DGAP-Regulatory: Nokia Corporation Q4 and full year2013 Interim report

23rd Jan 2014 11:03

Nokia / Miscellaneous 23.01.2014 12:03 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 CorporationFinancial Statement ReleaseJanuary 23, 2014 at 13.00 (CET+1) This is a summary of the fourth quarter and full year 2013 report publishedtoday. The complete fourth quarter and full year 2013 report with tables isavailable at http://www.results.nokia.com/results/Nokia_results2013Q4e.pdf.Investors should not rely on summaries of our interim reports only, but shouldreview the complete interim reports with tables. Nokia Corporation Report for Q4 2013 and Full Year 2013 FINANCIAL AND OPERATING HIGHLIGHTS Fourth quarter 2013 highlights for continuing operations*:Nokia's non-IFRS EPS in Q4 2013 of EUR 0.08 (0.06 in Q3 2013); reported EPS ofEUR 0.05 (0.04 in Q3 2013) Nokia's net sales in Q4 2013 were EUR 3.5 billion, up 18% compared to Q3 2013- In Q4 2013, underlying operating profitability for Nokia's continuingoperations increased to EUR 408 million or 11.7% of net sales, compared to EUR344 million or 11.7% of net sales in Q3 2013. - NSN achieved solid underlying operating profitability, with Q4 2013 non-IFRSoperating margin of 11.2% compared to 8.4% in Q3 2013. This reflected stronggross margin and continued progress relative to its strategy in a seasonallystrong quarter, partially offset by higher than normal non-IFRS other expenses. - HERE's external net sales grew to EUR 225 million, an increase of 10%year-on-year and 28% sequentially. - Nokia announced that Samsung extended a patent license agreement betweenNokia and Samsung for 5 years. Samsung will pay compensation to Nokia for theperiod commencing from January 1, 2014. The amount to be paid by Samsung willbe finally settled in a binding arbitration, which is expected to be concludedduring 2015. Full year 2013 highlights for continuing operations*:Nokia's full year 2013 non-IFRS EPS of EUR 0.21 (0.13 in 2012); reported EPS ofEUR 0.05 (-0.20 in 2012) Nokia's full year net sales 2013 were EUR 12.7 billion, down 17% compared tofull year 2012 - Despite NSN's lower top line, underlying operating profitability improved toEUR 1.1 billion or 9.7% of net sales, compared to EUR 0.8 billion or 5.7% ofnet sales in 2012, reflecting strong gross margin and continued progressrelative to its strategy. - NSN achieved its target to reduce non-IFRS annualized operating expenses andproduction overheads by more than EUR 1.5 billion by the end of 2013, comparedto the end of 2011. - NSN reported net profit improved to EUR 15 million, compared to a reportednet loss of EUR 1.4 billion in 2012, reflecting lower levels of restructuringcharges, strong operational performance in both Global Services and MobileBroadband, and lower purchase price accounting related expenses. Balance sheet highlights:- Nokia Group ended 2013 with a strong balance sheet and solid cash positionwith gross cash of EUR 9.0 billion and net cash of EUR 2.3 billion compared toEUR 9.1 billion and EUR 2.4 billion, respectively, at the end of Q3 2013. Atthe end of 2013, NSN's contribution to Nokia Group gross and net cash was EUR2.8 billion and EUR 1.7 billion, respectively, compared to EUR 2.7 billion andEUR 1.5 billion at the end of Q3 2013. Additional information*:- Nokia received shareholder approval for the sale of substantially all of itsDevices & Services business at our Extraordinary General Meeting. As a result,Nokia has commenced reporting substantially all of its Devices & Servicesbusiness as discontinued operations. In Q4 2013, discontinued operations netsales were EUR 2.6 billion and non-IFRS operating margin was -7.3%. Full year2013 discontinued operations net sales were EUR 10.7 billion and non-IFRSoperating margin was -4.8%. Within discontinued operations, we continue tofocus on innovation as well as working capital efficiency and the overall cashflow performance. - Nokia achieved its target to reduce its Devices & Services non-IFRS operatingexpenses to an annualized run rate of approximately EUR 3.0 billion by the endof 2013. *See note 3 to our Summary Financial Information table below concerning ourcurrent operational and reporting structure. Risto Siilasmaa, Nokia Chairman and interim CEO commented on the company'sprogress: 'The fourth quarter of 2013 was a watershed moment in Nokia's history. Havingreceived overwhelmingly strong support from our shareholders at ourextraordinary general meeting in November for the sale of our phones businessto Microsoft, we are diligently working towards defining Nokia's futuredirection. I am pleased with the progress we have made thus far in our strategyevaluation and excited by the opportunities ahead for each of our threecontinuing businesses: NSN, HERE and Advanced Technologies. During the fourth quarter, Nokia's continuing businesses produced a healthyunderlying operating margin of 12%. While the first quarter of the year isseasonally weak for our continuing operations, we continue to expect theclosing of the Microsoft transaction to significantly improve Nokia's earningsprofile. The strength of NSN's underlying profitability highlights just howfundamentally different the company is today, compared with two years ago whenit started its restructuring and transformation program. Today, we are morefocused, more innovative and more disciplined. With these fundamental elementsin place, we believe NSN is well-positioned to deliver solid businessperformance for the year ahead. For HERE, we see long-term transformational growth opportunities in theautomotive market, as well as in other industries. Thus, we are planning toincrease investment levels in 2014 to capture these exciting opportunities inthe coming years. For Advanced Technologies, we are focused on continuing to invest ininnovation, implementing our successful business strategy of licensing ourindustry leading intellectual property to companies interested in Nokia'sinnovations, and are planning to add further value to our partners throughtechnology licensing.' SUMMARY FINANCIAL INFORMATION ------------------------------------------------------------- Reported and Non-IFRS Reported and Non-IFRS fourth quarter 2013 results1-4 full year 2013 results1-5 ------------------- EUR million Q4/13 Q4/12 YoY Q3/13 QoQ 2013 2012 YoY Change Change Change----------------------------------------------------------------------------------------------------------------------------------------------------------------Nokia's continuing operations Net sales 3 476 4 413 -21% 2 939 18% 12 709 15 400 -17%Operating profit 274 329 -17% 262 5% 519 -821 Operating profit 408 670 -39% 344 19% 1 436 1 142 26%(non-IFRS) EPS, EUR diluted 0.05 0.06 -17% 0.04 25% 0.05 -0.21 EPS, EUR diluted 0.08 0.10 -20% 0.06 33% 0.21 0.13 62%(non-IFRS) Net cash from 1 152 1 930 -40%operating activities Net cash and other 2 309 4 360 -47% 2 413 -4% 2 309 4 360 -47%liquid assets6 -------------------------------------------------------------Nokia Solutions and Networks ------------------- Net sales 3 105 3 988 -22% 2 592 20% 11 282 13 779 -18%Mobile Broadband 1 563 1 776 -12% 1 259 24% 5 347 6 043 -12%net sales Global Services 1 540 1 979 -22% 1 331 16% 5 753 6 929 -17%net sales Operating profit 243 252 -4% 166 46% 420 -795 Operating profit 349 576 -39% 218 60% 1 089 782 39%(non-IFRS) Operating margin % 7.8% 6.3% 6.4% 3.7% -5.8% Operating margin % 11.2% 14.4% 8.4% 9.7% 5.7% (non-IFRS) --------------------------------------------------------------------------------HERE Net sales 254 278 -9% 211 20% 914 1 103 -17%Operating profit 18 -56 14 29% -154 -301 Operating profit 25 40 -38% 20 25% 48 154 -69%(non-IFRS) Operating margin % 7.1% -20.1% 6.6% -16.8% -27.3% Operating margin % 9.8% 14.4% 9.5% 5.2% 13.9% (non-IFRS) -------------------------------------------------------------Advanced Technologies ------------------- Net sales 121 151 -20% 140 -14% 529 534 -1%Operating profit 65 100 -35% 83 -22% 310 325 -5%Operating profit 82 100 -18% 84 -2% 329 329 (non-IFRS) Operating margin % 53.7% 66.2% 59.3% 58.6% 60.9% Operating margin % 67.8% 66.2% 60.0% 62.2% 61.6% (non-IFRS) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------Discontinued operations Net sales 2 633 3 701 -29% 2 758 -5% 10 735 15 152 -29%Operating profit -198 97 -145 -590 -1 479 Operating profit -191 -47 -130 -520 -1 012 (non-IFRS) Operating margin % -7.5% 2.6% -5.3% -5.5% -9.8% Operating margin % -7.3% -1.3% -4.7% -4.8% -6.7% (non-IFRS) Net cash from -1 081 -2 284 operating activities6 -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------Nokia Group (continuing and discontinued operations) EPS, EUR diluted -0.01 0.05 -0.02 -0.17 -0.84 EPS, EUR diluted 0.03 0.05 -40% 0.01 200% 0.02 -0.17 (non-IFRS) Net cash from 53 563 -91% 9 489% 72 -354 operating activities Net cash and other 2 309 4 360 -47% 2 413 -4% 2 309 4 360 -47%liquid assets6 -------------------------------------------------------------------------------- Note 1 relating to results information and non-IFRS (also referred to as'underlying') results: The results information in this report is unaudited. Inaddition to information on our reported IFRS results, we provide certaininformation on a non-IFRS, or underlying business performance, basis. Non-IFRSresults exclude all material special items for all periods. In addition,non-IFRS results exclude intangible asset amortization, other purchase priceaccounting related items and inventory value adjustments arising from (i) theformation of NSN and (ii) all business acquisitions completed after June 30,2008. Nokia believes that our non-IFRS results provide meaningful supplementalinformation to both management and investors regarding Nokia's underlyingbusiness performance by excluding the above-described items that may not beindicative of Nokia's business operating results. These non-IFRS financialmeasures should not be viewed in isolation or as substitutes to the equivalentIFRS measure(s), but should be used in conjunction with the most directlycomparable IFRS measure(s) in the reported results. See note 2 below forinformation about the exclusions from our non-IFRS results. More information,including a reconciliation of our Q4 2013 and Q4 2012 non-IFRS results to ourreported results, can be found in our complete Q4 2013 and full year 2013report with tables on pages 15 and 17-22. A reconciliation of our Q3 2013non-IFRS results to our reported results can be found in our complete Q3interim report with tables on pages 24 and 27-32 published on October 29, 2013. Note 2 relating to non-IFRS exclusions for continuing operations: Q4 2013 - EUR 135 million (net) consisting of:- EUR 95 million restructuring charge and other associated items in NokiaSolutions and Networks. - EUR 4 million restructuring charge in HERE- EUR 22 million of transaction and other related costs resulting from theproposed sale of Devices & Services business to Microsoft - EUR 11 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of Motorola Solutions'networks assets - EUR 3 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ Q3 2013 - EUR 82 million (net) consisting of:- EUR 39 million restructuring charge and other associated items in NokiaSolutions and Networks. - EUR 3 million restructuring charge in HERE- EUR 1 million restructuring charge in Advanced Technologies- EUR 5 million restructuring related impairments in Corporate Common- EUR 18 million of transaction costs related to the proposed sale of Devices &Services business to Microsoft - EUR 13 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of Motorola Solutions'networks assets - EUR 3 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ Q3 2013 taxes - EUR 11 million tax benefits related to previous year's earnings. Q4 2012 - EUR 341 million (net) consisting of:- EUR 255 million restructuring charge and other associated item in NokiaSolutions and Networks, including EUR 34 million of net charges related tocountry and contract exits based on new strategy that focuses on key marketsand product segments, as well as an impairment of assets of EUR 2 million. - EUR 9 million restructuring charge in HERE- EUR 79 million gain on sale of real estate in Corporate Common- EUR 67 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networksand the acquisition of Motorola Solutions' networks assets - EUR 87 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ Note 3 