29th Apr 2014 07:00
Nokia / Miscellaneous 29.04.2014 07:00 Dissemination of a Regulatory Announcement, transmitted byDGAP - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.--------------------------------------------------------------------------- Nokia CorporationInterim reportApril 29, 2014 at 08.00 (CET+1) This is a summary of the first quarter 2014 interim report published today. Thecomplete first quarter 2014 interim report with tables is available athttp://company.nokia.com/financials. Investors should not rely on summaries ofour interim reports only, but should review the complete interim reports withtables. FINANCIAL AND OPERATING HIGHLIGHTS First quarter 2014 highlights for continuing operations*: Nokia's non-IFRS diluted EPS in Q1 2014 of EUR 0.04 (0.01 in Q1 2013); reporteddiluted EPS of EUR 0.03 (-0.03 in Q1 2013) Nokia's net sales in Q1 2014 were EUR 2.7 billion, down 15% compared to Q1 2013. -- In Q1 2014, underlying operating profitability for Nokia's continuing operations increased to EUR 304 million, or 11.4% of net sales, compared to EUR 254 million, or 8.1% of net sales, in Q1 2013. -- Networks achieved solid underlying operating profitability, with Q1 2014 non-IFRS operating profit of EUR 216 million, or 9.3% of net sales, compared to EUR 196 million, or 7.0%, in Q1 2013. This was primarily due to a higher gross margin which benefitted from a higher proportion of software sales, significant efficiency improvements in Global Services and a higher proportion of Mobile Broadband sales. -- HERE's external net sales were EUR 185 million, an increase of 13% year-on-year, driven by strong sales to vehicle customers. -- Technologies entered in to an agreement with HTC, validating Nokia's implementation patents and enabling Technologies to focus on further licensing opportunities. *See note 4 to our Summary Financial Information table below concerning ourcurrent operational and reporting structure Balance sheet highlights: -- Nokia Group ended Q1 2014 with a strong balance sheet and solid cash position with gross cash of EUR 6.9 billion and net cash of EUR 2.1 billion compared to EUR 9.0 billion and EUR 2.3 billion, respectively, at the end of Q4 2013. The sequential decline in Nokia's gross cash was primarily due to repayment of certain debt facilities totalling approximately EUR 1.8 billion during the first quarter 2014. -- If the transaction to sell to Microsoft substantially all of our Devices & Services business would have closed before the end of the first quarter 2014, Nokia would have ended the quarter with gross cash of approximately EUR 10.5 billion and net cash of approximately EUR 7.1 billion. Risto Siilasmaa, Nokia Chairman, commented on the company's progress: With the closing of our transaction with Microsoft, Nokia begins a new era. Weare confident in our future. Nokia's vision is to be a leader in technologieswhich will be important in a world of billions of intelligent connecteddevices. With our strategic direction now set, our highly talented teams canfocus fully on realizing our vision by building on Nokia's three strongbusinesses - Networks, HERE, and Technologies. In all three businesses, Nokiahas a solid foundation and we continue to see attractive opportunities toinvest in growth. Additionally, we will focus on managing our capitaleffectively, and we have announced a comprehensive EUR 5 billion program tooptimize our capital structure. In the first quarter of 2014, all three of our businesses delivered solidperformance. In particular, we were pleased by the continued strength ofNetworks' underlying operating profitability. Under the leadership of RajeevSuri, Networks has become an innovation leader, with tremendously improvedstrategic focus and financial results. I believe Rajeev is the right person tolead Nokia forward, and that his passion for technology will help ensure thatNokia continues to deliver technologies that have a positive impact on people'slives. SUMMARY FINANCIAL INFORMATION ------------------------------------------------------------- Reported and Non-IFRS first quarter 2014 results1-4 EUR million Q1/14 Q1/13 YoY Q4/13 QoQ Change Change--------------------------------------------------------------------------------------------------------------------------Continuing Operations Net sales 2 664 3 140 -15% 3 476 -23%Gross margin % 45.7% 39.3% 42.5 % (non-IFRS) Operating expenses - 925 -1 004 -8% -1 018 -9%(non-IFRS) Operating profit 304 254 20% 409 -26%(non-IFRS) Non-IFRS 62 283 134 exclusions Operating profit 242 - 30 274 -12%EPS, EUR diluted 0.04 0.01 300% 0.08 -50%(non-IFRS) EPS, EUR diluted 0.03 -0.03 0.05 -40%(reported) Net cash from 198 498 -60% operating activities6 Net cash and 2 075 4 479 -54% 2 308 -10%other liquid assets5 -------------------------------------------------------------Networks Net sales 2 328 2 804 -17% 3 105 -25%Mobile Broadband 1 250 1 244 0% 1 563 -20%net sales Global Services 1 069 1 423 -25% 1 540 -31%net sales Gross margin % 39.6% 34.0% 37.6% (non-IFRS) Operating profit 216 196 10% 349 -38%(non-IFRS) Operating 9.3% 7.0% 11.2% margin % (non-IFRS) -------------------------------------------------------------HERE Net sales 209 216 -3% 255 -18%Gross margin % 77.5% 75.5% 75.6% (non-IFRS) Operating profit 10 -5 25 -60%(non-IFRS) Operating margin % 4.8% -2.3% 9.8% (non-IFRS) -------------------------------------------------------------Technologies Net sales 131 123 7% 121 8%Gross margin % 98.5% 99.2% 98.4% (non-IFRS) Operating profit 86 73 18% 81 6%(non-IFRS) Operating 65.6% 59.3% 66.9% margin % (non-IFRS) -------------------------------------------------------------Discontinued Operations Net sales 1 929 2 765 -30% 2 633 -27%Operating profit -306 -73 -191 (non-IFRS) Operating profit -326 -120 -198 Operating margin % -15.9% -2.6% -7.3% (non-IFRS) Operating margin % -16.9% -4.3% -7.5% Net cash from -336 -292 operating activities6 -------------------------------------------------------------Nokia Group (continuing and discontinued operations) EPS, EUR diluted -0.04 -0.02 0.03 (non-IFRS) EPS, EUR diluted -0.06 -0.07 -0.01 (reported) Net cash from -138 206 53 operating activities Net cash and 2 075 4 479 -54% 2 308 -10%other liquid assets5 ------------------------------------------------------------- Note 1 relating to results information and non-IFRS (also referred to as'underlying') results:The results information in this report is unaudited.Percentages and figures presented herein may include rounding differences andtherefore may not add up precisely to the totals presented and may vary frompreviously published financial information. In addition to information on ourreported IFRS results, we provide certain information on a non-IFRS, orunderlying business performance, basis. Non-IFRS results exclude all materialspecial items for all periods. In addition, non-IFRS results exclude intangibleasset amortization, other purchase price accounting related items and inventoryvalue adjustments arising from (i) the formation of Networks (formerly NSN) and(ii) all business acquisitions completed after June 30, 2008. Nokia believesthat our non-IFRS results provide meaningful supplemental information to bothmanagement and investors regarding Nokia's underlying business performance byexcluding the above-described items that may not be indicative of Nokia'sbusiness operating results. These non-IFRS financial measures should not beviewed in isolation or as substitutes to the equivalent IFRS measure(s), butshould be used in conjunction with the most directly comparable IFRS measure(s)in the reported results. See note 2 below for information about the exclusionsfrom our non-IFRS results. More information, including a reconciliation of ourQ1 2014 and Q1 2013 non-IFRS results to our reported results, can be found inour complete Q1 2014 report with tables on pages 19-23. A reconciliation of ourQ4 2013 non-IFRS results to our reported results can be found in our completeQ4 interim report with tables on pages 21-22 and 35-40 published on January 23,2014. Note 2 relating to non-IFRS exclusions/special items for continuing operations: Q1 2014 - EUR 62 million (net) consisting of: -- EUR 15 million restructuring charge and other associated items in Networks -- EUR 3 million restructuring charge in HERE -- EUR 9 million of transaction and other related costs in Corporate Common resulting from the sale of Devices & Services business to Microsoft -- EUR 3 million of transaction and other related costs in Technologies resulting from the sale of Devices & Services business to Microsoft -- EUR 6 million of transaction and other related costs in HERE resulting from the sale of Devices & Services business to Microsoft -- EUR 22 million of intangible asset and other purchase price accounting related items arising from the acquisition of Motorola Solutions' networks assets -- EUR 3 million of intangible asset and other purchase price accounting related items arising from the acquisition of NAVTEQ Q4 2013 -- EUR 134 million (net) consisting of: -- EUR 95 million restructuring charge and other associated items in Networks -- EUR 4 million restructuring charge in HERE -- EUR 22 million of transaction and other related costs resulting from the sale of Devices & Services business to Microsoft -- EUR 11 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of Motorola Solutions' networks assets -- EUR 3 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ Q1 2013 - EUR 283 million (net) consisting of: -- EUR 129 million restructuring charge