at the end of 2011.
SECOND QUARTER 2012 OPERATING HIGHLIGHTS
NOKIA OPERATING HIGHLIGHTS
- In April, Nokia started development of a new manufacturing facility in
Vietnam to serve the feature phone market.
- In June, Nokia outlined a range of planned actions aimed at sharpening its
strategy, improving its operating model and returning the company to profitable
growth. The planned measures include targeted investments in key growth areas,
operational changes and a significantly increased cost reduction target.
Specifically, planned measures include:
- Reductions within certain research and development projects, resulting in the
planned closure of its facilities in Ulm, Germany and Burnaby, Canada;
- Consolidation of certain manufacturing operations, resulting in the planned
closure of its manufacturing facility in Salo, Finland. Research and
Development efforts in Salo to continue;
- Focusing of marketing and sales activities, including prioritizing key
markets;
- Streamlining of IT, corporate and support functions; and
- Reductions related to non-core assets, including possible divestments.
As a result of the planned changes, Nokia plans to reduce up to 10 000
positions globally by the end of 2013.
- In June, Nokia announced plans to acquire world-class imaging specialists as
well as all technologies and intellectual property from Scalado AB. - In June, Nokia announced plans to divest Vertu, its luxury mobile phones
business to EQT VI, a European private equity firm. - During the quarter, Nokia announced a number of changes to its senior
leadership. In April, Nokia announced that Colin Giles, executive vice
president of sales, is stepping down from the Nokia Leadership Team. In May,
Esko Aho, executive vice president, Corporate Relations and Responsibility, was
appointed to the role of Senior Fellow at the Mossavar-Rahmani Center for
Business and Government at Harvard Kennedy School. Aho is continuing to
represent Nokia and drive the company's governmental affairs as a consultative
partner, although he will step down from the Nokia Leadership team, effective
August 31, 2012 out of respect for the demands of the Harvard appointment. In
June, Nokia appointed Juha Putkiranta as executive vice president of
Operations; Timo Toikkanen as executive vice president of Mobile Phones; Chris
Weber as executive vice president of Sales and Marketing; Tuula Rytila as
senior vice president of Marketing and chief marketing officer; and Susan
Sheehan as senior vice president of Communications. Putkiranta, Toikkanen and
Weber joined the Nokia Leadership Team effective July 1, 2012. Jerri DeVard has
stepped down as executive vice president of Marketing and chief marketing
officer; Mary McDowell has stepped down as executive vice president of Mobile
Phones; and Niklas Savander has stepped down as executive vice president of
Markets.
DEVICES & SERVICES OPERATING HIGHLIGHTS
SMART DEVICES
- Nokia has continued to expand the breadth and depth of its Lumia range of
Windows Phone-based smartphones since their debut in November 2011. Consumers
in more than 50 markets around the world can now purchase a Lumia smartphone.
Key highlights in the growth of Lumia in the second quarter included:
- In April, the Nokia Lumia 610, Nokia's most affordable Lumia smartphone to
date, went on sale, starting in Asia and expanding to other regions later in
the quarter. The Lumia 610 is introducing the Windows Phone platform to a new
generation of smartphone users, particularly in key China markets.
- In April, the Nokia Lumia 900 went on sale in the United States exclusively
through AT&T. Lumia 900 sales exceeded our expectations from the start at AT&T
and was consistently among the top selling smartphones on Amazon in the United
States. The device is our first LTE phone and has won praise for its design.
According to a survey of US customers conducted for Nokia by the independent
research company Nielsen and published in July, 95% of Lumia 900 owners are
willing to recommend the device to others. Nokia also launched a non-LTE
version of the Lumia 900 in other parts of the world during the second quarter.
- In June, the number of applications in the Windows Phone Marketplace
surpassed 100 000, up from more than 50 000 at the start of 2012.
- In May, the Nokia 808 PureView, the first smartphone to feature Nokia
PureView imaging technologies, went on sale. The device brings together high
resolution sensors, exclusive Carl Zeiss optics and Nokia-developed algorithms,
which will support new high-end imaging experiences for future Nokia products.
MOBILE PHONES
- Nokia has continued to expand the breadth and depth of its Asha family of
mobile phones since their debut in late 2011. The range, now ten products
strong, is available across more than 130 markets and receiving among the
highest consumer satisfaction scores of any Nokia products. Key highlights in
the growth of Asha in the second quarter included:
- In April, Nokia made available Nokia Browser 2.0, a major update for Nokia
Series 40 devices. The new version reduces data consumption by up to 85%,
meaning that consumers can enjoy faster and cheaper internet access.