relating to operational and reporting structure: Nokia introduced a newreporting structure starting with the reporting of the fourth quarter 2013 andfull year 2013 results report. Nokia has three continuing businesses: NokiaSolutions and Networks (NSN), HERE and Advanced Technologies. Nokia reportsfinancial information for a total of four reportable segments - MobileBroadband and Global Services within NSN, HERE, and Advanced Technologies -and, additionally, separate information for Discontinued Operations. NSN is oneof the leading global providers of telecommunications infrastructure hardware,software and services, with the focus on the mobile broadband market. On August7, 2013 Nokia completed the acquisition of Siemens' stake in Nokia SiemensNetworks, which was a joint venture between Nokia and Siemens. In accordancewith this transaction, the Siemens name has been phased out from Nokia SiemensNetworks' company name and branding. The new name and brand is Nokia Solutionsand Networks, also referred to as NSN, which is being used also for financialreporting purposes. Until the end of the second quarter 2013, NSN has beenreported as a single reportable segment for Nokia financial reporting purposes.Since then Nokia reports financial information for two operating and reportablesegments within NSN, Mobile Broadband and Global Services. Mobile Broadbandprovides mobile operators with radio and core network software together withthe hardware needed to deliver mobile voice and data services. Global Servicesprovides mobile operators with a broad range of services, includingprofessional services, network implementation and customer care services. NSNalso contains NSN Other, which includes net sales and related cost of sales andoperating expenses of non-core businesses as well as Optical Networks throughMay 6, 2013 when its divestment was completed. HERE focuses on the developmentof location-based services and local commerce. We introduced HERE as the newbrand for our location and mapping service in November 2012. As of January 1,2013 our Location & Commerce business and reportable segment was renamed HERE.Advanced Technologies business builds on several of Nokia's current ChiefTechnology Office (CTO) and Intellectual Property Rights activities throughadvanced research, development and concept products in areas such asconnectivity, sensing and material technologies, as well as web and cloudtechnologies. At the same time, Advanced Technologies plans to continue tobuild Nokia's patent portfolio from this innovation and targets to expand itsindustry-leading technology licensing program, spanning technologies thatenable mobility today and tomorrow. Nokia's IPR income is reported withAdvanced Technologies. Nokia has signed an agreement on September 2, 2013 toenter into a transaction whereby Nokia will sell substantially all of itsDevices & Services business to Microsoft. After receiving shareholderconfirmation and approval at Nokia's Extraordinary General Meeting in November2013 for the pending sale of substantially all of its Devices & Servicesbusiness, Nokia is currently reporting substantially all of its former Devices& Services business as discontinued operations. Historical results informationfor past periods before the fourth quarter 2013 has been regrouped forhistorical comparative purposes. As is customary, certain judgments have beenmade when regrouping historical results information and allocating items in theregrouped results. Note 4 relating to changes to historical comparative financials due to revisedIFRS accounting standard, IAS19 Employee Benefits: The historical comparativefinancials presented in this report include certain changes to previouslyreported information. These changes result from the retrospective applicationof a revised IFRS accounting standard IAS19, Employee Benefits and mainlyrelate to consolidated statements of comprehensive income and financialposition. For more information on the adjustments between the previouslyreported information and the adjusted information, please see the relateddisclosure starting on page 39 of the complete Q1 2013 interim report withtables published on April 18, 2013. Note 5 relating to January-December 2013 results: Further information about theresults for the period from January 1 to December 31, 2013 can be found onpages 27-32, 34-45 and 47 of the complete Q4 2013 and full year 2013 reportwith tables. Note 6 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 53-54 of the complete Q4 2013 and full year 2013 report with tables. NOKIA OUTLOOK Continuing Operations- Nokia expects NSN's non-IFRS operating margin for the full year 2014 to betowards the higher end of NSN's targeted long term non-IFRS operating marginrange of 5% to 10%. This outlook is based on Nokia's expectations regarding anumber of factors, including: - competitive industry dynamics;- product and regional mix;- the timing of major new network deployments;- efforts to drive year-on-year net sales growth in the second half of 2014; and- expected continued improvement under NSN's transformation programs. - Nokia expects NSN's non-IFRS operating margin in the first quarter 2014 to beapproximately 5% plus or minus 4 percentage points. This outlook is based onNokia's expectation that the first quarter will be seasonally weak, in additionto the factors mentioned above. - During 2014 Nokia expects HERE to invest to capture longer termtransformational growth opportunities. This is expected to negatively affectHERE's 2014 non-IFRS operating margin. - Nokia expects Advanced Technologies annualized net sales run rate to increaseto approximately EUR 600 million during 2014, after Microsoft becomes a moresignificant intellectual property licensee in conjunction with the sale ofsubstantially all of our Devices & Services business to Microsoft. Thiscompares to Advanced Technologies' current annualized net sales run rate ofapproximately EUR 500 million. - On a non-IFRS basis, until a pattern of tax profitability is reestablished inFinland, Nokia expects to record approximately EUR 250 million of annualizedtax expense for the continuing operations. This corresponds to the totalanticipated cash tax obligations for NSN, HERE, and Advanced Technologies. After a pattern of tax profitability is reestablished in Finland, Nokia expectsto record tax expenses at a long term effective tax rate of approximately 25%,however Nokia's cash tax obligations are expected to remain at approximatelyEUR 250 million annually until Nokia's Finnish tax losses carried forward ofapproximately EUR 11 billion have been fully utilized. - Nokia expects full year 2014 capital expenditures for continuing operationsto be approximately EUR 200 million, primarily attributable to NSN. Discontinued Operations- Nokia received shareholder approval for the sale of substantially all of itsDevices & Services business at our Extraordinary General Meeting. As a result,Nokia has commenced reporting substantially all of its Devices & Servicesbusiness as discontinued operations. In the first quarter 2014, Nokia expectsthe discontinued operations related to the Devices & Services business togenerate a negative operating margin on a non-IFRS basis. NOKIA'S ANNUAL GENERAL MEETING 2014Nokia'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 at a later date. As announced earlier, Nokia's Board of Directors is conducting a strategyevaluation for Nokia Group between signing and closing of the transactionwhereby Nokia will sell substantially all of its Devices & Services businessand license its patents to Microsoft. This evaluation is comprised ofevaluations of strategies for each of Nokia's three continuing businesses andpossible synergies between them, as well as an evaluation of the optimalcorporate and capital structure for Nokia after the closing of the transaction.After this evaluation is complete, deemed excess capital is planned to bedistributed to shareholders. The Nokia Board of Directors will decide on itsproposal to the Annual General Meeting on distributions to shareholders onlyafter the anticipated closing of the transaction and the completion of thestrategy evaluation. NOKIA TO SELL DEVICES & SERVICES TO MICROSOFT IN EUR 5.44 BILLION ALL-CASHTRANSACTION On September 3, 2013, Nokia announced that it had signed an agreement to enterinto a transaction whereby Nokia will sell substantially all of its Devices &Services business and license its patents to Microsoft for EUR 5.44 billion incash, payable at closing. At our Extraordinary General Meeting on November 19, 2013, Nokia receivedshareholder approval for the sale, with more than 99% of the votes cast insupport of the proposal and recommendation of the Nokia Board of Directors. Asa result, Nokia has commenced reporting substantially all of its Devices &Services business as discontinued operations. The transaction is expected to close in the first quarter of 2014, subject toregulatory approvals and other customary closing conditions. As of the end of2013, Nokia has received the majority of regulatory approvals for thetransaction. FOURTH QUARTER 2013 FINANCIAL AND OPERATING DISCUSSION NOKIA'S CONTINUING OPERATIONS See note 3 to our Summary Financial Information table above concerning ourcurrent operational and reporting structure and note 4 concerning certainchanges to historical comparative financials due to a revised IFRS accountingstandard, IAS19 Employee Benefits. 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. 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. FOURTH QUARTER 2013 NET SALES, REPORTED & CONSTANT CURRENCY1 ---------------------------------------------------- YoY QoQ Change Change---------------------------------------------------Continuing operations -21% 18% net sales - reported Continuing operations -17% 18% net sales - constant currency1 NSN net sales - reported -22% 20% NSN net sales - constant currency1 -19% 20% HERE net sales - reported -9% 20% HERE net sales - constant currency1 -8% 21% --------------------------------------------------- Note 1: Change in net sales at constant currency excludes the impact of changesin exchange rates in comparison to the Euro, our reporting currency. At constant currency Nokia's continuing operations net sales would havedecreased 17% year-on-year and increased 18% sequentially. 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 CASH FLOW AND FINANCIAL POSITION ----------------------------------------------------------------EUR million Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change------------------------------------------------------------------------------------------------------------------------------Total cash and 8 971 9 909 -9% 9 134 -2%other liquid assets NSN contribution 2 768 2 420 14% 2 656 4%---------------------------------------------------------------Net cash and 2 309 4 360 -47% 2 413 -4%other liquid assets1 ---------------------------------------------------------------NSN contribution 1 678 1 270 32% 1 536 9%--------------------------------------------------------------- Note 1: Total cash and other liquid assets minus interest-bearing liabilities. In the fourth quarter 2013, Nokia's total cash and other liquid assetsdecreased by EUR 163 million and Nokia's net cash and other liquid assetsdecreased by EUR 104 million, compared to the third quarter 2013. Thesequential decline in Nokia's net cash and other liquid assets was primarilydue to cash outflows from discontinued operations, which more than offset cashinflows from Nokia's continuing operations. The cash inflows from Nokia'scontinuing operations were primarily driven by an increase in NSN'sprofitability on a sequential basis. Excluding approximately EUR 150 million ofrestructuring-related cash outflows, NSN had cash inflows from net workingcapital in the fourth quarter 2013 of approximately EUR 80 million. At the end of the fourth quarter 2013, NSN's contribution to Nokia's total cashand other liquid assets was approximately EUR 2.8 billion and its contributionto Nokia's net cash and other liquid assets was approximately EUR 1.7 billion,a sequential increase of approximately EUR 110 million and EUR 140 million,respectively. In the fourth quarter 2013, Nokia's continuing operations financial income andexpenses was a net expense of EUR 50 million, compared to a net expense of 52million in the fourth quarter 2012 and a net expense of EUR 