21st Apr 2011 11:00
Nokia / Final Results 21.04.2011 12:00 Dissemination of a UK Regulatory Announcement, transmitted byDGAP - a company of EquityStory AG.The issuer is solely responsible for the content of this announcement.--------------------------------------------------------------------------- - 9.8% Devices & Services non-IFRS operating margin at top end of outlook range- Microsoft definitive agreement signed- Shifting from developing strategy to executing strategy Nokia CorporationInterim ReportApril 21, 2011 at 13.00 (CET+1) This is a summary of the first quarter 2011 interim report published today. Thecomplete first quarter 2011 interim report with tables is available athttp://www.nokia.com/results/Nokia_results2011Q1e.pdf. Investors should notrely on summaries of our interim reports only, but should review the completeinterim reports with tables. Non-IFRS first quarter 2011 results1 -------------------------------------------------------------------------EUR million Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change-------------------------------------------------------------------------Net sales 10 400 9 522 9% 12 653 -18%-------------------------------------------------------------------------Devices & Services 7 088 6 663 6% 8 501 -17%------------------------------------------------------------------------- NAVTEQ 232 189 23% 309 -25%-------------------------------------------------------------------------Nokia Siemens Networks 3 171 2 718 17% 3 961 -20%------------------------------------------------------------------------- -------------------------------------------------------------------------Operating profit 704 820 -14% 1090 -35%-------------------------------------------------------------------------Devices & Services 694 804 -14% 961 -28%------------------------------------------------------------------------- NAVTEQ 54 41 32% 100 -46%-------------------------------------------------------------------------Nokia Siemens Networks 3 15 -80% 145 -98%------------------------------------------------------------------------- -------------------------------------------------------------------------Operating margin 6.8% 8.6% 8.6% -------------------------------------------------------------------------Devices & Services 9.8% 12.1% 11.3% ------------------------------------------------------------------------- NAVTEQ 23.3% 21.7% 32.4% -------------------------------------------------------------------------Nokia Siemens Networks 0.1% 0.6% 3.7% ------------------------------------------------------------------------- -------------------------------------------------------------------------EPS, EUR Diluted 0.13 0.14 -7% 0.22 -41%------------------------------------------------------------------------- Reported first quarter 2011 results -------------------------------------------------------------------------EUR million Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change-------------------------------------------------------------------------Net sales 10 399 9 522 9% 12 651 -18%-------------------------------------------------------------------------Devices & Services 7 087 6 663 6% 8 499 -17%------------------------------------------------------------------------- NAVTEQ 232 189 23% 309 -25%-------------------------------------------------------------------------Nokia Siemens Networks 3 171 2 718 17% 3 961 -20%------------------------------------------------------------------------- -------------------------------------------------------------------------Operating profit 439 488 -10% 884 -50%-------------------------------------------------------------------------Devices & Services 690 831 -17% 1 018 -32%------------------------------------------------------------------------- NAVTEQ -62 -77 -19 -------------------------------------------------------------------------Nokia Siemens Networks -142 -226 1 ------------------------------------------------------------------------- -------------------------------------------------------------------------Operating margin 4.2% 5.1% 7.0% -------------------------------------------------------------------------Devices & Services 9.7% 12.5% 12.0% ------------------------------------------------------------------------- NAVTEQ -26.7% -40.7% -6.1% -------------------------------------------------------------------------Nokia Siemens Networks -4.5% -8.3% 0.0% ------------------------------------------------------------------------- -------------------------------------------------------------------------EPS, EUR Diluted 0.09 0.09 0% 0.20 -55%------------------------------------------------------------------------- Note 1 relating to non-IFRS results: Non-IFRS results exclude special items forall periods. In addition, non-IFRS results exclude intangible assetamortization, other purchase price accounting related items and inventory valueadjustments arising from i) the formation of Nokia Siemens Networks and ii) allbusiness acquisitions completed after June 30, 2008. More specific informationabout the exclusions from the non-IFRS results may be found in our completeinterim report with tables for the first quarter 2011 on pages 3-4, 15-17 and19. Nokia believes that these non-IFRS financial measures provide meaningfulsupplemental information to both management and investors regarding Nokia'sperformance by excluding the above-described items that may not be indicativeof Nokia's business operating results. These non-IFRS financial measures shouldnot be viewed in isolation or as substitutes to the equivalent IFRS measure(s),but should be used in conjunction with the most directly comparable IFRSmeasure(s) in the reported results. A reconciliation of the non-IFRS results toour reported results for Q1 2011 and Q1 2010 can be found in the tables onpages 13 and 15-19 of our complete interim report with tables. A reconciliationof our Q4 2010 non-IFRS results can be found on pages 11-12 and 14-18 of ourcomplete Q4 2010 interim report with tables which was published on January 27,2011. FIRST QUARTER 2011 HIGHLIGHTS- Nokia net sales of EUR 10.4 billion in Q1 2011, up 9% year-on-year and down18% sequentially (up 4% and down 18% at constant currency). - Devices & Services net sales of EUR 7.1 billion in