- In May, Nokia launched the Nokia 110 and Nokia 112, both running the new
Nokia Browser.
- In June, Nokia launched its first full touch Asha feature phones. The three
new phone models - the Nokia Asha 305, Nokia Asha 306 and Nokia Asha 311 -
offer a fully re-designed touch user interface. The Asha 311 has a capacitive
touchscreen device and is powered by a 1GHz processor to provide a great
internet experience.
- In June, Nokia made Mail for Exchange available for free in the Nokia Store
for the Asha 302 and Asha 303.
LOCATION & COMMERCE OPERATING HIGHLIGHTS
Nokia's Location & Commerce business continued to strengthen its location-based
offerings during the second quarter:
- The Nokia Location Platform continued to be adopted by more partners,
including Microsoft's Bing Maps, which is also now using Location & Commerce
traffic information and geocoding algorithms, and Ford, whose research
organization is using the platform to advance innovation for smart and
connected vehicles. Nokia announced that the Nokia Location Platform will be a
central part of the Windows Phone 8 experience. As such, Windows Phone 8
partners and developers will be able to use Nokia's location assets to build
location-based apps and experiences of superior quality.
- Nokia announced the availability of free turn by turn navigation with Nokia
Drive out of the box for all future Windows Phone 8 users in North America and
the United Kingdom.
- Nokia continued to update and enhance existing location applications,
including:
- Nokia Maps, the latest version of which brings better sharing and
personalization to Lumia smartphones; and
- Nokia Transport, the latest version of which extends coverage and introduces
features such as stops nearby, detailed line view and support for multiple
tiles.
- Nokia launched Nokia City Lens beta, which brings augmented reality to Nokia
Lumia, enabling users to orientate themselves and discover and recognize the
places in their immediate vicinity in a new way. - Nokia continued to improve its web offering at maps.nokia.com refining
features and introducing a travel discovery element with city pages. - Nokia entered into an agreement with the Audi Urban Intelligence Assist
(AUIA) project aimed at developing connected car technologies that help reduce
congestion and improve safety supported by the use of NAVTEQ map data. - Nokia announced the expansion of its location content offering in India with
an increase of coverage by 80% to more than 4200 cities and the launch of
Destination Maps in 150 malls in 17 cities.
NOKIA SIEMENS NETWORKS OPERATING HIGHLIGHTS
- Nokia Siemens Networks stepped up its mobile broadband deal momentum in the
second quarter, including a contract with SOFTBANK MOBILE Corp. in Japan to
upgrade its mobile broadband capacity across the country, supplying, deploying
and integrating its HSPA+ (3G) and FDD LTE (4G) networks; also in Japan it was
announced that Nokia Siemens Networks has deployed the world's first
multi-technology, multi-vendor self-operating 3G and 4G mobile networks in
Japan for KDDI.
- Nokia Siemens Networks was also selected by T-Mobile to support its 4G
network evolution plan with the modernization of its GSM, HSPA+ core and radio
access infrastructure in key markets to improve existing voice and data
coverage.
- Other mobile broadband deals in the second quarter included: being selected
by Singapore's StarHub as its 4G mobile broadband infrastructure and services
vendor; becoming the sole 4G, LTE radio and core network supplier and
expanding 3G and GSM networks for Tele2 in Estonia, Latvia and Lithuania;
enabling Croatia's first commercial 4G services with Hrvatski Telekom; being
selected to deliver and manage 4G services in Jeddah for Saudi Arabian Zain KSA
and upgrading TOT's 3G network in Thailand to HSPA+.
- In May 2012, Nokia Siemens Networks signed a global reseller agreement with
Ruckus Wireless to help operators integrate Wi-Fi networks to deliver
cost-effective mobile broadband services, as part of its comprehensive small
cells portfolio. Nokia Siemens Networks also extended its comprehensive small
cells portfolio with the launch of an enhanced range of picocell base stations
and 3G Femto access points, and announced a US-based trial of its Hot Zone
approach for increasing network capacity in the Chicago area. - At International CTIA Wireless 2012, in May, Nokia Siemens Networks unveiled
its 'Intelligent IP Edge', the world's most advanced network gateway that
enables operators to deliver a better mobile broadband experience and reduce
running costs using Nokia Siemens Networks' Liquid Net approach. Nokia Siemens
Networks also launched a new CDMA base station, bringing the benefits of its
globally recognized Flexi Multiradio Base Station platform to CDMA operators
whilst reducing base station operating costs by up to 70%, and with 4G upgrade
capability underlining Nokia Siemens Networks' commitment to mobile broadband
technology evolution. - In June, Nokia Siemens Networks achieved 1.3 Gbps in China using its
commercial Flexi base station hardware, a new global TD-LTE speed record. - Nokia Siemens Networks was recognized for its advances in Customer Experience
Management (CEM) at the Global Telecoms Business (GTB) Innovation Awards 2012
in the wireless infrastructure category where it won a joint award with
Telkomsel for its use of Nokia Siemens Networks' CEM on Demand portfolio.