63 million in thethird quarter 2013. On a year-on-year basis, the decrease was primarily due tolower net foreign exchange-related losses, partially offset by higher interestexpenses. On a sequential basis, the decrease was primarily due to therecognition of income related to one of our investments and lower interestexpenses, partially offset by higher net foreign exchange-related losses. At the end of the fourth quarter 2013, Nokia's continuing operations in Finlandhad approximately EUR 2.2 billion (calculated at the Finnish corporate tax rateof 20%) of net deferred tax assets that have not been recognized in thefinancial statements as the net deferred tax assets were subject to a valuationallowance. The majority of Nokia's Finnish deferred tax assets are indefinitein nature and available against future Finnish tax income. Given the likelyimpact of the expected transaction and related licensing agreements withMicrosoft on the continuing Nokia businesses as well as the recent financialperformance of NSN, the company will continue closely monitoring the need forthe valuation allowance. NOKIA SOLUTIONS AND NETWORKS The following table sets forth a summary of the results for NSN and itsreportable segments, Mobile Broadband and Global Services, for the periodsindicated, as well as the year-on-year and sequential growth rates. NSN RESULTS SUMMARY ------------------------------------------------------------------------- Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change------------------------------------------------------------------------Net sales (EUR million) 3 105 3 988 -22% 2 592 20%------------------------------------------------------------------------Mobile Broadband 1 563 1 776 -12% 1 259 24%net sales (EUR million) ------------------------------------------------------------------------Global Services 1 540 1 979 -22% 1 331 16%net sales (EUR million) ------------------------------------------------------------------------Non-IFRS gross margin (%) 37.6% 36.0% 36.6% ------------------------------------------------------------------------Non-IFRS operating expenses 771 843 -9% 732 5%(EUR million) ------------------------------------------------------------------------Non-IFRS operating margin (%) 11.2% 14.4% 8.4% ------------------------------------------------------------------------Mobile Broadband 7.5% 16.8% 4.9% contribution margin (%) ------------------------------------------------------------------------Global Services 15.2% 11.7% 12.3% contribution margin (%) ------------------------------------------------------------------------Operating margin (%) 7.8% 6.3% 6.4% ------------------------------------------------------------------------ Net SalesThe following table sets forth NSN net sales for the periods indicated, as wellas the year-on-year and sequential growth rates, by geographic area. NSN NET SALES BY GEOGRAPHIC AREA ----------------------------------------------------------------EUR million Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change------------------------------------------------------------------------------------------------------------------------------Europe 834 1 058 -21% 701 19%Middle East & Africa 337 388 -13% 247 36%Greater China 424 416 2% 278 53%Asia-Pacific 907 1 176 -23% 791 15%North America 263 426 -38% 299 -12%Latin America 340 524 -35% 276 23%---------------------------------------------------------------Total 3 105 3 988 -22% 2 592 20%--------------------------------------------------------------- The year-on-year decrease of 22% in NSN net sales in the fourth quarter 2013was 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, NSN net sales in the fourth quarter2013 declined by approximately 15% primarily due to reduced wirelessinfrastructure deployment activity, which affected both Global Services andMobile Broadband. Additionally, NSN net sales were negatively affected byforeign currency fluctuations. The year-on-year decrease in Mobile Broadbandwas primarily due to lower sales in GSM and core networks, which were partiallyoffset by an increase in LTE sales primarily in Greater China, Europe andAsia-Pacific excluding Japan. The year-on-year decrease in Global Services wasprimarily due to a reduction in network implementation activity, consistentwith lower levels of large scale Mobile Broadband deployments, and the exitingof certain contracts in line with NSN's strategic focus. On a regional basis,NSN continued to have lower net sales in Japan following high levels ofspending in the fourth quarter 2012. In Europe, the year-on-year sales declinewas primarily related to network modernization and divestments in line withNSN's strategy. The year-on-year sales decline in Latin America was primarilydriven by constrained operator spending and certain contract exits. Finally,the year-on-year decline in Middle East and Africa was primarily due to countryexits. The sequential increase of 20% in NSN net sales in the fourth quarter 2013reflects a seasonal increase in sales in both Mobile Broadband and GlobalServices. The increase in Mobile Broadband net sales was driven by growthacross our radio access portfolio. The increase in Global Services was drivenby growth in all business lines. On a regional basis, NSN's net sales increasedsequentially primarily due to Greater China, Middle East & Africa and AsiaPacific, partially offset by lower sales in North America. In the fourth quarter 2013, Global Services represented 50% of NSN net sales,compared to 50% in the fourth quarter 2012 and 51% in the third quarter 2013.In the fourth quarter 2013, Mobile Broadband represented 50% of NSN net sales,compared to 45% in the fourth quarter 2012 and 49% in the third quarter 2013. At constant currency, NSN net sales would have decreased 19% year-on-year andincreased 20% sequentially. Non-IFRS Gross MarginOn a year-on-year basis, the increase in NSN non-IFRS gross margin in thefourth quarter 2013 was due to a higher gross margin in Global Services relatedto significant efficiency improvements as a result of NSN's restructuringprogram, as well as a higher proportion of Mobile Broadband in the overallsales mix. This was partially offset by a slightly lower gross margin in MobileBroadband driven by lower net sales in Japan and North America and costsincurred in anticipation of a technology shift to TD-LTE related to majorprojects in China, as well as the absence of non-recurring IPR income whichbenefitted the fourth quarter 2012 by approximately EUR 30 million. On a sequential basis, the increase in NSN non-IFRS gross margin in the fourthquarter 2013 was primarily due to a higher gross margin in Global Servicesoffset by a lower gross margin in Mobile Broadband. The higher gross margin inGlobal Services was primarily driven by seasonally higher networkimplementation activities. The gross margin decline in Mobile Broadband wasprimarily due to lower net sales in North America. Non-IFRS Operating ExpensesNSN non-IFRS research and development expenses decreased 10% year-on-year inthe fourth quarter 2013. 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 with NSN'sfocused strategy, as well as increased research and development efficiency,partially offset by higher investments in areas that are consistent with NSN'sfocused strategy, most notably LTE. On a sequential basis, non-IFRS researchand development expenses increased 3% primarily due to higher accrued incentiveexpenses consistent with NSN's business performance in the fourth quarter 2013. On a year-on-year basis, NSN non-IFRS sales and marketing expenses decreased16% primarily due to structural cost savings from NSN's transformation andrestructuring program. On a sequential basis NSN's non-IFRS sales and marketingexpenses increased 9% consistent with seasonally higher net sales and due tohigher accrued incentive expenses consistent with NSN's business performance inthe fourth quarter 2013. NSN non-IFRS general and administrative expenses increased 15% year-on-year and9% sequentially in the fourth quarter 2013. On a year-on-year basis, non-IFRSgeneral and administrative expenses were higher, primarily due to consultancyfees related to information technology and other projects. On a sequentialbasis non-IFRS general and administrative expenses were higher due to higheraccrued incentive expenses consistent with NSN's business performance in thefourth quarter 2013. Non-IFRS Operating MarginThe year-on-year decrease in NSN non-IFRS operating margin in the fourthquarter 2013 was primarily due to a lower contribution margin in MobileBroadband, partially offset by a higher contribution margin in Global Services. On a year-on-year basis, the 9.3 percentage point decline in Mobile Broadbandcontribution margin was primarily due to higher operating expenses as apercentage of net sales and, to a lesser extent, by slightly lower grossmargin. The year-on-year 3.5 percentage point increase in Global Servicescontribution margin was primarily due to higher gross margin, partially offsetby higher operating expenses as a percentage of net sales. On a sequential basis, NSN non-IFRS operating margin increased due to highercontribution margin for both Global Services and Mobile Broadband, whichincreased by 2.9 and 2.6 percentage points, respectively. The sequentialincrease in Global Services contribution margin was primarily due to highergross margin partially offset by higher operating expenses as a percentage ofnet sales. The sequential increase in Mobile Broadband contribution margin wasprimarily due to lower operating expenses as a percentage of net salespartially offset by a lower gross margin. NSN non-IFRS other income and expenses for the fourth quarter 2013 was anexpense of EUR 50 million, compared to an expense of EUR 16 million in thefourth quarter 2012, and income of EUR 1 million in the third quarter 2013. Ona year-on-year basis, the change in non-IFRS other income and expenses wasprimarily due to a non-recurring litigation provision and a write down of a VATreceivable. In addition to these items the sequential increase was alsonegatively affected by an increase in doubtful account allowances and assetretirement charges that are recurring in nature, but were at an elevated levelin the fourth quarter 2013. Operating MarginThe year-on-year increase in NSN operating margin in the fourth quarter 2013was primarily due to a higher gross margin. NSN's operating expenses alsodeclined as a result of the absence of purchase price accounting-related itemsarising from the formation of Nokia Siemens Networks, which had been fullyamortized as of the end of the first quarter 2013. NSN's other income andexpenses was an expense of EUR 145 million in the fourth quarter 2013, comparedto an expense of EUR 274 million in the fourth quarter 2012. The decline inNSN's other income and expenses was primarily due to lower restructuringcharges. On a sequential basis NSN operating margin increased primarily due to highergross margin, and to a lesser extent from lower operating expenses as apercentage of net sales. NSN's other income and expense was an expense of EUR145 million in the fourth quarter 2013, compared to an expense of EUR 38million in the third quarter 2013. The increase in NSN's other income andexpenses was primarily due to higher restructuring charges and due to anon-recurring litigation provision and a write down of a VAT receivable. Inaddition to these items the sequential increase was also negatively affected byan increase in doubtful account allowances and asset retirement charges thatare recurring in nature, but were at an elevated level in the fourth quarter2013. Global Restructuring ProgramThe following table sets forth a summary of NSN cost reduction activities andplanned operational adjustments under the global restructuring programannounced in November 2011. NSN RESTRUCTURING SUMMARY (Program announced in November 2011) --------------------------------------------------------------------------------- EUR (million) Q4/2013 Cumulativ 2013 2014 Total (approxima e up (approxima (approxim (approxi- te) to te) ate mate Q4/2013 estimate) estimate) (approxim ate) --------------------------------------------------------------------------------Restructuring-related 94 1 850 550 100 1 950 charges --------------------------------------------------------------------------------Restructuring-related 150 1 250 600 450 1 700 cash outflows -------------------------------------------------------------------------------- NSN achieved a reduction in its non-IFRS annualized operating expenses andproduction overheads by more than EUR 1.5 billion at the end of 2013, comparedto the end of 2011. In conjunction with this restructuring program, NSNestimates total restructuring related charges of approximately EUR 1.95billion, as well as total restructuring related cash outflows of approximatelyEUR 1.7 billion. This is an update to the earlier estimate of approximately EUR1.8 billion for restructuring related charges and approximately EUR 1.6 billionfor restructuring related cash outflows. Non-cash charges and timing differences account for the differences between theabove charges and the corresponding cash out-flows. Changes in estimates oftiming or amounts of costs to be incurred and associated cash flows may becomenecessary as the transformation and restructuring program is being completed. 