and other associated items in Networks, including EUR 53 million of net charges related to country and contract exits based on the strategy that focuses on key markets and product segments -- EUR 5 million restructuring charge in HERE -- EUR 64 million of intangible asset and other purchase price accounting related items arising from the formation of Networks (formerly Nokia Siemens Networks and Nokia Solutions and Networks) and the acquisition of Motorola Solutions' networks assets -- EUR 87 million of intangible asset and other purchase price accounting related items arising from the acquisition of NAVTEQ Note 3 relating to non-IFRS exclusions for discontinuing operations: Q1 2014 - EUR 19 million (net) consisting of: -- EUR 19 million of transaction and other related costs resulting from the sale of Devices & Services business to Microsoft Q4 2013 - EUR 7 million (net) consisting of: -- EUR 7 million of transaction and other related costs resulting from the sale of Devices & Services business to Microsoft Q1 2013 - EUR 47 million (net) consisting of: -- EUR 72 million restructuring charge -- EUR 27 million gain on a cartel claim settlement Note 4 relating to operational and reporting structure: We have threebusinesses: Networks, HERE, and Technologies, and four operating and reportablesegments for financial reporting purposes: Mobile Broadband and Global Serviceswithin Networks, HERE, and Technologies. We also present certain segment datafor discontinued operations. Below is a description of our four reportablesegments. Mobile Broadband provides mobile operators with radio and corenetwork software together with the hardware needed to deliver mobile voice anddata services. Global Services provides mobile operators with a broad range ofservices, including network implementation, care, managed services, networkplanning and optimization as well as systems integration. HERE focuses on thedevelopment of location intelligence, location-based services and localcommerce. Technologies is built on Nokia's Chief Technology Office andintellectual property rights and licensing activities. Networks also containsNetworks Other, which includes net sales and related cost of sales andoperating expenses of non-core businesses, as well as Optical Networks businessuntil May 6, 2013, when its divestment was completed. It also includesrestructuring and associated charges for Networks business. Additionally, as aresult of the transaction announced on September 3, 2013 and closed on April25, 2014 whereby Nokia sold substantially all of Nokia's Devices & Servicesbusiness to Microsoft ('Sale of the D&S Business'), we report certain separateinformation for Discontinued Operations. On August 7, 2013 Nokia completed theacquisition of Siemens' stake in Nokia Siemens Networks, which was a jointventure between Nokia and Siemens and renamed the company Nokia Solutions andNetworks, also referred to as NSN. NSN was consolidated by Nokia prior to thistransaction. After the closing of the Sale of the D&S Business, NSN was renamedNetworks. Beginning in the third quarter of 2013, Nokia has reported financialinformation for the two operating and reportable segments within Networks;Mobile Broadband and Global Services. Beginning in the fourth quarter of 2013,the Devices & Services business has been reported as Discontinued Operations.To reflect these changes, historical results information for past periods havebeen regrouped for historical comparative purposes. As is customary, certainjudgments have been made when regrouping historical results information andallocating items in the regrouped results. When presenting financialinformation as at and related comparative information for previous periods, wegenerally refer to the names of the businesses and reportable segments as theyare named currently. However, the terms 'Networks' and 'Nokia Solutions andNetworks, or 'NSN', as well as 'Technologies' and 'Advanced Technologies' canbe used interchangeably in this report. Note 5 relating to Nokia net cash and other liquid assets: Calculated as totalcash and other liquid assets less interest-bearing liabilities. For selectedinformation on Nokia Group interest-bearing liabilities, please see the tableon pages 35-36 of the complete Q1 2014 report with tables. Note 6 relating to continuing and discontinuing operations net cash fromoperating activities: No comparative data available for Q4 2013. For the fullyear 2013 the net cash from operations was an inflow of EUR 1 133 million forcontinuing operations and an outflow of EUR 1 062 million for the discontinuedoperations. NOKIA OUTLOOK Continuing Operations -- Nokia continues to expect Networks' non-IFRS operating margin for the full year 2014 to be towards the higher end of Networks' targeted long term non-IFRS operating margin range of 5% to 10%. In addition, Nokia now expects Networks' net sales to grow on a year-on-year basis in the second half of 2014. This outlook is based on Nokia's expectations regarding a number of factors, including: -- competitive industry dynamics -- product and regional mix; -- the timing of major new network deployments; and -- expected continued improvement under Networks' transformation programs. -- Nokia expects software sales to comprise a lower proportion of Networks' second quarter 2014 net sales compared to the first quarter 2014, which is expected to negatively affect Networks' second quarter 2014 non-IFRS operating margin. -- During 2014, Nokia continues to expect HERE to invest to capture longer term transformational growth opportunities. This is expected to negatively affect HERE's 2014 non-IFRS operating margin. -- Nokia continues to expect the Technologies annualized net sales run rate to expand to approximately EUR 600 million during 2014, now that Microsoft has become a more significant intellectual property licensee in conjunction with the sale of substantially all of our Devices & Services business. -- Nokia expects cash flow in the second quarter 2014 to be negatively affected by incentive-related cash outflows related to Networks' strong business performance in 2013. -- On a non-IFRS basis, until a pattern of tax profitability is re-established in Finland, Nokia continues to expect to record approximately EUR 250 million of annualized tax expense for the continuing operations. This corresponds to the anticipated cash tax obligations for Networks, HERE and Technologies. After a pattern of tax profitability is re-established in Finland, Nokia expects to record tax expenses at a long term effective tax rate of approximately 25%, however Nokia's cash tax obligations are expected to remain at approximately EUR 250 million annually until Nokia's currently unrecognized Finnish deferred tax assets have been fully utilized. At the end of the first quarter Nokia had approximately EUR 2.4 billion of unrecognized Finnish deferred tax assets that would be available against approximately EUR 11.8 billion of taxable profits. Nokia expects to utilize approximately EUR 200 million of these unrecognized Finnish deferred tax assets against the expected gain on sale of our Devices & Services business to Microsoft, and thus have available EUR 2.2 billion of unrecognized Finnish deferred tax assets after the transaction that would be available against EUR 10.8 billion of taxable profits. -- Nokia continues to expect full year 2014 capital expenditures for continuing operations to be approximately EUR 200 million, primarily attributable to Networks. COMPLETION OF THE SALE OF SUBSTANTIALLY ALL OF THE DEVICES & SERVICES BUSINESSTO MICROSOFT On April 25, 2014 Nokia completed the sale of substantially all of its Devices& Services business to Microsoft. As earlier communicated, the transaction was subject to potential purchaseprice adjustments. At closing, the agreed transaction price of EUR 5.44 billionwas increased by approximately EUR 170 million as a result of the estimatedadjustments made for net working capital and cash earnings. However thisadjustment is based on an estimate which will be finalized when the final cashearnings and net working capital numbers are available during the secondquarter 2014. Nokia expects to book a gain on sale of approximately EUR 3.0 billion from thetransaction, of which approximately EUR 1.0 billion is expected to be taxableincome in Finland. As a result of the gain, Nokia expects to record taxexpenses of approximately EUR 180 million and to utilize approximately EUR 200million of Nokia's unrecognized deferred tax assets in Finland. Additionally, as is customary for transactions of this size, scale andcomplexity, Nokia and Microsoft made certain adjustments to the scope of theassets originally planned to transfer. These adjustments have no impact on thematerial deal terms of the transaction and Nokia will be materially compensatedfor any retained liabilities. In India, our manufacturing facility remains part of Nokia following theclosing of the transaction. Nokia and Microsoft have entered into a serviceagreement whereby Nokia would produce mobile devices for Microsoft for alimited time. In Korea, Nokia and Microsoft agreed to exclude the Masanfacility from the scope of the transaction and Nokia is taking steps to closethe facility, which employs approximately 200 people. Altogether, andaccounting for these adjustments, Nokia transferred approximately 25 000employees to Microsoft at the closing. The EUR 1.5 billion convertible bonds issued by Nokia to Microsoft followingthe announcement of the transaction have been