Guangdong MCC in China has signed up to Nokia Siemens Networks' CEM software
and services, enabling it to improve customer experience by providing a unified
view of its customer data and continuous reporting of usage trends. - During the second quarter, Nokia Siemens Networks completed the sale of its
microwave transport business to DragonWave, and the sale of its fixed line
Broadband Access business to ADTRAN.
FORWARD-LOOKING STATEMENTS
It should be noted that certain statements herein that are not historical facts
are forward-looking statements, including, without limitation, those regarding:
A) the expected plans and benefits of our partnership with Microsoft to bring
together complementary assets and expertise to form a global mobile ecosystem
for smartphones; B) the timing and expected benefits of our new strategies,
including expected operational and financial benefits and targets as well as
changes in leadership and operational structure; C) the timing of the
deliveries of our products and services; D) our ability to innovate, develop,
execute and commercialize new technologies, products and services; E)
expectations regarding market developments and structural changes; F)
expectations and targets regarding our industry volumes, market share, prices,
net sales and margins of our products and services; G) expectations and targets
regarding our operational priorities and results of operations; H) expectations
and targets regarding collaboration and partnering arrangements; I) the outcome
of pending and threatened litigation; J) expectations regarding the successful
completion of restructurings, investments, acquisitions and divestments on a
timely basis and our ability to achieve the financial and operational targets
set in connection with any such restructurings, investments, acquisitions and
divestments; and K) statements preceded by 'believe,' 'expect,' 'anticipate,'
'foresee,' 'target,' 'estimate,' 'designed,' 'aim', 'plans,' 'intends,' 'will'
or similar expressions. These statements are based on management's best
assumptions and beliefs in light of the information currently available to it.
Because they involve risks and uncertainties, actual results may differ
materially from the results that we currently expect. Factors that could cause
these differences include, but are not limited to: 1) our success in the
smartphone market, including our ability to introduce and bring to market
quantities of attractive, competitively priced Nokia products with Windows
Phone that are positively differentiated from our competitors' products, both
outside and within the Windows Phone ecosystem; 2) our ability to make Nokia
products with Windows Phone a competitive choice for consumers, and together
with Microsoft, our success in encouraging and supporting a competitive and
profitable global ecosystem for Windows Phone smartphones that achieves
sufficient scale, value and attractiveness to all market participants; 3)
reduced consumer demand for Nokia smartphones that operate on current versions
of the Windows Phone platform as consumers anticipate our launch and sales
ramp-up of Nokia smartphones with newer versions of the Windows Phone platform
available from Microsoft, specifically the new Windows Phone 8 operating
system; 4) the difficulties we experience in having a competitive offering of
Symbian devices and maintaining the economic viability of the Symbian
smartphone platform during the transition to Windows Phone as our primary
smartphone platform; 5) our ability to effectively and timely implement planned
changes to our operational structure, including the planned restructuring
measures, and to successfully complete the planned investments, acquisitions
and divestments in order to improve our operating model and achieve targeted
efficiencies and reductions in operating expenses; 6) our future sales
performance, among other factors, may require us to recognize allowances
related to excess component inventory, future purchase commitments and
inventory write-offs in our Devices & Services business; 7) our ability to
realize a return on our investment in next generation devices, platforms and
user experiences; 8) our ability to produce attractive and competitive feature
phones, including devices with more smartphone-like features, in a timely and
cost efficient manner with differentiated hardware, software, localized
services and applications; 9) the intensity of competition in the various
markets where we do business and our ability to maintain or improve our market
position or respond successfully to changes in the competitive environment; 10)
our ability to retain, motivate, develop and recruit appropriately skilled
employees; 11) the success of our Location & Commerce strategy, including our
ability to maintain current sources of revenue, provide support for our Devices
& Services business and create new sources of revenue from our location-based
services and commerce assets; 12) our actual performance in the short-term and
long-term could be materially different from our forecasts, which could impact
future estimates of recoverable value of our reporting units and may result in
impairment charges; 13) our success in collaboration and partnering
arrangements with third parties, including Microsoft; 14) our ability to
increase our speed of innovation, product development and execution to bring
new innovative and competitive mobile products and location-based or other
services to the market in a timely manner; 15) our dependence on the
development of the mobile and communications industry, including location-based
and other services industries, in numerous diverse markets, as well as on
general economic conditions globally and regionally; 16) our ability to protect