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 --------------------------------------------------------------------- Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change--------------------------------------------------------------------Net sales 254 278 -9 % 211 20 %(EUR million) --------------------------------------------------------------------External net sales 225 204 10 % 176 28 %(EUR million) --------------------------------------------------------------------Internal net sales 29 74 -61 % 35 -17 %(EUR million) --------------------------------------------------------------------Non-IFRS gross margin (%) 75.6 % 82.0 % 82.5 % --------------------------------------------------------------------Non-IFRS operating 167 189 -12 % 153 9 %expenses (EUR million) --------------------------------------------------------------------Non-IFRS operating 9.8 % 14.4 % 9.5 % margin (%) --------------------------------------------------------------------Operating margin (%) 7.1 % -20.1 % 6.6 % -------------------------------------------------------------------- Net SalesIn the fourth quarter 2013, the year-on-year increase in external HERE netsales was primarily due to higher sales to vehicle customers, partially offsetby lower sales to personal navigation device (PND) customers consistent withdeclines in the PND industry. In the fourth quarter 2013, the sequential increase in external HERE net saleswas primarily due to higher seasonal sales to vehicle and PND customers. In the fourth quarter 2013, HERE had sales of new vehicle licenses of 3.2million units, compared to 2.4 million units in the fourth quarter 2012 and 2.6million units in the third quarter 2013. On a year-on-year basis, unit sales tovehicle customers increased primarily due to higher vehicle sales and higherconsumer uptake of in-vehicle navigation. On a sequential basis unit sales tovehicle customers increased primarily due to higher consumer uptake ofin-vehicle navigation. Sales to vehicle customers represented well over 50% ofexternal HERE net sales in the fourth quarter 2013, as well as in the fourthquarter 2012 and the third quarter 2013. In the fourth quarter 2013, the year-on-year and sequential declines ininternal HERE net sales were primarily due to lower recognition of deferredrevenue related to our smartphone sales. At constant currency HERE's overall net sales would have decreased 8%year-on-year and increased 21% sequentially. Non-IFRS Gross MarginOn a year-on-year basis, the decrease in HERE non-IFRS gross margin in thefourth quarter 2013 was primarily due to a non-recurring licensing expense, aswell as higher sales of update units to vehicle customers, which generallycarry a lower gross margin, partially offset by lower costs related to servicedelivery. On a sequential basis, the decrease in HERE non-IFRS gross margin in the fourthquarter 2013 was primarily due to a non-recurring licensing expense, as well ashigher sales of update units to vehicle customers, which generally carry alower gross margin and higher costs related to service delivery. Non-IFRS Operating ExpensesHERE non-IFRS research and development expenses decreased 12% year-on-year dueto cost reduction actions. On a sequential basis, research and developmentexpenses increased 4% in the fourth quarter 2013 primarily due to higherinvestments with the aim of capturing longer term transformational growthopportunities. HERE non-IFRS sales and marketing expenses decreased 9% year-on-year due tocost reduction actions. On a sequential basis, sales and marketing expensesincreased 25% in the fourth quarter 2013, primarily due to higher seasonalmarketing expenses. HERE non-IFRS general and administrative expenses decreased 11% year-on-yearprimarily due to cost reduction actions. On a sequential basis, general andadministrative expenses increased 21% in the fourth quarter 2013 primarily dueto higher personnel costs. Non-IFRS Operating MarginThe year-on-year decrease in HERE non-IFRS operating margin in the fourthquarter 2013 was primarily due to lower internal net sales. On a sequential basis, HERE's non-IFRS operating margin in the fourth quarter2013 benefitted from lower operating expenses as a percentage of net sales,which was offset by a lower gross margin. HERE non-IFRS other income and expenses for the fourth quarter 2013 wasapproximately zero, an expense of EUR 1 million in the third quarter and anincome of EUR 1 million in the fourth quarter 2012. Operating MarginIn the fourth quarter 2013, HERE operating margin improved to 7.1%, compared tonegative 20.1% in the fourth quarter 2012, and 6.6% in the third quarter 2013.The year-on-year improvement in HERE operating margin in the fourth quarter2013 was primarily due to the absence of significant purchase priceaccounting-related items arising from the purchase of NAVTEQ, the vast majorityof which had been fully amortized as of the end of the second quarter 2013. Ona sequential basis the improvement in HERE operating margin was primarily dueto lower operating expenses as a percentage of net sales, partially offset by alower gross margin. HERE other income and expenses for the fourth quarter 2013 was an expense ofEUR 4 million, an expense of EUR 4 million in the third quarter of 2013 and anexpense of EUR 8 million in the fourth quarter 2012. ADVANCED TECHNOLOGIES The following table sets forth a summary of the results for AdvancedTechnologies, for the periods indicated, as well as the year-on-year andsequential growth rates. ADVANCED TECHNOLOGIES RESULTS SUMMARY ---------------------------------------------------------------------------- Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change---------------------------------------------------------------------------Net sales 121 151 -20% 140 -14%(EUR million) ---------------------------------------------------------------------------Non-IFRS 98.4% 98.8% 98.6% gross margin (%) ---------------------------------------------------------------------------Non-IFRS 37 49 -24% 54 -31%operating expenses (EUR million) ---------------------------------------------------------------------------Non-IFRS 67.8% 66.2% 60.0% operating margin (%) ---------------------------------------------------------------------------Operating margin (%) 53.7% 66.2% 59.3% --------------------------------------------------------------------------- Net SalesThe year-on-year and sequential decline in Advanced Technologies net sales inthe fourth quarter 2013 was primarily due to lower intellectual propertylicensing income from certain licensees that experienced lower levels ofbusiness activity. Sequentially, net sales was also negatively affected byfluctuations in quarterly revenue recognition from certain licensees. Non-IFRS Gross MarginOn both a year-on-year and sequential basis, Advanced Technologies non-IFRSgross margin was stable. Non-IFRS Operating ExpensesAdvanced Technologies non-IFRS research and development expenses decreased by31% year-on-year and decreased by 23% sequentially due to timing of certainresearch and development projects. Advanced Technologies non-IFRS sales and marketing expenses were flatyear-on-year and decreased by 62% sequentially due to fluctuations inlitigation-related expenses. Advanced Technologies non-IFRS general and administrative expenses wereapproximately flat year-on-year and sequentially. Non-IFRS Operating MarginBoth year-on-year and sequentially, the increase in Advanced Technologiesnon-IFRS operating margin was primarily due to lower operating expenses as apercentage of net sales. Operating MarginBoth year-on-year and sequentially, the decline in Advanced Technologiesoperating margin was primarily due to higher operating expenses as percentageof net sales. 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 --------------------------------------------------------------------------------- Q4/2013 Q4/2012 YoY Q3/2013 QoQ Change Change --------------------------------------------------------------------------------Net sales (EUR million) 2 633 3 701 -29% 2 758 -5%--------------------------------------------------------------------------------Non-IFRS gross margin (%) 20.3% 20.9% 19.4% --------------------------------------------------------------------------------Non-IFRS operating expenses (EUR 717 817 -12% 659 9% million) --------------------------------------------------------------------------------Non-IFRS operating margin (%) -7.3% -1.3% -4.7% --------------------------------------------------------------------------------Operating margin (%) -7.5% 2.6% -5.3% -------------------------------------------------------------------------------- Net SalesThe year-on-year decline in discontinued operations net sales in the fourthquarter 2013 was primarily due to lower Mobile Phones net sales and, to alesser extent, lower Smart Devices net sales. 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, as well as our portfolio transition from Symbian productsto Lumia products. The sequential decline in discontinued operations net sales in the fourthquarter 2013 was primarily due to lower Smart Devices net sales. Our SmartDevices net sales were affected by competitive industry dynamics including thestrong momentum of competing smartphone platforms. On a sequential basis,Mobile Phones net sales were approximately flat. On a year-on-year basis, discontinued operations unit volumes declined in thefourth quarter 2013 due to lower Mobile Phones unit volumes, partially offsetby higher Smart Devices unit volumes. On a sequential basis, discontinuedoperations unit volumes increased in the fourth quarter 2013 due to higherMobile Phones unit volumes, partially offset by lower Smart Devices unitvolumes. Discontinued operations ASP declined on both a year-on-year and sequentialbasis in the fourth quarter 2013. The year-on-year and sequential declines indiscontinued operations ASP were due to both Smart Devices and Mobile Phones. We ended the fourth quarter 2013 within our normal 4 to 6 week channelinventory range. Non-IFRS Gross MarginThe slight year-on-year decline in discontinued operations non-IFRS grossmargin in the fourth quarter 2013 was primarily due to lower Smart Devicesgross margin, partially offset by higher Mobile Phones gross margin. On asequential basis, the increase in discontinued operations non-IFRS gross marginin the fourth quarter 2013 was primarily due to higher Mobile Phones grossmargin, partially offset by lower Smart Devices gross margin. Smart Devices non-IFRS gross margin in the fourth quarter 2013 was negativelyaffected by approximately EUR 50 million of net allowances related to excesscomponent inventory, future purchase commitments and an inventory revaluation. Non-IFRS Operating ExpensesThe year-on-year decline in discontinued operations non-IFRS operating expensesin the fourth quarter 2013 was primarily due to lower Mobile Phones and SmartDevices operating expenses. On a sequential basis, the increase in discontinuedoperations non-IFRS operating expenses in the fourth quarter 2013 was primarilydue to higher Smart Devices and Mobile Phones operating expenses. Non-IFRS Operating MarginThe year-on-year decline in discontinued operations non-IFRS operating marginin the fourth quarter 2013 was primarily due to lower Mobile Phones and SmartDevices contribution margin. On a sequential basis, the decline in discontinuedoperations non-IFRS operating margin in the fourth quarter 2013 was primarilydue to lower Smart Devices