redeemed and netted against thedeal proceeds by the amount of principal and accrued interest. Related to thisredemption, the accounting treatment of the equity component of the convertiblebonds negatively impacted Nokia's net cash by approximately EUR 150 million. If the transaction to sell Microsoft substantially all of our Devices &Services business would have closed before the end of the first quarter 2014,Nokia would have ended the quarter with gross cash of approximately EUR 10.5billion and net cash of approximately EUR 7.1 billion. In addition to theproceeds from the transaction and other transaction related items, thisestimate includes approximately EUR 250 million of payments from Nokia toMicrosoft relating to the timing of platform support payments received, as partof the previous agreement between the two companies. This compares to reported gross cash of EUR 6.9 billion and net cash of EUR 2.1billion at the end of the first quarter 2014. ANNOUNCEMENT OF NEW STRATEGY, STRUCTURE AND LEADERSHIP TEAM The completion of the transaction with Microsoft has provided Nokia with asolid basis for future investment. It has also significantly strengthened ourfinancial position, supporting our target of returning to being an investmentgrade company. On April 29, 2014, and shortly prior to the publication of thisQ1 2014 interim report, Nokia outlined its next steps and future plans. Theseincluded: -- The appointment of Rajeev Suri as President and CEO, effective May 1, 2014; -- A vision to be a leader in technologies important in a connected world; -- A strategy to realize that vision by building on Nokia's three strong businesses in Networks, HERE and Technologies; -- Plans for a EUR 5 billion program to optimize capital structure, including the Nokia Board's proposal to the Annual General Meeting 2014 for the dividend and for an authorization for the Board to repurchase shares; and -- A new governance structure and the appointment of a new leadership team, effective May 1, 2014. More details about our announcement can be found in our stock exchange releaseissued today entitled: 'Nokia appoints Rajeev Suri as President and CEO andannounces new strategy, program to optimize capital structure, and leadershipteam'. The release is available at http://company.nokia.com/press. NOKIA'S ANNUAL GENERAL MEETING 2014 Nokia's Annual General Meeting 2014 is scheduled to be held on June 17, 2014.The Nokia Board of Directors will convene the meeting and publish the noticeand related proposals later today. FIRST QUARTER 2014 FINANCIAL AND OPERATING DISCUSSION NOKIA'S CONTINUING OPERATIONS See note 4 to our Summary Financial Information table above concerning ourcurrent operational and reporting structure. The following discussion includesinformation on a non-IFRS, or underlying business performance, basis. See notes1 and 2 to our Summary Financial Information table above for information aboutour underlying non-IFRS results and the non-IFRS exclusions for the periodsdiscussed below. Net sales The following table sets forth the year-on-year and sequential growth rates inour net sales on a reported basis and at constant currency for the periodsindicated. FIRST QUARTER 2014 NET SALES, REPORTED & CONSTANT CURRENCY1 ----------------------------------------------- YoY QoQ Change Change----------------------------------------------Continuing operations -15% -23% net sales - reported Continuing operations -11 % -22% net sales - constant currency1 Networks net sales -17% -25% - reported Networks net sales -13% -23% - constant currency1 HERE net sales -3% -18% - reported HERE net sales -2% -18% - constant currency1 ---------------------------------------------- Note 1: Change in net sales at constant currency excludes the impact of changesin exchange rates in comparison to the Euro, our reporting currency. Nokia's continuing operations net sales decreased 15% year-on-year and 23%sequentially. At constant currency Nokia's continuing operations net saleswould have decreased 11% year-on-year and 22% sequentially. The year-on-year decrease in Nokia's continuing operations net sales in thefirst quarter 2014 was primarily due to lower net sales in Networks and, to alesser extent, lower net sales in HERE. This was partially offset by a slightincrease in net sales in Technologies. The decrease in Networks' net sales inthe first quarter 2014 was primarily driven by lower net sales in GlobalServices and the divestments of businesses not consistent with its strategicfocus, as well as the exiting of certain customer contracts and countries. The sequential decrease in Nokia's continuing operations net sales in the firstquarter 2014 was primarily due to lower net sales in Networks and, to a lesserextent, lower net sales in HERE. This was partially offset by a slight increasein net sales in Technologies. The sequential decrease in net sales for Networksand HERE in the first quarter 2014 was primarily due to typical industryseasonality. Gross Margin Nokia's continuing operations gross margin in the first quarter 2014 improvedyear-on-year to 45.7% compared to 39.3% in the first quarter 2013. Theyear-on-year increase in Nokia's continuing operations gross margin in thefirst quarter 2014 was primarily due to a higher gross margin in Networks and,to a lesser extent, a higher gross margin in HERE. The year-on-year increase inNetworks gross margin in the first quarter 2014 was primarily due to a higherproportion of software mainly in Japan, a higher gross margin in GlobalServices related to significant efficiency improvements as a result ofNetworks' transformation program, and a higher proportion of Mobile Broadbandin the overall sales mix. Nokia's continuing operations gross margin in the first quarter increasedsequentially to 45.7%, compared to 42.5% in the fourth quarter 2013. Thesequential increase in Nokia's continuing operations gross margin in the firstquarter 2014 was primarily due to a higher gross margin in Networks and, to alesser extent, a higher gross margin in HERE. The sequential increase inNetworks gross margin in the first quarter 2014 was primarily due to a higherproportion of software mainly in Japan, a higher gross margin in GlobalServices related to significant efficiency improvements as a result ofNetworks' transformation program, and a higher proportion of Mobile Broadbandin the overall sales mix. Operating expenses Nokia's continuing operations research and development expenses decreasedyear-on-year in the first quarter 2014 primarily due to a decrease in researchand development expenses in HERE and Networks, primarily due to lower purchaseprice accounting related expenses. Nokia's continuing operations research and development expenses decreasedsequentially in the first quarter 2014 primarily due to a decrease in researchand development expenses in Networks and Technologies. Nokia's continuing operations selling, general and administrative expensesdecreased year-on-year and sequentially in the first quarter 2014 primarily dueto a decrease in selling, general and administrative expenses in Networks and,to a lesser extent, HERE and Technologies. Non-IFRS Operating profit Nokia's continuing operations non-IFRS operating profit increased year-on-yearin the first quarter 2014 primarily due to increases in non-IFRS operatingprofit for Networks and, to a lesser extent, HERE and Technologies. Nokia's continuing operations non-IFRS operating profit decreased sequentiallyin the first quarter 2014 primarily due to decreases in non-IFRS operatingprofit for Networks and, to a lesser extent, HERE, partially offset by anincrease in Technologies non-IFRS operating profit. Nokia's non-IFRS other income and expenses was an income of EUR 11 million inthe first quarter 2014, compared to an income of EUR 24 million in the firstquarter 2013 and an expense of EUR 52 million in the fourth quarter 2013. On asequential basis, the change in Nokia's non-IFRS other income and expenses wasprimarily due to the absence of the following factors which resulted inelevated expense levels in the fourth quarter 2013: a non-recurring litigationprovision, a write down of a VAT receivable, an increase in doubtful accountallowances, and asset retirement charges. Operating profit Nokia's continuing operations operating profit increased year-on-year in thefirst quarter 2014 primarily due to an increase in operating profit forNetworks and, to a lesser extent, HERE and Technologies. Nokia's continuing operations operating profit decreased sequentially in thefirst quarter 2014 primarily due to decrease in operating profit for Networksand, to a lesser extent, HERE, partially offset by an increase in Technologiesoperating profit. Nokia's other income and expenses was an expense of EUR 3 million in the firstquarter 2014, compared to an expense of EUR 108 million in the first quarter2013 and an expense of EUR 155 million in the fourth quarter 2013. On ayear-on-year basis Nokia's other income and expenses was a lower expenseprimarily due to lower restructuring charges. On a sequential basis Nokia'sother income and expenses was a lower expense primarily due to the absence ofthe following factors which resulted in elevated expense levels in the fourthquarter 2013: a non-recurring litigation provision, a write down of a VATreceivable, an increase in doubtful account allowances, and asset retirementcharges. Financial income and expenses In the first quarter 2014, Nokia's continuing operations financial income andexpenses was a net expense of EUR 74 