numerous patented standardized or proprietary technologies from third-party
infringement or actions to invalidate the intellectual property rights of these
technologies; 17) our ability to maintain and leverage our traditional
strengths in the mobile product market if we are unable to retain the loyalty
of our mobile operator and distributor customers and consumers as a result of
the implementation of our strategies or other factors; 18) the success,
financial condition and performance of our suppliers, collaboration partners
and customers; 19) our ability to manage efficiently our manufacturing and
logistics, as well as to ensure the quality, safety, security and timely
delivery of our products and services; 20) our ability to source sufficient
amounts of fully functional quality components, sub-assemblies, software and
services on a timely basis without interruption and on favorable terms; 21) our
ability to manage our inventory and timely adapt our supply to meet changing
demands for our products; 22) any actual or even alleged defects or other
quality, safety and security issues in our products; 23) the impact of a
cybersecurity breach or other factors leading to any actual or alleged loss,
improper disclosure or leakage of any personal or consumer data collected by us
or our partners or subcontractors, made available to us or stored in or through
our products; 24) our ability to successfully manage the pricing of our
products and costs related to our products and operations; 25) exchange rate
fluctuations, including, in particular, fluctuations between the euro, which is
our reporting currency, and the US dollar, the Japanese yen and the Chinese
yuan, as well as certain other currencies; 26) our ability to protect the
technologies, which we or others develop or that we license, from claims that
we have infringed third parties' intellectual property rights, as well as our
unrestricted use on commercially acceptable terms of certain technologies in
our products and services; 27) the impact of economic, political, regulatory or
other developments on our sales, manufacturing facilities and assets located in
emerging market countries; 28) the impact of changes in government policies,
trade policies, laws or regulations where our assets are located and where we
do business; 29) the potential complex tax issues and obligations we may incur
to pay additional taxes in the various jurisdictions in which we do business
and our actual or anticipated performance, among other factors, could result in
allowances related to deferred tax assets; 30) any disruption to information
technology systems and networks that our operations rely on; 31) unfavorable
outcome of litigations; 32) allegations of possible health risks from
electromagnetic fields generated by base stations and mobile products and
lawsuits related to them, regardless of merit; 33) Nokia Siemens Networks
ability to implement its new strategy and restructuring plan effectively and in
a timely manner to improve its overall competitiveness and profitability; 34)
Nokia Siemens Networks' success in the telecommunications infrastructure
services market and Nokia Siemens Networks' ability to effectively and
profitably adapt its business and operations in a timely manner to the
increasingly diverse service needs of its customers; 35) Nokia Siemens
Networks' ability to maintain or improve its market position or respond
successfully to changes in the competitive environment; 36) Nokia Siemens
Networks' liquidity and its ability to meet its working capital requirements;
37) Nokia Siemens Networks' ability to timely introduce new competitive
products, services, upgrades and technologies; 38) Nokia Siemens Networks'
ability to execute successfully its strategy for the acquired Motorola
Solutions wireless network infrastructure assets; 39) developments under large,
multi-year contracts or in relation to major customers in the networks
infrastructure and related services business; 40) the management of our
customer financing exposure, particularly in the networks infrastructure and
related services business; 41) whether ongoing or any additional governmental
investigations into alleged violations of law by some former employees of
Siemens may involve and affect the carrier-related assets and employees
transferred by Siemens to Nokia Siemens Networks; and 42) any impairment of
Nokia Siemens Networks customer relationships resulting from ongoing or any
additional governmental investigations involving the Siemens carrier-related
operations transferred to Nokia Siemens Networks, as well as the risk factors
specified on pages 13-47 of Nokia's annual report on Form 20-F for the year
ended December 31, 2011 under Item 3D. 'Risk Factors.' Other unknown or
unpredictable factors or underlying assumptions subsequently proving to be
incorrect could cause actual results to differ materially from those in the
forward-looking statements. Nokia does not undertake any obligation to publicly
update or revise forward-looking statements, whether as a result of new
information, future events or otherwise, except to the extent legally required.
Nokia, Helsinki - July 19, 2012
Media and Investor Contacts:
Corporate Communications, tel. +358 7180 34900
Investor Relations Europe, tel. +358 7180 34927
Investor Relations US, tel. +1 914 368 0555
- Nokia plans to publish its third quarter 2012 interim report on October 18,
www.nokia.com
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Language: English
Company: Nokia
Finland
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ISIN: FI0009000681
Category Code: IR
LSE Ticker: 0HAF
Sequence Number: 1130
Time of Receipt: Jul 19, 2012 11:59:42
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