contribution margin, partially offset by higherMobile Phones contribution margin. Operating MarginThe year-on-year decline in discontinued operations operating margin in thefourth quarter 2013 was primarily due to lower Mobile Phones and Smart Devicescontribution margin. On a sequential basis, the decline in discontinuedoperations operating margin in the fourth quarter 2013 was primarily due tolower Smart Devices contribution margin, partially offset by higher MobilePhones contribution margin. Additional InformationFor comparative purposes, if Devices & Services had been presented as in theprior three quarters of 2013, Devices & Services net sales would have been EUR2 753 million and non-IFRS operating margin would have been negative 4.8% inthe fourth quarter 2013. Note that these results were negatively affected byapproximately EUR 50 million of net allowances related to excess componentinventory, future purchase commitments and an inventory revaluation. FOURTH QUARTER 2013 OPERATING HIGHLIGHTSOperating highlights for previous quarters are available in the respectiveinterim reports and for the full year 2013 later in this report. NOKIA - Nokia's Extraordinary General Meeting held on November 19, 2013 confirmed andapproved the sale of substantially all of Nokia's Devices & Services businessto Microsoft in line with the proposal and recommendation of the Nokia Board ofDirectors. More than 99 % of the votes cast at the Extraordinary GeneralMeeting were in favor of this proposal. - Following the announcement of shareholder approval for the sale ofsubstantially all of the Devices & Services business to Microsoft, Nokiaannounced on November 20, 2013 that it would relocate its headquarters to theKaraportti office campus in Espoo, Finland, where its wholly-owned subsidiaryNSN is also headquartered. The office building in Keilaniemi, where Nokia waspreviously headquartered, is to become a Microsoft site after the expectedclosing of the deal. - Nokia received a ruling from the Delhi High Court in December for the releaseof its Indian assets, including the Chennai factory, which had been frozen bythe Indian tax authorities related to a tax dispute that started in early 2013.While the tax dispute is still ongoing, the ruling allows Nokia to proceed withthe planned transfer of its Indian assets to Microsoft as part of the globaltransaction. NSN - NSN's strong mobile broadband deal momentum continued. During the quarter NSNwas granted a contract with Sprint in the United States for the deployment ofits TD- LTE network; was awarded the largest market share of non-Chinesenetwork suppliers of China Mobile's nationwide TD-LTE network; won an LTEcontract with China Telecommunications Corporation as major partner for itsnationwide LTE rollout; won Taiwan's first LTE tender for Chunghwa Telecom, thelargest operator in Taiwan with over 10 million mobile subscribers; and wasselected by Oi Brasil to supply its LTE network and to upgrade its GSM and 3Gnetworks. NSN was also selected as the key supplier for Ooredoo's nationwide 3Gservices launch in Myanmar, the supplier of location-based services for NTTDoCoMo; the supplier of Single RAN for Vodacom Tanzania; and of a networksecurity solution for E-Plus in Germany. - NSN continues to lead in 4G technology, introducing new (FlexiZone) microcelland picocell base stations that are the industry's only small cell solutionwith the same features and capacity as macro base stations and that have theunique ability to become a FlexiZone which overcomes the limitations on howmany small cells can be added within a macro cell coverage; launching apowerful TD-LTE Base Station radio module and enhancing its Radio Base StationSmart Scheduler to deliver even higher uplink data rates and cell capacity; andenhancing its Telephony Application Server solution with full VoLTEfunctionality. In December, the Singapore-based operator StarHub successfullycompleted Southeast Asia's first 3GPP standard Voice over LTE call in a livenetwork on NSN's equipment. - NSN made proof of concept projects and trials with Tier 1 operators on corenetwork virtualization and successfully demonstrated its telco cloudcapabilities in a joint proof-of-concept for Evolved Packet Core (EPC)virtualization with SK Telecom, the leading operator in Korea. - In December, NSN demonstrated its advanced mobile broadband solutions at theZain Technology Conference (ZTC): Liquid Applications, Active Antenna Systems,Voice over LTE (VoLTE), Congestion Aware Packet Core, CEM, NetAct, ServiceQuality Manager (SQM), Operations on Demand, and intelligent Self-OrganizingNetworks (iSON). - NSN continues to invest in innovation to stay at the forefront of mobilebroadband and announced research co-operation with China Mobile ResearchInstitute, the research and development branch of China Mobile: the two partieswill further their cooperation on research and standardization of advancedmobile broadband technologies in LTE, as well as in 5G. NSN also made amulti-year commitment to actively participate in 5G research activitiestogether with the NYU WIRELESS research center and in December announced itsparticipation as a founding member in the 5G public-private partnership betweenthe European Union and 5G PPP Association. The PPP will further develop 5Gtechnology to prepare for the future standardization of the system andcomponents that are expected to be deployed in the next decade. HERE HERE continued to further extend its reach across multiple platforms,demonstrated through a number of new partnerships and agreements. HERE hasbecome the preferred partner across industries for maps and location-relatedtechnology. - HERE introduced HERE Maps for Windows RT 8.1 by bringing its renownedcomprehensive mapping application with true offline maps to the newlyintroduced Nokia Lumia 2520 tablet. - HERE announced that it will provide maps and maps-related functionality to beembedded into the Tizen SDK. Thus, third party developers can createlocation-enabled applications for the Tizen ecosystem that ultimately allfuture users of Tizen-based devices can benefit from. HERE also joined thenewly launched partner program of the Tizen Association, aimed at acceleratingthe development and commercialization of the Tizen OS. - HERE announced that it will license positioning services and map technologyto Jolla for use in Sailfish operating system. This will provide Jolla userswith up-to-date map data and rich location information, such as restaurants andhotels, from over 190 countries around the world. - Honda introduced its first signature suite of connected apps, HondaLink(tm) NextGeneration, for 2014 Civic drivers in the US last quarter. Two of the appsleverage the HERE Platform's comprehensive cloud-based services with 3D mapsand dynamic content including weather, navigation, traffic and local search. Atlaunch, iPhone 5, 5S and 5C will benefit from all the features in HondaLink. - HERE updated its suite of integrated location experiences on Windows Phone byintroducing its augmented reality technology LiveSight across HERE Maps, HEREDrive and HERE Transit, bringing real-time traffic information to HERE Drive,introducing Collections in HERE Maps enabling people to organize favorites intocollections and sync them across other HERE apps and on here.com, and enhancingthe personalization options for routing and timing of HERE Transit. - HERE simplified the way people can benefit from new offline maps byintroducing incremental map updates for Windows Phone 8 devices. When an updateis available, people no longer have to download all their maps anew, but onlythose roads and other map features that have been updated will be downloaded.On average, this means 85-90 percent less data and therefore a much fasterupdate process. - HERE announced the launch of a community mapping pilot program in India, thefirst major country where HERE will combine its industrial data collectionmethods with a crowd mapping initiative. By balancing both its highly advancedindustrial capture methods and contributions from residents of localcommunities, HERE takes a best-of-both-worlds approach to ensuring that itsmaps consistently provide the freshest, most precise and locally relevantinformation. - Nissan in North America switched to HERE for upgraded map features includingextended POI listings, extended lane guidance data and 3D city models in thein-dash navigation system for Nissan's 08IT equipped vehicles. - Digicore, a global fleet management company, has powered their advancedmachine-to-machine tracking with the HERE Platform for UK and Europe initially,with expansion to Australia, New Zealand and other APAC countries, in order toachieve operational efficiencies and cost-reductions for more than 750,000systems sold. - Deutsche Telekom announced its collaboration with HERE to launch its ArrivalControl app which is the first app developed from the HERE native SDKsleveraging map content and traffic for iOS and Android available in 19 Europeancountries with plans to expand worldwide. ADVANCED TECHNOLOGIES - Nokia announced that Samsung has extended a patent license agreement betweenNokia and Samsung for five years. The agreement would have expired at the endof 2013. According to the agreement, Samsung will pay additional compensationto Nokia for the period commencing from January 1, 2014 onwards, and the amountof such compensation will be finally settled in a binding arbitration, which isexpected to be concluded during 2015. - Nokia's CTO unit continued advanced research and development of sensing andmaterials technologies, including Nokia Research Center's efforts as a founderpartner and board member of the European Union's Graphene Flagship, the EU'sbiggest research initiative ever. During the fourth quarter of 2013, NRC'sCambridge lab in the UK demonstrated one potential for graphene, creating anultra-thin, transparent, flexible humidity sensor capable of unprecedentedresponse times. The sensor's fast performance and physical properties makepossible a wide range of exciting future applications. DISCONTINUED OPERATIONS - Nokia launched its first Windows tablet, the Nokia Lumia 2520, and its firstlarge screen Lumia smartphones, the Lumia 1520 and Lumia 1320. - Lumia smartphones continued to benefit from a growing Windows Phoneapplication store, with key applications including Instagram, Waze and Vineannounced in the quarter. - Nokia introduced new additions to its Asha platform family of devices: theNokia Asha 500, Asha 502 and Asha 503. NOKIA'S CONTINUING OPERATIONS FULL YEAR 2013 The following discussion is of Nokia's continuing operations reported resultsfor full year 2013. Comparisons are given to full year 2012 results, unlessotherwise indicated. See note 3 to our Summary Financial Information tableabove concerning our current operational and reporting structure and note 4concerning certain changes to historical comparative financials due to arevised IFRS accounting standard, IAS19 Employee Benefits. The following table sets forth a summary of the reported results for theperiods indicated, as well as the year-on-year growth rates. NOKIA'S CONTINUING OPERATIONS RESULTS SUMMARY ----------------------------------------------------- 2013 2012 YoY Change----------------------------------------------------Net sales 12 709 15 400 -17%(EUR million) ----------------------------------------------------Gross margin (%) 42.1% 36.1% ----------------------------------------------------Operating expenses 4 290 5 143 -17%(EUR million) ----------------------------------------------------Operating margin (%) 4.1% -5.3% ----------------------------------------------------Financial income -280 -357 and expense, net ----------------------------------------------------Tax -202 -304 ----------------------------------------------------Profit/Loss 41 -1 483 ----------------------------------------------------Profit/Loss attributable to -615 -3 105 equity holders of the parent ----------------------------------------------------EPS, basic 0.05 -0.21 ----------------------------------------------------EPS, diluted 0.05 -0.21 ----------------------------------------------------Net cash from 1 152 1 930 -40%operating activities ----------------------------------------------------NSN contribution 771 1 630 -53%(approximate) ----------------------------------------------------Total cash and 8 971 9 909 -9%other liquid