million, compared to a net expense of EUR111 million in the first quarter 2013 and a net expense of EUR 50 million inthe fourth quarter 2013. On a year-on-year basis, the improvement was primarilydue to lower net foreign exchange-related losses, partially offset by higherinterest expenses. On a sequential basis, the increase in net expense wasprimarily due to the recognition of income related to one of our investments inthe fourth quarter of 2013, partially offset by lower net foreignexchange-related losses. Taxes At the end of the first quarter 2014, Nokia's continuing operations in Finlandhad approximately EUR 2.4 billion (calculated at the Finnish corporate tax rateof 20%) of net deferred tax assets that have not been recognized in thefinancial statements. A significant portion of Nokia's Finnish deferred taxassets are indefinite in nature and available against future Finnish taxableincome. Nokia will continue to closely monitor its ability to utilize thesedeferred tax assets, including assessing the future financial performance ofNokia's continuing operations in Finland. Should the recent improvements inNokia's continuing operations financial results be sustained, all or part ofthe unrecognized deferred tax assets may be recognized in the future. Cash and cash flow The following table sets forth Nokia's continuing operations financial positionat the end of the periods indicated, as well as the year-on-year and sequentialgrowth rates. NOKIA'S CONTINUING OPERATIONS FINANCIAL POSITION -----------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change--------------------------------------------------------------------------------------------------------------------------------Total cash 6 859 10 102 -32% 8 971 -24%and other liquid assets Networks Contribution 2 870 2 753 4% 2 768 4%----------------------------------------------------------------Net cash and 2 075 4 479 -54% 2 308 -10%other liquid assets1 ----------------------------------------------------------------Networks Contribution 1 868 1 484 26% 1 678 11%---------------------------------------------------------------- Note 1: Total cash and other liquid assets minus interest-bearing liabilities. In the first quarter 2014, Nokia's total cash and other liquid assets decreasedby EUR 2 112 million and Nokia's net cash and other liquid assets decreased byEUR 233 million, compared to the fourth quarter 2013. The sequential decline inNokia's total cash and other liquid assets was primarily due to repayment ofcertain debt facilities totaling EUR 1 750 million during the first quarter2014. The sequential decline of EUR 233 million in Nokia's net cash and other liquidassets in the first quarter 2014 was primarily due to cash outflows fromdiscontinued operations, which more than offset cash inflows from Nokia'scontinuing operations. The cash inflows from Nokia's continuing operations wereprimarily driven by Networks cash inflows. In the first quarter 2014, Nokia's continuing operations adjusted net profitwas EUR 272 million. In the first quarter 2014, Nokia's continuing operationshad cash inflows of approximately EUR 50 million related to Networks otherreceivables and approximately EUR 40 million related to net working capital,which included approximately EUR 110 million of restructuring-related cashoutflows. In addition, Nokia's continuing operations had cash outflows ofapproximately EUR 100 million related to taxes, approximately EUR 60 millionnegative foreign exchange impact from translation of net cash and approximatelyEUR 50 million related to capital expenditures. Nokia's discontinued operationscash outflow totaled approximately EUR 380 million in the first quarter 2014. At the end of the first quarter 2014, Networks' contribution to Nokia's totalcash and other liquid assets was approximately EUR 2.9 billion and itscontribution to Nokia's net cash and other liquid assets was approximately EUR1.9 billion, a sequential increase of approximately EUR 102 million and EUR 190million, respectively. NETWORKS The following table sets forth a summary of the results for Networks and itsreportable segments, Mobile Broadband and Global Services, for the periodsindicated, as well as the year-on-year and sequential growth rates. NETWORKS RESULTS SUMMARY -------------------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change------------------------------------------------------------------------Net sales 2 328 2 804 -17% 3 105 -25%------------------------------------------------------------------------Mobile Broadband 1 250 1 244 0% 1 563 -20%net sales ------------------------------------------------------------------------Global Services 1 069 1 423 -25% 1 540 -31%net sales ------------------------------------------------------------------------Non-IFRS gross 39.6% 34.0% 37.6% margin (%) ------------------------------------------------------------------------Non-IFRS operating -704 -762 -8% -770 -9%expenses ------------------------------------------------------------------------Research and -421 -463 -9% -452 -7%development expenses ------------------------------------------------------------------------Non-IFRS operating 216 196 10% 349 -38%profit ------------------------------------------------------------------------Mobile Broadband 103 129 -20% 117 -12%non-IFRS operating profit ------------------------------------------------------------------------Global Services non-IFRS 115 80 44% 234 -51%operating profit ------------------------------------------------------------------------Non-IFRS operating margin (%) 9.3% 7.0% 11.2% ------------------------------------------------------------------------Mobile Broadband 8.2% 10.4% 7.5% non-IFRS operating margin (%) ------------------------------------------------------------------------Global Services non-IFRS 10.8% 5.6% 15.2% operating margin (%) ------------------------------------------------------------------------ Net Sales The following table sets forth Networks net sales for the periods indicated, aswell as the year-on-year and sequential growth rates, by geographic area. NETWORKS NET SALES BY GEOGRAPHIC AREA ------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change--------------------------- --------- ------------------------------------------------------------Europe 630 731 -14% 834 -24%Middle East & 181 259 -30% 337 -46%Africa Greater China 278 223 25% 424 -34%Asia Pacific 766 872 -12% 907 -16%North America 262 424 -38% 263 0%Latin America 211 295 -28% 340 -38%------------------ -------- -------Total 2 328 2 804 -17% 3 105 -25%------------------------------------------------------------ The year-on-year decrease of 17% in Networks net sales in the first quarter2014 was partially due to divestments of businesses not consistent with itsstrategic focus, as well as the exiting of certain customer contracts andcountries. Excluding these two factors, Networks net sales in the first quarter2014 declined year-on-year by approximately 10% primarily due to lower netsales in Global Services. Mobile Broadband net sales increased slightlyyear-on-year. Additionally, Networks net sales were negatively affected byforeign currency fluctuations. Excluding the negative effect of foreigncurrency fluctuations and the divestments of businesses not consistent with itsstrategic focus, as well as the exiting of certain customer contracts andcountries, Networks net sales would have decreased approximately 6%year-on-year. The year-on-year decrease of 25% in Global Services net sales in the firstquarter 2014 was primarily due to a reduction in network implementation andmaintenance activity, consistent with lower levels of large scale networkdeployments, and the exiting of certain customer contracts and countries. Inthe first quarter 2014, Mobile Broadband net sales benefitted from higher netsales in core networks and LTE offset by lower net sales in other radiotechnologies, resulting in a slight net sales increase year-on-year.Additionally, Mobile Broadband net sales were adversely affected by shortagesof certain components which we expect to continue to impact our business atleast through the end of the second quarter 2014. On a regional basis compared to the first quarter of 2013, net sales in NorthAmerica declined 38% primarily due to a cyclical slow-down in LTE roll-outs; inMiddle East and Africa, net sales declined 30% primarily due to the focus on aspecific set of countries, in Latin America net sales declined by 28% primarilydue to constrained operator spending and the exit of certain projects in linewith Networks' strategy; in Europe net sales declined by 14%, primarily due tocontract exits in line with Networks' strategy and operator spending that, onbalance, was constrained; in Asia Pacific, net sales declined 12% primarily dueto a decline from the height of the LTE network roll-outs in the first quarterof 2013 in Korea and net sales in Greater China increased 25% primarily due tothe new TD-LTE network roll-outs. The sequential decrease of 25% in Networks net sales in the first quarter 2014reflects a seasonal decrease in sales in both Global Services and MobileBroadband. The sequential decrease in Global Services was primarily due to areduction in network implementation and maintenance activity. The decrease inMobile Broadband net sales was driven by decline in legacy radio technologies.On a regional basis, Networks' net sales decreased sequentially primarily dueto Greater China, Middle East & Africa, Asia Pacific and Latin America. In the first quarter 2014, Global Services represented 46% of Networks netsales, compared to 51% in the first quarter 2013 and 50% in the fourth quarter2013. In the first quarter 2014, Mobile Broadband represented 54% of Networksnet sales, compared to 44% in the first quarter 2013 and 50% in the fourthquarter 2013. At constant currency, Networks net sales would have decreased 13% year-on-yearand decreased 23% sequentially. Excluding the negative effect of foreigncurrency fluctuations and the divestments of businesses not consistent with itsstrategic focus, as well as the exiting of certain customer contracts andcountries, Networks net sales would have decreased 6% year-on-year anddecreased 23% sequentially. Non-IFRS Gross Margin On a year-on-year basis, the increase in Networks non-IFRS gross margin in thefirst quarter 2014 was primarily due to a higher proportion of software salesmainly in Japan, a higher gross margin in Global Services related tosignificant efficiency improvements as a result of Networks' transformationprogram, and a higher proportion of Mobile Broadband in the overall sales mix. On a sequential basis, the increase in Networks non-IFRS gross margin in thefirst quarter 2014 was primarily due to a higher proportion of software salesmainly in Japan, and a higher proportion of Mobile Broadband in the overallsales mix. The improved margin within Mobile Broadband was primarily due tolower costs in connection with the technology shift to TD-LTE in China. Non-IFRS Operating Expenses Networks non-IFRS research and development expenses decreased 9% year-on-yearin the first quarter 2014. On a year-on-year basis, non-IFRS research anddevelopment expenses were lower primarily due to business divestments andreduced investments in business activities that are not consistent withNetworks' focused strategy, as well as increased research and developmentefficiency, partially offset by higher investments in areas that are consistentwith Networks' focused strategy, most notably LTE. On a sequential basis,non-IFRS research and development expenses decreased 7% primarily due to loweraccrued incentive expenses which were at an elevated level in the fourthquarter 2013 as well as improved research and development efficiency. On a year-on-year basis, Networks non-IFRS selling, general and administrativeexpenses decreased 5% primarily due to structural cost savings from Networks'global restructuring program. On a sequential basis, Networks non-IFRS selling,general and administrative expenses decreased by 11% consistent with seasonallylower net sales and lower accrued incentive expenses which were at an elevatedlevel in the fourth quarter 2013. Non-IFRS Operating Profit The year-on-year increase in Networks non-IFRS operating profit in the firstquarter 2014 was primarily due to the higher non-IFRS operating profit inGlobal Services partially offset by a lower non-IFRS operating profit in MobileBroadband. On a year-on-year basis, the increase in Global Services non-IFRSoperating profit was primarily due to higher gross profit. On a year-on-yearbasis, the decrease in Mobile Broadband non-IFRS operating profit was primarilydue to lower gross profit. The sequential decrease in Networks non-IFRS operating profit in the firstquarter 2014 was primarily due to the lower non-IFRS operating profit in GlobalServices and to a lesser degree a lower non-IFRS operating profit in MobileBroadband. On a sequential basis, the decrease in Global Services non-IFRSoperating profit was primarily due to seasonally lower net sales contributingto lower gross profit partially offset by lower operating expenses. On asequential basis, the decrease in Mobile Broadband non-IFRS operating profitwas primarily due to seasonally lower net sales contributing to lower grossprofit partially offset by lower operating expenses. Networks non-IFRS other income and expenses was an expense of EUR 2 million inthe first quarter 2014, compared to an income of EUR 7 million in the firstquarter 2013 and an expense of EUR 50 million in the fourth quarter 2013. On asequential basis Networks non-IFRS other income and expenses was a lowerexpense due to the absence of the following factors which resulted in elevatedexpense levels in the fourth quarter 2013: a non-recurring litigationprovision, a write down of a VAT receivable, an increase in doubtful accountallowances, and asset retirement charges. Global Restructuring Program (announced in November 2011) During the first quarter 2014, restructuring related charges were approximatelyEUR 15 million and the related cash outflows were approximately EUR 110million. At March 31 2014, since the commencement of the global restructuringprogram, cumulative restructuring charges amounted to approximately EUR 1 850million, and cumulative related cash outflows amounted to approximately EUR 1350 million. We continue to estimate cumulative restructuring related chargesand related cash outflows to be approximately EUR 1 950 million and EUR 1 700million, respectively, by the end of 2014. Changes in estimates of timing oramounts of costs to be incurred and associated cash flows may become necessaryas the transformation and restructuring program is being completed. At the end of the first quarter 2014, Networks had approximately 48 500employees, a reduction of approximately 8 200 employees compared to the end ofthe first quarter 2013, and a reduction of approximately 100 employees comparedto the end of the fourth quarter 2013. HERE The following table sets forth a summary of the results for HERE for theperiods indicated, as well as the year-on-year and sequential growth rates. HERE RESULTS SUMMARY -------------------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change------------------------------------------------------------------------Net sales 209 216 -3% 255 -18%------------------------------------------------------------------------External net sales 185 163 13% 225 -18%------------------------------------------------------------------------Internal net sales 24 52 -54% 30 -20%------------------------------------------------------------------------Non-IFRS gross margin (%) 77.5% 75.5% 75.6% ------------------------------------------------------------------------Non-IFRS operating expenses -154 -168 -8% -167 -8%------------------------------------------------------------------------Research and development -117 -122 -4% -120 -3%expenses ------------------------------------------------------------------------Non-IFRS operating profit 10 -5 25 -60%------------------------------------------------------------------------Non-IFRS operating margin (%) 4.8% -2.3% 9.8% ------------------------------------------------------------------------ HERE internal sales refers to sales that HERE made to our DiscontinuedOperations (formerly Devices & Services business) that used certain HEREservices in its mobile devices. The internal net sales have not been eliminatedin the continuing operations consolidated income statements for all periodspresented. After the closing of the Sale of the D&S Business, HERE no longergenerates such internal sales, however it will continue to recognize deferredrevenue related to this business for up to 24 months after the closing of theSale of the D&S Business. As part of the Sale of the D&S Business, Microsoftwill become a strategic licensee of the HERE platform, and will separately payHERE for a four-year license that will be recognized ratably as external netsales. Net Sales In the first quarter 2014, the year-on-year increase in external HERE net saleswas primarily due to higher sales to vehicle customers and a benefit related tothe conversion of a contract to a perpetual license. This increase waspartially offset by lower sales to personal navigation device (PND) customersconsistent with declines in the PND industry. In the first quarter 2014, the sequential decrease in external HERE net saleswas primarily due to lower seasonal sales to PND and vehicle customers,partially offset by a benefit related to the conversion of a contract to aperpetual license. In the first quarter 2014, HERE had sales of new vehicle licenses of 2.8million units, compared to 2.2 million units in the first quarter 2013 and 3.2million units in the fourth quarter 2013. On a year-on-year basis, unit salesto vehicle customers increased primarily due to higher consumer uptake ofin-vehicle navigation and higher vehicle sales. On a sequential basis unitsales to vehicle customers decreased primarily due to lower seasonal vehiclesales. Sales to vehicle customers represented well over 50% of external HERE net salesin the first quarter 2014, as well as in the first quarter 2013 and the fourthquarter 2013. In the first quarter 2014, the year-on-year and sequential declines in internalHERE net sales were primarily due to lower recognition of deferred revenuerelated to our smartphone sales. At constant currency HERE's overall net sales would have decreased 2%year-on-year and 18 % sequentially. Non-IFRS Gross Margin On a year-on-year basis, the increase in HERE non-IFRS gross margin in thefirst quarter 2014 was primarily due to a benefit related to the conversion ofa contract to a perpetual license and an overall positive mix shift towardssales to vehicle customers. On a sequential basis, the increase in HERE non-IFRS gross margin in the firstquarter 2014 was primarily due to a benefit related to the conversion of acontract to a perpetual license and the absence of a non-recurring licensingexpense that negatively affected the fourth quarter 2013. Non-IFRS Operating