assets ----------------------------------------------------NSN contribution 2 768 2 420 14%----------------------------------------------------Net cash and 2 309 4 360 -47%other liquid assets1 ----------------------------------------------------NSN contribution 1 678 1 270 32%---------------------------------------------------- The decline in Nokia's continuing operations net sales in 2013 was primarilydue to lower NSN and HERE net sales. The decline in NSN net sales was partiallydue to divestments of businesses not consistent with its strategic focus, aswell as the exiting of certain customer contracts and countries. Excludingthese two factors, NSN net sales in 2013 declined by approximately 13%primarily due to reduced wireless infrastructure deployment activity, whichaffected both Global Services and Mobile Broadband. The decline in HERE netsales was primarily due to a decline in internal HERE net sales due to lowerrecognition of deferred revenue related to our smartphone sales, partiallyoffset by an increase in external HERE net sales due to higher sales to vehiclecustomers. Additionally, NSN and HERE net sales were negatively affected byforeign currency fluctuations. The increase in Nokia's continuing operations gross margin in 2013 wasprimarily due to a higher NSN gross margin. NSN gross margin increased due tohigher gross margin in both Global Services and Mobile Broadband related tosignificant efficiency improvements as a result of NSN's restructuring program,as well as a higher proportion of Mobile Broadband within the total sales mix. The decrease in Nokia's continuing operations operating expenses in 2013 wasprimarily due to lower NSN and HERE operating expenses. The decline in NSN'soperating expenses was primarily due the absence of purchase priceaccounting-related items arising from the formation of Nokia Siemens Networks,which had been fully amortized as of the end of the first quarter 2013. Inaddition, NSN benefitted from business divestments and reduced operatingexpenses in business activities that are not consistent with NSN's focusedstrategy, as well as increased research and development efficiency, partiallyoffset by higher investments in areas that are consistent with NSN's focusedstrategy, most notably LTE. Other income and expenses in 2013 was asignificantly lower expense than in 2012 due to lower restructuring andassociated charges. Nokia's continuing operations net financial income and expense in 2013 was alower expense than in 2012. The lower net expense was primarily due to lowernet foreign exchange-related losses, partially offset by higher interestexpenses. Nokia's continuing operations tax expense in 2013 was lower than in 2012. Thelower tax expense was primarily due to the absence of a non-cash valuationallowance of EUR 135 million related to NSN's deferred tax assets in the firstquarter 2012. Nokia's continuing operations produced a net profit in 2013 compared to a lossin 2012. The net profit improvement was primarily due to lower operatingexpenses and lower other expenses. In 2013, Nokia's continuing operations total cash and other liquid assetsdecreased by EUR 938 million and Nokia's continuing operations net cash andother liquid assets decreased by EUR 2.05 billion. The items below are the primary drivers of the decrease in Nokia's continuingoperations net cash and other liquid assets in 2013 of EUR 2.05 billion: - Nokia's continuing operations net profit adjusted for non-cash items ofpositive EUR 1.3 billion; - Nokia's continuing operations outflow related to the acquisition of Siemens'stake in Nokia Siemens Networks of EUR 1.7 billion; - Nokia's continuing operations net working capital-related cash outflows ofapproximately EUR 70 million, which included approximately EUR 600 million ofrestructuring related cash outflows; - NSN net working capital-related outflows of approximately EUR 260 million,which included approximately EUR 600 million of restructuring-related cashoutflows. Excluding the restructuring-related cash outflows, NSN net workingcapital-related inflows of approximately EUR 340 million is primarily due to adecrease in receivables and inventories, partially offset by an decrease ininterest free short term liabilities. - HERE net working capital-related inflows of approximately EUR 120 million;- Advanced Technologies net working capital-related inflows of approximatelyEUR 70 million. - Nokia's continuing operations net financial income and expense-related cashinflow of approximately EUR 220 million, - Nokia's continuing operations cash tax net outflows of approximately EUR 250million; - Nokia's continuing operations net proceeds related to unlisted funds ofapproximately EUR 80 million; - Nokia's continuing operations capital expenditure of approximately EUR 210million; - Nokia's continuing operations net outflows of approximately 60 million EUROrelated to business divestments; - Nokia's continuing operations inflow related to the proceeds from the sale offixed assets of approximately EUR 80 million; - Nokia's continuing operations proceeds related to the equity component of theMicrosoft convertible bond of approximately EUR 150 million; - Nokia's continuing operations negative foreign exchange impact fromtranslation of opening net cash of approximately EUR 230 million; and - Discontinued operations cash outflow of approximately EUR 1.2 billion. DISCONTINUED OPERATIONS FULL YEAR 2013 The following discussion is of discontinued operations reported results forfull year 2013. Comparisons are given to full year 2012 results, unlessotherwise indicated. See note 3 to our Summary Financial Information tableabove concerning our current operational and reporting structure and note 4concerning certain changes to historical comparative financials due to arevised IFRS accounting standard, IAS19 Employee Benefits. DISCONTINUED OPERATIONS RESULTS SUMMARY ------------------------------------------------- 2013 2012 YoY Change------------------------------------------------Net sales 10 735 15 152 -29%(EUR million) ------------------------------------------------Gross margin (%) 20.6% 18.7% ------------------------------------------------Operating expenses 2 685 3 796 -29%(EUR million) ------------------------------------------------Operating margin (%) -5.5% -9.8% ------------------------------------------------Net cash from -1 081 -2 284 operating activities ------------------------------------------------ The decline in discontinued operations net sales in 2013 was primarily due tolower Mobile Phones net sales and, to a lesser extent, lower Smart Devices netsales. The decline in Mobile Phones net sales was due to lower volumes andASPs, affected by competitive industry dynamics, including intense smartphonecompetition at increasingly lower price points and intense competition at thelow end of our product portfolio. The decline in Smart Devices net sales wasdue to lower volumes, affected by competitive industry dynamics including thestrong momentum of competing smartphone platforms, as well as our portfoliotransition from Symbian products to Lumia products. The increase in discontinued operations gross margin in 2013 was primarily dueto a higher Smart Devices gross margin, partially offset by slightly lowerMobile Phones gross margin. The increase in Smart Devices gross margin wasprimarily due to lower inventory related allowances, which negatively affectedSmart Devices gross margin in 2012. The decrease in discontinued operations operating expenses in 2013 was due tolower Mobile Phones and Smart Devices operating expenses, primarily due tostructural cost savings, as well as overall cost controls. The discontinued operations net financial income and expense in 2013 was alower income than in 2012. The lower net income was primarily due to lower netforeign exchange-related gains. The discontinued operations tax expense in 2013 was significantly lower than in2012. The lower tax expense was primarily due to the absence of a non-cashvaluation allowance of EUR 800 million related to Finnish deferred tax assetsin the second quarter 2012. The discontinued operations loss in 2013 was a smaller loss primarily due tolower tax expense and lower operating losses. In 2013, discontinued operations had cash outflows of approximately EUR 1.2billion. This was primarily driven approximately EUR 1.1 billion of net cashoutflows from operating activities and EUR 130 million of net cash outflowsfrom investing activities. FULL YEAR 2013 OPERATING HIGHLIGHTS NOKIA - Nokia completed the acquisition of Siemens' stake in Nokia Siemens Networksin August, making it wholly owned subsidiary. The acquisition was initiallyannounced in July. In accordance with this transaction, the Siemens name wasphased out from Nokia Siemens Networks' company name and branding. The new nameand brand was announced to be Nokia Solutions and Networks, also referred to asNSN, which is also used for financial reporting purposes. - On September 3, 2013, Nokia announced that it had signed an agreement toenter into a transaction whereby Nokia will sell substantially all of itsDevices & Services business and license its patents to Microsoft for EUR 5.44billion in cash, payable at closing. - Nokia also announced changes to its leadership as a result of the proposedtransaction in September. To avoid the perception of any potential conflict ofinterest between now and the pending closure of the transaction, Stephen Elopstepped aside as President and CEO of Nokia Corporation, resigned from theBoard of Directors, and became Executive Vice President, Devices & Services.Risto Siilasmaa assumed an interim CEO role for Nokia while continuing to servein his role as Chairman of the Nokia Board of Directors. Timo Ihamuotila becamePresident of Nokia for the interim period while also continuing to serve asCFO. Mr. Ihamuotila assumed the responsibility of chairing the Nokia LeadershipTeam. - In the third quarter 2013, Nokia issued EUR 1.5 billion of financing in theform of three EUR 500 million tranches of convertible bonds issued to Microsoftmaturing in 5, 6 and 7 years, respectively. On September 6, 2013, Nokiaannounced that it had decided to draw down all of this financing to prepayfinancing raised for the acquisition of the shares in NSN, which was completedin August 2013, and for general corporate purposes. Microsoft has agreed not tosell any of the bonds or convert any of the bonds to Nokia shares prior to theclosing of the sale of the Devices & Services business. If the sale of theDevices & Services business is completed, the bonds will be redeemed and theprincipal amount and accrued interest netted against the proceeds from thetransaction. - As a result of the planned sale of substantially all of its Devices &Services business, Nokia announced that it plans to focus on its threeestablished businesses: NSN, a leader in network infrastructure and services;HERE, a leader in mapping and location services; and Advanced Technologies,which will build on several of Nokia's current CTO and intellectual propertyrights activities. Additionally, Nokia announced that its Board of Directors isconducting a strategy evaluation for Nokia Group between signing and closing ofthe transaction. - Nokia's Extraordinary General Meeting held on November 19, 2013 confirmed andapproved the sale of substantially all of Nokia's Devices & Services businessto Microsoft in line with the proposal and recommendation of the Nokia Board ofDirectors. - Nokia ranked second within the Communications Equipment industry in the DowJones Sustainability Indexes (World) released in September 2013. Nokia is alsoamong companies that have achieved the largest proportional improvement intheir sustainability performance within their sector. - The Carbon Disclosure Project (CDP) listed Nokia in the CDP Nordic 260Climate Change Report 2013 (comprising 260 largest Nordic companies). Nokia wasmentioned for the fifth year in a row in the Climate Disclosure LeadershipIndex, being the only Nordic company to have been featured in the index for twoconsecutive quarters. NSN - NSN added significant commercial LTE deals during 2013, including: contractsfor China Mobile's and China Telecom's nationwide TD-LTE networks; a contractwith Sprint in the USA for the deployment of their TD-LTE network; a contractwith TIM Brasil and with Oi Brasil to build their 4G LTE networks ahead of the2014 football