Expenses HERE non-IFRS research and development expenses decreased 4% year-on-year and3% sequentially primarily due to cost reduction actions and improvements in R&Defficiency, such as greater use of automation in map creation. These factorswere partially offset by higher investments in targeted growth areas. HERE non-IFRS selling, general, and administrative expenses decreased 20%year-on-year primarily due to cost reduction actions. On a sequential basis,selling, general, and administrative expenses decreased 21% in the firstquarter 2014, primarily due to lower seasonal marketing expenses. Non-IFRS Operating Profit The year-on-year increase in HERE non-IFRS operating profit in the firstquarter 2014 was primarily due to lower operating expenses. The sequential decrease in HERE non-IFRS operating profit in the first quarter2014 was primarily due to lower gross profit, partially offset by loweroperating expenses. HERE non-IFRS other income and expenses was income of EUR 1 million in thefirst quarter 2014, compared to approximately zero the first quarter 2013 andthe fourth quarter 2013. TECHNOLOGIES The following table sets forth a summary of the results for Technologies, forthe periods indicated, as well as the year-on-year and sequential growth rates. TECHNOLOGIES RESULTS SUMMARY ---------------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change--------------------------------------------------------------------Net sales 131 123 7% 121 8%--------------------------------------------------------------------Non-IFRS gross margin (%) 98.5% 99.2% 98.4% --------------------------------------------------------------------Non-IFRS operating -40 -48 -17% -37 8%expenses --------------------------------------------------------------------Research and -32 -36 -11% -27 19%development expenses --------------------------------------------------------------------Non-IFRS operating 86 73 18% 81 6%profit --------------------------------------------------------------------Non-IFRS operating 65.6% 59.3% 66.9% margin (%) -------------------------------------------------------------------- Net Sales The year-on-year increase in Technologies net sales in the first quarter 2014was primarily due to higher intellectual property licensing income from certainlicensees primarily related to new agreements. This increase was partiallyoffset by the absence of an intellectual property rights divestment transactionthat benefitted net sales in the first quarter 2013 and declines in licensingincome from certain licensees that experienced lower levels of businessactivity. The sequential increase in Technologies net sales in the first quarter 2014 wasprimarily due to higher intellectual property licensing income from certainlicensees primarily related to new agreements and revenue share related topreviously divested intellectual property rights, partially offset by declinesin licensing income from certain licensees that experienced lower levels ofbusiness activity. Non-IFRS Gross Margin On both a year-on-year and sequential basis, Technologies non-IFRS gross marginwas stable. Non-IFRS Operating Expenses Technologies non-IFRS research and development expenses decreased by 11%year-on-year and increased by 19% sequentially, primarily due to timing ofresearch and development projects. Technologies non-IFRS selling, general and administrative expenses decreased38% year-on-year and decreased by 20% sequentially, primarily due to a declinein intellectual property licensing related litigation expenses. Non-IFRS Operating Profit The year-on-year increase in Technologies non-IFRS operating profit in thefirst quarter 2014 was primarily due to higher gross profit and lower operatingexpenses. The sequential increase in Technologies non-IFRS operating profit in the firstquarter 2014 was primarily due to higher gross profit, partially offset byhigher operating expenses. Technologies non-IFRS other income and expenses was an expense of EUR 2 millionin the first quarter 2014, compared to EUR 0 million in the first quarter 2013and in the fourth quarter 2013. DISCONTINUED OPERATIONS The following table sets forth a summary of the results for discontinuedoperations, for the periods indicated, as well as the year-on-year andsequential growth rates. DISCONTINUED OPERATIONS RESULTS SUMMARY ----------------------------------------------------------------EUR million Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change---------------------------------------------------------------Net sales 1 929 2 765 -30% 2 633 -27%---------------------------------------------------------------Non-IFRS gross 16.2% 21.9% 20.3% margin (%) ---------------------------------------------------------------Non-IFRS operating -597 -660 -10% -717 -17%expenses ---------------------------------------------------------------Non-IFRS operating -15.9% -2.6% -7.3% margin (%) ---------------------------------------------------------------Operating margin (%) -16.9% -4.3% -7.5% --------------------------------------------------------------- Net Sales The year-on-year and sequential declines in discontinued operations net salesin the first quarter 2014 were primarily due to lower Mobile Phones net salesand, to a lesser extent, lower Smart Devices net sales. On both a year-on-year and sequential basis, our Mobile Phones net sales wereaffected by competitive industry dynamics, including intense smartphonecompetition at increasingly lower price points and intense competition at thelow end of our product portfolio. Our Smart Devices net sales were affected bycompetitive industry dynamics including the strong momentum of competingsmartphone platforms. On both a year-on-year and sequential basis, discontinued operations unitvolumes declined in the first quarter 2014. The year-on-year decline indiscontinued operations unit volumes was due to lower Mobile Phones unitvolumes, partially offset by higher Smart Devices unit volumes. Sequentially,the decline in discontinued operations unit volumes was primarily due to lowerMobile Phones unit volumes and, to a lesser extent, lower Smart Devices unitvolumes. Discontinued operations Average Selling Price (ASP) declined on both ayear-on-year and sequential basis in the first quarter 2014. The year-on-yearand sequential declines in discontinued operations ASP were due to lower ASPsfor both Smart Devices and Mobile Phones. Discontinued operations ended the first quarter 2014 within our normal 4 to 6week channel inventory range. Non-IFRS Gross Margin The year-on-year decline in discontinued operations non-IFRS gross margin inthe first quarter 2014 was primarily due to lower Smart Devices gross marginand, to a lesser extent, lower Mobile Phones gross margin. Compared to thefirst quarter 2013, Smart Devices non-IFRS gross margin was negatively impactedby the absence of the reversal of approximately EUR 50 million of previouslyrecognized inventory related allowances for our Windows Phone 7-based Lumiaproducts which benefitted Smart Devices non-IFRS gross margin in the firstquarter 2013 as well as approximately EUR 20 million of allowances related toexcess components in the first quarter 2014. Compared to the first quarter2013, Mobile Phones non-IFRS gross margin in the first quarter 2014 benefittedfrom lower warranty costs, mainly offset by the negative affect ofapproximately EUR 40 million of allowances related to excess components. On a sequential basis, the decline in discontinued operations non-IFRS grossmargin in the first quarter 2014 was primarily due to lower Mobile Phones grossmargin and, to a lesser extent, lower Smart Devices gross margin. On asequential basis, Smart Devices non-IFRS gross margin in the first quarter 2014benefitted from the absence of approximately EUR 50 million of net allowancesrelated to excess component inventory, future purchase commitments and aninventory revaluation that negatively impacted Smart Devices non-IFRS grossmargin in the fourth quarter 2013, partially offset by approximately EUR 20million of allowances related to excess components in the first quarter 2014.Compared to the previous quarter, Mobile Phones non-IFRS gross margin in thefirst quarter 2014 benefitted from lower warranty costs, mainly offset by thenegative affect of approximately EUR 40 million of allowances related to excesscomponents. Non-IFRS Operating Expenses On both a year-on-year and sequential basis, the decline in discontinuedoperations non-IFRS operating expenses in the first quarter 2014 was due tolower operating expenses in both Mobile Phones and Smart Devices. Non-IFRS Operating Profit The year-on-year decline in discontinued operations non-IFRS operating profitin the first quarter 2014 was primarily due to lower Smart Devices and MobilePhones non-IFRS operating profit. On a sequential basis, the decline indiscontinued operations non-IFRS operating profit in the first quarter 2014 wasdue to lower Mobile Phones non-IFRS operating profit, partially offset byhigher Smart Devices non-IFRS operating profit. Discontinued operations non-IFRS other income and expenses was an expense ofEUR 22 million in the first quarter 2014, compared to an expense of EUR 18million in the first quarter 2013 and an expense of EUR 9 million in the fourthquarter 2013. Operating Profit The year-on-year decline in discontinued operations operating profit in thefirst quarter 2014 was primarily due to lower Smart Devices and Mobile Phonesoperating profit. On a sequential basis, the decline in discontinued operationsoperating profit in the first quarter 2014 was due to lower Mobile Phonesoperating profit, partially offset by higher Smart Devices operating profit. Discontinued operations other income and expenses was an expense of EUR 32million in the first quarter 2014, compared to an expense of EUR 65 million inthe first quarter 2013 and an expense of EUR 15 million in the fourth quarter2013. On a year-on-year basis discontinued operations other income and expenseswas a lower expense primarily due to lower restructuring charges. FIRST QUARTER 2014 OPERATING HIGHLIGHTS NOKIA Q1 OPERATING HIGHLIGHTS -- During the first quarter, Nokia focused on making progress with respect to obtaining the relevant regulatory approvals needed to ensure it could close the transaction with Microsoft, which was originally announced on September 3, 2013. Since the end of the quarter, the two companies were able to obtain the remaining approvals needed and meet customary closing conditions in order to close the transaction on April 25, 2014. -- During the first quarter, Nokia continued attempts to resolve the future of its manufacturing facility in India whose transfer to Microsoft as part of the transaction between the two companies was prevented owing to an asset freeze relating to Nokia's ongoing tax proceedings in the country. Nokia continues to contest the claims it believes are meritless made by the Indian tax authorities. NETWORKS Q1 OPERATING HIGHLIGHTS -- Network's strong deal momentum in mobile broadband and related services continued. During the quarter Networks was granted a five-year contract with Vodafone for the SingleRAN and Subscriber Data Management solutions in the operator's Project Spring network upgrade and was selected by Everything Everywhere in the UK to support the continued expansion of its LTE network. Networks was also selected as the sole supplier of Elisa's LTE network in Finland. Other contracts in the quarter included VimpelCom's LTE radio access networks in the central region of Russia, Siberia, South and most of the Volga and Ural regions; the implementation of an LTE network and modernization of the existing GSM and 3G networks for TELE Greenland; the implementation of Taiwan Mobile's multi-band LTE and LTE-Advanced network; the upgrade of Telkomsel's GSM and 3G HSPA+ network in Indonesia; the modernization and expansion of Mobily's 2G, 3G WCDMA and TD-LTE networks in Saudi Arabia; and LTE infrastructure for Avantel in Colombia. At the end of the first quarter of 2014, Networks had 138 commercial LTE contracts. -- Networks continues to lead in 4G radio technology, demonstrating 2.6 Gbps throughput over a single sector in Sprint's TD-LTE network. In the live network of Optus in Australia, the operator and Networks built the world's first 'Gigasite' attaining an aggregate downlink capacity of 1.7 Gbps. -- Networks announced the world's first TDD-FDD carrier aggregation demonstration together with two South Korean operators, Korea Telecom and SK Telecom; and together with Broadcom Corporation and Elisa in Finland the first ever demonstration of LTE Advanced carrier aggregation on a live commercial network. -- Networks continues to invest in innovation and further evolved the Networks Smart Scheduler that is now able to provide up to 30 percent faster downlink speeds at the cell edge; and announced new Centralized RAN software capable of doubling the uplink capacity of existing LTE networks. Networks also demonstrated its FutureWorks 5G research concept, which enables ultra-dense networks, a mobile network 'on demand' for mega events, and a self-learning network that analyzes big data in real time and responds in an instant. -- Networks extended its Flexi Zone small cell architecture and introduced the Flexi Zone controller, which supports the integration of NetworksLiquid Applications to deliver services directly from small cell base station clusters. -- Networks announced the first telco cloud based IP Multimedia Subsystem (IMS); launched theTelco Cloud Management solution for operators; and extended its Services to help operators prepare, implement and run their own telco clouds and migrate existing telco services to cloud-based networks. -- Tele2 Sweden chose Networks' Serve atOnce Traffica Customer Experience Management (CEM) solution, and Networks announced CEM for Loyalty Scores and the CEM Umbrella Solution for a customized overview of customer experience across an operator group's countries or regions. -- Networks renewed the managed services contract with Saudi Telecom Company, covering the operator's GSM, 3G and LTE network. Networks launched Predictive Operations, the world's first managed service for predicting mobile broadband service and network degradations; LTE Service Management that helps ensure the quality of mobile broadband services running over LTE networks; and Services for OTT management, which helps operators improve the delivery of OTT content. -- Telecommunication Development Industry Alliance (TDIA) awarded Networks' contribution to time division (TD) technology; Networks' Liquid Applications won a Global TD-LTE Initiative (GTI) Award in the 'Innovative Solutions' category; at the GSMA Global Mobile Awards 2014, Networks and O2 (Telefonica UK) won the top prize in the 'Best Mobile Infrastructure' category for the deployment of iSON Automation for Operations. HERE Q1 OPERATING HIGHLIGHTS -- During the first quarter, HERE continued to expand its reach, delivering the latest maps, platform services and location experiences to more people and businesses across screens and operating systems. New, renewed and expanded partnerships with companies from various industries demonstrate that HERE is a valued and preferred partner for maps and location intelligence. -- HERE introduced the HERE Maps experience with true offline maps and integrated turn-by-turn navigation to more people and new markets on the newly introduced Nokia X family of devices. -- HERE made HERE Maps available to the whole Windows 8.1 ecosystem, including tablets and desktops. -- HERE introduced the HERE Mobile SDK for Business enabling companies and government agencies to quickly and easily develop native location-based applications tailored to their specific needs. -- HERE opened up its community-editing tool Map Creator, available in more than 100 countries, to expert communities in North America and Western Europe, enabling them to add new roads, trails or places and updating road or place information, to keep HERE maps up to date. -- HERE was selected by ARS Traffic & Transport Technology to advance and streamline the UK Highway Agency's logistics for vehicles that exceed standard dimensions. Accurate location content from HERE will allow haulers, police, and road and bridge authorities to plot the most efficient route and assess the suitability of the route for the vehicle. -- HERE and Continental announced that they will intensify their collaboration in bringing the Connected Car to life, focusing on Electronic Horizon, future Automated Driving functionalities and Intelligent Transportation Systems (ITS). -- Garmin reinforced its long term global commitment to HERE Traffic by extending its contract by three years and expanding Automotive OEM map update distribution relationships beyond North America and the European Union. Additionally, Garmin switched its Places mobile search offering to the HERE Location Platform to enhance its consumers' search experience. -- Honda unveiled its first signature suite of connected apps called HondaLink Navigation in Thailand and Australia. The applications are powered by cloud-based dynamic content, traffic and Web search provided through the HERE Platform. -- HERE Traffic was selected to provide the Missouri Department of Transportation with real-time traffic data. The data will be used to analyze road conditions, track incidents or events, and distribute travel-time information to the public in real-time. -- HERE launched its real-time Traffic service through Mitsubishi Electric Corporation to Mitsubishi Motors vehicles in North America, Europe, and Russia. HERE map content and updates also have expanded to Australia and New Zealand. -- HERE announced that QNX Software Systems will add support for HERE Auto to the QNX CAR Platform for Infotainment. -- Volvo Cars launched new navigation platforms - Sensus Navigation and Sensus Connect - that incorporate HERE Automotive Cloud connected services to provide seamless and connected navigation to drivers. These platforms make use of advanced navigation maps, content and services, providing innovative navigation solutions to consumers. -- Yahoo! integrated full venue maps powered by HERE for places like shopping malls, travel interchanges and sports stadiums. HERE venue maps are available for more than 75 000 buildings worldwide. TECHNOLOGIES Q1 OPERATING HIGHLIGHTS -- Nokia and HTC settled all pending patent litigation between them, and entered into a patent and technology collaboration agreement. HTC is making payments to Nokia and the collaboration involves HTC's LTE patent portfolio, further strengthening Nokia's licensing offering. The companies also announced that they are exploring future technology collaboration opportunities. DISCONTINUED OPERATIONS Q1 OPERATING HIGHLIGHTS -- Nokia introduced five new affordable handsets, including the Nokia X, a family of smartphones that run Android(TM) apps, Microsoft services and signature Nokia experiences. PERSONNEL PERSONNEL END OF QUARTER -------------------------------------------------------- Q1/2014 