World Cup; LTE networks for MTS in the Moscow and Central Russiaregions. - NSN also added a large number of other mobile broadband contracts including:Taiwan's first LTE with Chunghwa Telecom; New Zealand's first 4G service withVodafone; 4G mobile broadband services for Ooredoo in Qatar and Ooredoo'snationwide 3G services in Myanmar; modernizing the 3G network for M1 inSingapore; 4G network infrastructure for Celcom in Malaysia; modernizing andexpanding Mobily's 2G, 3G and 4G networks in Saudi Arabia; implementing USCellular's second wave of LTE services; expanding Movistar Chile's 3G networkand implementing their LTE network as well as Claro's LTE network in Chile;SFR's commercial LTE services in Paris; Tele2 Netherlands' 4G servicesnationwide; extending Orange's network in Switzerland and preparing it for 4Groll-out; modernizing and expanding E-Plus Group's GSM and HSPA+ networks inGermany; MTS's network upgrade in Ukraine. - NSN continued to stay at the forefront of mobile broadband, further enhancingits Radio Base Station Smart Scheduler, which notably offers significantlyimproved cell edge coverage and better sustained performance under load andlaunching a powerful TD-LTE Base Station radio module; and introducing new(FlexiZone) microcell and picocell base stations with the unique ability tobecome a FlexiZone which overcomes the limitations on how many small cells canbe added within a macro cell coverage. - In other LTE technology developments, NSN and China Mobile enabled theworld's first live TV broadcast via TD-LTE; NSN and the Singapore-basedoperator StarHub successfully completed Southeast Asia's first 3GPP standardVoice over LTE call in a live network. - NSN and Panasonic Mobile Communications were selected by NTT DOCOMO in Japanto develop for LTE-Advanced next-generation mobile broadband networkarchitecture; NSN also helped all three major Korean operators - SK Telecom, LGU+ and Korea Telecom - to become the world's first to launch LTE-Advancedservices commercially; NSN demonstrated the world's first 4G TD-LTE networktrial showing that Authorized Shared Access (ASA) is paving the way for future5G networks. - NSN announced Liquid Applications, turning base stations into an intelligentpart of a mobile operator's network to serve and deliver local content. InSeptember, SK Telecom of South Korea and NSN completed world's firstproof-of-concept of Liquid Applications over LTE. - NSN completed comprehensive testing of mobile voice core services running inthe telco cloud and successfully demonstrated its telco cloud capabilities in ajoint proof-of-concept for Evolved Packet Core (EPC) virtualization with SKTelecom. - The Lebanese telecommunications operator, touch, chose NSN to simplify itsoperations and improve its customer experience with the company's uniqueoperations support systems (OSS) portfolio and its related integrationservices. NSN also opened a Global Delivery Center hub in China. The newfacility provides tools, processes and skilled resources to remotely managemobile broadband networks for operators in China and around the world. - Zain Kuwait deployed NSN's Customer Experience Management (CEM), and NSN'sCEM contract with Beijing Mobile was extended, to implement an extensiveQuality of Experience solution. - With over 15 years of experience in Managed Services, NSN during 2013 furtherenhanced its Managed Services business approach and increased its overalloperational efficiency while also renewing nearly 90% of its existing ManagedServices contracts. - NSN announced research co-operation with China Mobile Research Institute;made a multi-year commitment to 5G research activities together with the NYUWIRELESS research center; and announced its participation as a founding memberin the 5G public-private partnership between the European Union and 5G PPPAssociation. - NSN is putting its Technology Vision 2020 into practice, with its big datatelco platform prototype analyzing 1 million live messages a second, bridgingthe best of IT and telco technologies - During the year, NSN was recognized for its global advances and deploymentsby Global TD-LTE Initiative (GTI), winning the TD-LTE Market Development Award2013; for its progress in innovation with two Emerging Technologies Awards atCTIA 2013 (its Fuel Cell solution and Liquid Applications); also a three-timewinner with its operator customers at the prestigious Global Telecoms BusinessInnovation Awards in the 'Wireless network infrastructure innovation' category.The awards recognized joint projects with SK Telecom (Liquid Applications),touch Telecom (centralized Network and Operations Center) and Zain Kuwait(Customer Experience Index). - In June 2013, ABI Research ranked NSN number 1 in its macro base stationvendor competitive assessment; and industry analyst firm Gartner positioned NSNin the 'Leaders' quadrant of the Magic Quadrant for LTE Network Infrastructure,for the second consecutive year. - In 2013, NSN completed its plan to streamline the portfolio and focus onmobile broadband, including divestment of non-core businesses. HERE In 2013 HERE made significant progress towards its goal of becoming the leadinglocation cloud business with the introduction of new, innovative products aswell as updates to its signature experiences, a number of new partnerships thatdemonstrate that HERE is the preferred partner across industries for maps andlocation-based technology, and through further extending its reach across anumber of operating systems. - HERE announced a complete Connected Driving offer, including HERE Auto, HEREAuto Cloud and HERE Auto Companion. It is the only end-to-end driving solutionon the market today, which will help car makers and in-vehicle technologysuppliers connect the car to the cloud. - HERE radically improved its traffic product, HERE Traffic, by building a newsystem and engine that processes data even faster and more accurately thanbefore. - HERE continued to strengthen its popular and critically acclaimed suite ofintegrated location experiences on Windows Phone with a number of updatesthroughout the year that brought new features and further refined the userexperience. - Continental Corporation implemented 3D content from HERE in its newentertainment platform. Automotive manufacturers can expand theirlocation-based applications to include rich 3D landmarks, satellite imagerywith split screen and current traffic information. This also will advance themulti-modal transportation concept another step by providing drivers theability to synch their route profiles across in-dash systems in their vehiclesand their smartphone, tablet or PC. - Garmin continued to put their trust in HERE across the globe by adoptingNatural Guidance in North America and Europe, changing the way people providedirections to each other. This includes leveraging local knowledge and marketresearch to incorporate local nuances for choosing and describing referencecues such as the color of a building or the name of a restaurant. - Magneti Marelli and HERE announced their cooperation to develop an end-to-endconnected driving solution ready to use for car makers based on MagnetiMarelli's open platform and the HERE Connected Driving offering. - HERE teamed up with Mercedes-Benz to jointly develop smart maps for connectedcars and ultimately, self-driving cars leveraging cloud technology. - HERE announced that it delivers its indoor Venue Maps to Qualcomm Atheros,Inc., a subsidiary of Qualcomm Incorporated, helping Qualcomm IZat(TM) locationtechnologies deliver more precise positioning to mobile devices insidebuildings. - Rand McNally, one of the largest commercial truck routing software companiesin North America, chose HERE as its preferred map provider. HERE contributesinformation specific to truck transportation, such as the height of a bridgeoverpass, road weight restrictions for trucks and posted speed limits. - SAP selected HERE to serve as the location technology for its TwoGocar-sharing service. - As a significant advancement in the longstanding partnership with Toyota,Toyota Motor Europe selected the HERE platform's Local Search for Automotive topower its next generation Touch & Go navigation and infotainment systems. LocalSearch for Automotive is a specifically designed solution developed to fulfillthe requirements of the automotive industry. - TripAdvisor, the world's largest travel site, selected the HERE Platform forgeocoding services to offer global coverage for consumers to plan trips. HEREoffers precise location information in more than 196 countries, helpingTripAdvisor website visitors to find hotels, restaurants, and attractionsacross the world. - The U.S. Federal Highway Administration has leveraged HERE Traffic coveringall major highways and border crossings in the U.S. to develop performancemeasures. - The embedded navigation systems of more than 10 million new cars sold in 2013are powered by maps from HERE. This milestone underlines the leadership of HEREin providing navigation and mapping solutions for the automotive industry. - HERE further strengthened the Windows Phone 8 ecosystem by making its suiteof location-based experiences available for all Windows Phone 8 devices. - HERE brought HERE Maps to the new Asha platform, thus helping to connect thenext billion. - HERE introduced HTML5-based HERE Maps for the new Firefox OS as a firstcollaborative step with Mozilla. ADVANCED TECHNOLOGIES- Nokia was one of the founding industrial partners and board members for theEU's Graphene Flagship, the EU's biggest research initiative ever, tasked withtaking graphene, a nano-technology material with unique properties, from therealm of academic research into commercial use in the space of ten years. Ourparticipation is led from the Nokia Research Center in Cambridge, UK. DISCONTINUED OPERATIONS- Nokia's new manufacturing facility in Hanoi, Vietnam, became fullyoperational in the third quarter. - Nokia was ranked ninth in Interbrand's Best Global Green Brands survey, aheadof all its peers in the mobile industry. - Nokia launched its first Windows tablet, the Nokia Lumia 2520, and its firstlarge screen Lumia smartphones, the Lumia 1520 and Lumia 1320. - Nokia launched the Lumia 1020, which set a new benchmark for smartphoneimaging, and the Lumia 925, which introduced metal for the first time to theNokia Lumia range. - Nokia launched the Lumia 620, a compact smartphone with a colorful design andthe Nokia Lumia 520, its most affordable Windows Phone 8 smartphone. - Nokia introduced several new imaging innovations in 2013. These innovationsincluded, for instance, Smart Camera that allows people to shoot a sequence ofphotos, making it easier to capture great moments. - Lumia smartphones continued to benefit from a growing Windows Phoneapplication store, with key applications including Instagram, Waze and Vineannounced during the year. Nokia itself launched new applications such as NokiaStoryteller, Beamer and Video Director. - Nokia introduced Asha 501, the first of a new generation of smartphones torun on the new Asha platform, before following up with new additions to theAsha platform family in the form of the Nokia Asha 500, Asha 502 and Asha 503. - Nokia started shipments of the Nokia 105, the most affordable phone in itsportfolio, retailing at a recommended price of EUR 15. - Nokia introduced a new ultra-affordable camera phone, the Nokia 108.- Nokia unveiled and started shipments of the Nokia 515, a premium mobile phonewith a 5 megapixel camera. SHARES The total number of Nokia shares on December 31, 2013, was 3 744 994 342. OnDecember 31, 2013, Nokia and its subsidiary companies owned 32 567 617 Nokiashares, representing approximately 0.9% of the total number of Nokia shares andthe total voting rights. DIVIDEND The Nokia Board of Directors will decide on its proposal to the Annual GeneralMeeting on distributions to shareholders only after the anticipated closing ofthe transaction whereby Nokia will sell substantially all of its Devices &Services business and license its patents to Microsoft and the completion ofthe strategy evaluation. The distributable funds on the balance sheet of theparent company at December 31, 2013 amounted to EUR 4 676 million. RISKS AND FORWARD-LOOKING STATEMENTSIt 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)the planned sale by Nokia of substantially all of Nokia's Devices & Servicesbusiness, including Smart Devices and Mobile Phones (referred to below as 'Saleof the D&S Business') pursuant to the Stock and Asset Purchase Agreement, datedas of September 2, 2013, between Nokia and Microsoft International HoldingsB.V.