Q1/2013 YoY Q4/2013 QoQ Change Change-------------------------------------------------------Networks 48 505 56 670 -14% 48 628 0%-------------------------------------------------------HERE 5 936 6 030 -2% 5 741 3%-------------------------------------------------------Technologies 852 920 -7% 875 -3%and corporate common -------------------------------------------------------Nokia's 55 293 63 620 -13% 55 244 0%continuing operations ------------------------------------------------------- The average number of Nokia's continuing operations employees during the periodfrom January to March 2014 was 54 914, of which the average number of employeesat HERE and Networks was 5 839 and 48 567 respectively. SHARES The total number of Nokia shares on March 31, 2014, was 3 744 994 342. On March31, 2014, Nokia and its subsidiary companies owned 31 196 362 Nokia shares,representing approximately 0.8% of the total number of Nokia shares and thetotal voting rights. RISKS AND FORWARD-LOOKING STATEMENTS It should be noted that Nokia and its business are exposed to various risks anduncertainties and certain statements herein that are not historical facts areforward-looking statements, including, without limitation, those regarding: A)expectations, plans or benefits related to Nokia's new strategy; B)expectations, plans or benefits related to future performance of Nokia'scontinuing businesses Networks, HERE and Technologies; C) expectations, plansor benefits related to changes in leadership and operational structure; D)expectations regarding market developments, general economic conditions andstructural changes; E) expectations and targets regarding performance,including those related to market share, prices, net sales and margins; F) thetiming of the deliveries of our products and services; G) expectations andtargets regarding our financial performance, cost savings and competitivenessas well as results of operations; H) expectations and targets regardingcollaboration and partnering arrangements; I) the outcome of pending andthreatened litigation, disputes, regulatory proceedings or investigations byauthorities; J) expectations regarding restructurings, investments, uses ofproceeds from transactions, acquisitions and divestments and our ability toachieve the financial and operational targets set in connection with any suchrestructurings, investments, divestments and acquisitions, including anyexpectations, plans or benefits related to or caused by the transactionannounced on September 3, 2013 where Nokia sold substantially all of Nokia'sDevices & Services business to Microsoft on April 25, 2014 ('Sale of the D&SBusiness'); K) statements preceded by or including 'believe,' 'expect,''anticipate,' 'foresee,' 'sees,' 'target,' 'estimate,' 'designed,' 'aim','plans,' 'intends,' 'focus', 'continue', 'project', 'should', 'will' or similarexpressions. These statements are based on management's best assumptions andbeliefs in light of the information currently available to it. Because theyinvolve risks and uncertainties, actual results may differ materially from theresults that we currently expect. Factors, including risks and uncertaintiesthat could cause these differences include, but are not limited to: 1) ourability to execute our new strategy successfully and in a timely manner, andour ability to successfully adjust our operations; 2) our ability to sustain orimprove the operational and financial performance of our continuing businessesand correctly identify business opportunities or successfully pursue newbusiness opportunities; 3) our ability to execute Networks' strategy andeffectively, profitably and timely adapt its business and operations to theincreasingly diverse needs of its customers and technological developments; 4)our ability within our Networks business to effectively and profitably investin and timely introduce new competitive high-quality products, services,upgrades and technologies; 5) our ability to invent new relevant technologies,products and services, to develop and maintain our intellectual propertyportfolio and to maintain the existing sources of intellectual property relatedrevenue and establish new such sources; 6) our ability to protect numerouspatented standardized or proprietary technologies from third-party infringementor actions to invalidate the intellectual property rights of thesetechnologies; 7) our ability within our HERE business to maintain currentsources of revenue, historically derived mainly from the automotive industry,create new sources of revenue, establish a successful location-based platformand extend our location-based services across devices and operating systems; 8)effects of impairments or charges to carrying values of assets, includinggoodwill, or liabilities; 9) our dependence on the development of the mobileand communications industry in numerous diverse markets, as well as on generaleconomic conditions globally and regionally; 10) our Networks business'dependence on a limited number of customers and large, multi-year contracts;11) our ability to retain, motivate, develop and recruit appropriately skilledemployees; 12) the potential complex tax issues and obligations we may face,including the obligation to pay additional taxes in various jurisdictions andour actual or anticipated performance, among other factors, could result inallowances related to deferred tax assets; 13) our ability to manage ourmanufacturing, service creation and delivery, and logistics efficiently andwithout interruption, especially if the limited number of suppliers we dependon fail to deliver sufficient quantities of fully functional products andcomponents or deliver timely services; 14) potential exposure to contingentliabilities due to the Sale of the D&S Business and possibility that theagreements we have entered into with Microsoft may have terms that prove to beunfavorable to us; 15) any inefficiency, malfunction or disruption of a systemor network that our operations rely on or any impact of a possiblecybersecurity breach; 16) our ability to reach targeted results or improvementsby managing and improving our financial performance, cost savings andcompetitiveness; 17) management of Networks' customer financing exposure; 18)the performance of the parties we partner and collaborate with, and our abilityto achieve successful collaboration or partnering arrangements; 19) our abilityto protect the technologies, which we develop, license, use or intend to usefrom claims that we have infringed third parties' intellectual property rights,as well as, impact of possible licensing costs, restriction on our usage ofcertain technologies, and litigation related to intellectual property rights;20) the impact of regulatory, political or other developments on our operationsand sales in those various countries or regions where we do business; 21)exchange rate fluctuations, particularly between the euro, which is ourreporting currency, and the US dollar, the Japanese yen and the Chinese yuan,as well as certain other currencies; 22) our ability to successfully implementplanned transactions, such as acquisitions, divestments, mergers or jointventures, manage unexpected liabilities related thereto and achieve thetargeted benefits; 23) the impact of unfavorable outcome of litigation,contract related disputes or allegations of health hazards associated with ourbusiness, as well as the risk factors specified in the most recent Nokia'sannual report on Form 20-F in under Item 3D. 'Risk Factors'. Other unknown orunpredictable factors or underlying assumptions subsequently proven to beincorrect could cause actual results to differ materially from those in theforward-looking statements. Nokia does not undertake any obligation to publiclyupdate or revise forward-looking statements, whether as a result of newinformation, future events or otherwise, except to the extent legally required. Nokia, Helsinki - April 29, 2014 Media and Investor Contacts: Corporate Communications, tel. +358 10 448 4900 email: [email protected] Relations Europe, tel. +358 4080 34080Investor Relations US, tel. +1 408 663 5685 Planned publication dates for interim reports in 2014 - report for Q2 2014 and January-June 2014: July 24, 2014 - report for Q3 2014 and January-September 2014: October 23, 2014 Publication of 'Nokia in 2013' and Nokia Form 20-F 2013 Nokia plans to publish its 'Nokia in 2013' annual report, which includes theaudited financial statements and the Board's annual review on April 30, 2014. Nokia plans to file its annual report on Form 20-F for 2013 with the USSecurities and Exchange Commission on April 30, 2014. The annual reports will be available at http://company.nokia.com/financials,where you may also access our past quarterly and annual financial reports. Nokia's Annual General Meeting 2014Nokia's Annual General Meeting 2014 will be held on June 17, 2014. Click on, or paste the following link into your web browser, to view theassociated documents https://newsclient.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=471456 News Source: NASDAQ OMX 29.04.2014 DGAP's Distribution Services include Regulatory Announcements,Financial/Corporate News and Press Releases.Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: EnglishCompany: Nokia FinlandPhone: Fax: E-mail: Internet: ISIN: FI0009000681Category Code: MSCTIDM: 0HAFSequence Number: 2016Time of Receipt: Apr 29, 2014 07:00:04 End of Announcement DGAP News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.
Related Shares:
Nokia Ord