(referred to below as the 'Agreement'); B) the closing of the Sale of theD&S Business; C) receiving timely, or at all, necessary regulatory approvalsfor the Sale of the D&S Business; D) expectations, plans or benefits related toor caused by the Sale of the D&S Business; E) expectations, plans or benefitsrelated to Nokia's strategies, including plans for Nokia with respect to itscontinuing businesses that will not be divested in connection with the Sale ofthe D&S Business; F) expectations, plans or benefits related to changes inleadership and operational structure; G) expectations and targets regarding ouroperational priorities, financial performance or position, results ofoperations and use of proceeds from the Sale of the D&S Business; H) the timingof the deliveries of our products and services; I) our ability to innovate,develop, execute and commercialize new technologies, products and services; J)expectations regarding market developments and structural changes; K)expectations and targets regarding performance, including those related tomarket share, prices, net sales and margins of products and services; L)expectations and targets regarding collaboration and partnering arrangements;M) the outcome of pending and threatened litigation, regulatory proceedings orinvestigations by authorities; N) expectations regarding the successfulcompletion of restructurings, investments, acquisitions and divestments on atimely basis and our ability to achieve the financial and operational targetsset in connection with any such restructurings, investments, divestments andacquisitions, as well as any expected plans and benefits related to or causedby such transactions; and O) statements preceded by 'believe,' 'expect,''anticipate,' 'foresee,' 'sees,' 'target,' 'estimate,' 'designed,' 'aim','plans,' 'intends,' 'focus,' 'will' or similar expressions. These statementsare based on management's best assumptions and beliefs in light of theinformation currently available to it. Because they involve risks anduncertainties, actual results may differ materially from the results that wecurrently expect. Factors, including risks and uncertainties that could causethese differences include, but are not limited to: 1) the inability to closethe Sale of the D&S Business in a timely manner, or at all, for instance due tothe inability or delays in obtaining necessary regulatory approvals for theSale of the D&S Business, or the occurrence of any event, change or othercircumstance that could give rise to the termination of the Agreement; 2) thepotential adverse effect on the sales of our mobile devices, businessrelationships, operating results and business generally resulting from theannouncement of the Sale of the D&S Business or from the terms that we haveagreed for the Sale of the D&S Business; 3) any negative effect from theimplementation of the Sale of the D&S Business, as we may forego othercompetitive alternatives for strategies or partnerships that would benefit ourDevices & Services business and if the Sale of the D&S Business is not closed,we may have limited options to continue the Devices & Services business orenter into another transaction on terms favorable to us, or at all; 4) ourability to effectively and smoothly implement planned changes to our leadershipand operational structure or maintain an efficient interim governance structureand preserve or hire key personnel; 5) any negative effect from theimplementation of the Sale of the D&S Business, including our internalreorganization in connection therewith, which will require significant time,attention and resources of our senior management and others within the companypotentially diverting their attention from other aspects of our business; 6)disruption and dissatisfaction among employees caused by the plans andimplementation of the Sale of the D&S Business, reducing focus and productivityin areas of our business; 7) the amount of the costs, fees, expenses andcharges related to or triggered by the Sale of the D&S Business; 8) anyimpairments or charges to carrying values of assets or liabilities related toor triggered by the Sale of the D&S Business; 9) potential adverse effects onour business, properties or operations caused by us implementing the Sale ofthe D&S Business; 10) the initiation or outcome of any legal proceedings,regulatory proceedings or enforcement matters that may be instituted against usrelating to the Sale of the D&S Business; 11) Nokia Solutions and Networks'(renamed from Nokia Siemens Networks) also referred to as NSN success in themobile broadband infrastructure and related services market and its ability toeffectively, profitably and timely adapt business and operations to the diverseneeds of its customers; 12) NSN's ability to maintain and improve its marketposition and respond successfully to changes and competition in the mobilebroadband infrastructure and related services market; 13) NSN's success inimplementing its restructuring plan and reducing its operating expenses andother costs; 14) NSN's ability to invest in and timely introduce newcompetitive products, services, upgrades and technologies; 15) NSN's dependenceon limited number of customers and large, multi-year contracts; 16) NSN'sliquidity and its ability to meet its working capital requirements, includingaccess to available credit under its financing arrangements and other creditlines as well as cash at hand; 17) the management of NSN's customer financingexposure; 18) the success of our HERE strategy, including our ability toestablish a successful location-based platform and extend our location-basedservices across devices and operating systems; 19) our ability to protectnumerous patented standardized or proprietary technologies from third-partyinfringement or actions to invalidate the intellectual property rights of thesetechnologies; 20) our ability to maintain the existing sources of intellectualproperty related revenue and establish new such sources; 21) the intensity ofcompetition in the various markets where we do business and our ability tomaintain or improve our market position or respond successfully to changes inthe competitive environment; 22) our ability to keep momentum and increase ourspeed of innovation, product development and execution in order to bring newinnovative and competitive products and location-based or other services to themarket in a timely manner; 23) our ability to effectively and smoothlyimplement the planned changes in our operational structure and achieve targetedefficiencies and reductions in operating expenses and our ability to completethe planned divestments and acquisition, including obtaining any neededregulatory approvals; 24) our ability to retain, motivate, develop and recruitappropriately skilled employees; 25) our dependence on the development of themobile and communications industry, including location-based and other servicesindustries, in numerous diverse markets, as well as on general economicconditions globally and regionally; 26) our ability to maintain and leverageour position and strengths, especially if we are unable retain the loyalty ofour mobile operator and distributor customers and consumers as a result of theimplementation of our strategies or other factors; 27) the performance of theparties we partner and collaborate with and our ability to achieve successfulcollaboration or partnering arrangements; 28) our ability to deliver ourproducts profitably, in line with quality requirements and on time, especiallyif the limited number of suppliers we depend on, many of which aregeographically concentrated with a majority based in Asia, fail to deliversufficient quantities of fully functional products, components, sub-assemblies,software and services on favorable terms and in compliance with our supplierrequirements; 29) our ability to manage efficiently our manufacturing andlogistics, as well as to ensure the quality, safety, security and timelydelivery of our products and services; 30) any actual or even alleged defectsor other quality, safety and security issues in our products; 31) anyinefficiency, malfunction or disruption of a system or network that ouroperations rely on; 32) the impact of cybersecurity breach or other factorsleading to an actual or alleged loss, improper disclosure or leakage of anypersonal or consumer data collected by us or our partners or subcontractors,made available to us or stored in or through our products; 33) our ability tosuccessfully manage the pricing of our products and services and costs relatedto our products and services and our operations; 34) the potential complex taxissues and obligations we may face, including the obligation to pay additionaltaxes in various jurisdictions and our actual or anticipated performance, amongother factors, could result in allowances related to deferred tax assets; 35)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; 36) our ability to protect thetechnologies, which we or others develop or which we license, from claims thatwe have infringed third parties' intellectual property rights, as well as ourunrestricted use on commercially acceptable terms of certain technologies inour product and services; 37) the impact of economic, regulatory, political orother development on our sales, manufacturing facilities and assets located inemerging market countries as well as the impact of regulations against importsto those countries; 38) the impact of changes in and enforcement of governmentpolicies, technical standards, trade policies, laws or regulations in countrieswhere our assets are located and where we do business; 39) investigations orclaims by contracting parties in relation to exits from countries, areas orcontractual arrangements; 40) unfavorable outcome of litigation, regulatoryproceedings or investigations by authorities; 41) allegations of possiblehealth risks from electromagnetic fields generated by base stations and mobiledevices, and the lawsuits and publicity related to them, regardless of merit;42) whether ongoing or any additional governmental investigations of allegedviolations of law by some former employees of Siemens may involve and affectthe carrier-related assets and employees transferred by Siemens to NokiaSiemens Networks (renamed Nokia Solutions and Networks); 43) any impairment ofNSN's customer relationships resulting from ongoing or any additionalgovernmental investigations involving the Siemens carrier-related operationstransferred to Nokia Siemens Networks (renamed Nokia Solutions and Networks),as well as the risk factors specified on pages 12-47 of Nokia's annual reporton Form 20-F for the year ended December 31, 2012 under Item 3D. 'RiskFactors'. Other unknown or unpredictable factors or underlying assumptionssubsequently proven to be incorrect could cause actual results to differmaterially from those in the forward-looking statements. Nokia does notundertake any obligation to publicly update or revise forward-lookingstatements, whether as a result of new information, future events or otherwise,except to the extent legally required. Nokia, Helsinki - January 23, 2014 Media and Investor Contacts: NokiaCorporate Communicationstel. +358 7180 34900email: [email protected] Investor Relations Europetel. +358 7180 34927 Investor Relations UStel. +1 914 368 0555 Planned publication dates for interim reports in 2014- report for Q1 2014: April 29, 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'Nokia plans to publish its 'Nokia in 2013' annual report, which includes thereview by the Board of Directors and the audited annual accounts, on March 31,2014. The annual report will be available at www.nokia.com/financials, whereyou may also access our past quarterly and annual financial reports. Nokia's Annual General Meeting 2014Nokia's Annual General Meeting 2014 is scheduled to 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=457197 News Source: NASDAQ OMX 23.01.2014 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: 1850Time of Receipt: Jan 23, 2014 12:03:13 End of Announcement DGAP News-Service ---------------------------------------------------------------------------

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