Q1 2011, up 6%year-on-year and down 17% sequentially (up 1% and down 16% at constantcurrency). - Services net sales of EUR 211 million in Q1 2011, up 43% year-on-year and 5%sequentially; billings of EUR 338 million, up 48% year-on-year and down 4%sequentially. - Nokia total mobile device volumes of 108.5 million units in Q1 2011, up 1%year-on-year and down 12% sequentially. - Nokia converged mobile device (smartphone and mobile computer) volumes of24.2 million units in Q1 2011, up 13% year-on-year and down 14% sequentially. - Nokia mobile device ASP (including services revenue) of EUR 65 in Q1 2011, upfrom EUR 62 in Q1 2010 and down from EUR 69 in Q4 2010. - Devices & Services gross margin of 29.1% in Q1 2011, down from 32.4% in Q12010 and 29.2% in Q4 2010. - Devices & Services non-IFRS operating margin of 9.8% in Q1 2011, down from12.1% in Q1 2010 and 11.3% in Q4 2010. - NAVTEQ net sales of EUR 232 million in Q1 2011, up 23% year-on-year and down25% sequentially (up 20% and down 26% at constant currency). - Nokia Siemens Networks net sales of EUR 3.2 billion in Q1 2011, up 17%year-on-year and down 20% sequentially (up 15% and down 21% at constantcurrency). - Nokia Siemens Networks non-IFRS operating margin of 0.1% in Q1 2011, downfrom 0.6% in Q1 2010 and 3.7% in Q4 2010. - Nokia operating cash flow of negative EUR 173 million and cash generated fromoperations of EUR 182 million in Q1 2011. - Total cash and other liquid assets of EUR 11.1 billion and net cash and otherliquid assets of EUR 6.4 billion at the end of Q1 2011. - Nokia taxes continued to be unfavorably impacted by Nokia Siemens Networkstaxes as no tax benefits are recognized for certain Nokia Siemens Networksdeferred tax items. In Q1, this was partially offset by favorable profit mixboth in Devices & Services and in Nokia Siemens Networks taxes. If Nokia'sestimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS wouldhave been approximately 0.4 Euro cents higher in Q1 2011. STEPHEN ELOP, NOKIA CEO:'In the first quarter, we shifted from defining our strategy to executing ourstrategy. On this front, I am pleased to report that we signed our definitiveagreement with Microsoft and already our product design and engineering work iswell under way. Following a solid first quarter, we expect a more challenging second quarter.However, we are encouraged by our roadmap of mobile phones and Symbiansmartphones, which we will ship through the balance of the year. We are fullyfocused on delivering the needed accountability, speed and results topositively drive our future financial performance.' NOKIA OUTLOOK- Nokia expects Devices & Services net sales to be between EUR 6.1 billion andEUR 6.6 billion in the second quarter 2011. - Nokia expects its non-IFRS operating margin in Devices & Services to bebetween 6% and 9% in the second quarter 2011. - Nokia targets its net sales in Devices & Services to be at approximately thesame level in the third quarter 2011 as in the second quarter 2011, and targetsits net sales in Devices & Services to be seasonally higher in the fourthquarter 2011, compared to the third quarter 2011. - Nokia targets its non-IFRS operating margin in Devices & Services to bebetween 6% and 9% in 2011. - Nokia targets to reduce Devices & Services' non-IFRS operating expenses byEUR 1 billion for the full year 2013, compared to the full year 2010 Devices &Services non-IFRS operating expenses of EUR 5.65 billion. - Nokia and Nokia Siemens Networks expect Nokia Siemens Networks' net sales tobe between EUR 3.2 billion and EUR 3.5 billion in the second quarter 2011. - Nokia and Nokia Siemens Networks expect the non-IFRS operating margin inNokia Siemens Networks to be between 1% and 4% in the second quarter 2011. - Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networksnet sales to grow faster than the market in 2011. - Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networksnon-IFRS operating margin to be above breakeven in 2011. - Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks toreduce its non-IFRS annualized operating expenses and production overheads byEUR 500 million by the end of 2011, compared to the end of 2009 - All items relating to Nokia Siemens Networks exclude the impacts of theplanned acquisition of Motorola Solutions' network assets. The outlook for Devices & Services net sales and non-IFRS operating margin forthe second quarter 2011 is based on our expectations regarding a number offactors, including: - Receipt of approximately EUR 150 million of royalty income related to earlierperiods; - Competitive industry dynamics and our planned tactical pricing actions;- Greater impact from the tragic events in Japan than we experienced in thefirst quarter 2011, particularly relating to component supply visibility forcertain devices and other logistics disruptions related to suppliers located inJapan. We expect these factors and their negative impact on our mobile devicesvolumes to continue not only during the second quarter 2011 but also throughthe third quarter 2011, at least. - Greater impact from our lack of dual-SIM devices than we experienced in thefirst quarter 2011; and - A lower contribution from new products in the second quarter 2011 compared tothe first quarter 2011 as we plan to start shipping the majority of our newproducts in the second half of the year. FIRST QUARTER 2011 FINANCIAL HIGHLIGHTS The non-IFRS results exclusionsQ1 2011 ? EUR 265 million consisting of:- EUR 28 million restructuring charge and other associated items in NokiaSiemens Networks - EUR 117 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networks - EUR 116 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ - EUR 4 million of intangible assets amortization and other purchase pricerelated items arising from the acquisition of OZ Communications, Novarra andMotally in Devices & Services Q1 2010 ? EUR 332 million (net) consisting of:- EUR 125 million restructuring charge and other one-time items in NokiaSiemens Networks. - EUR 29 million gain on sale of assets and a business in Devices & Services.- EUR 116 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networks. - EUR 118 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ. - EUR 2 million of intangible assets amortization and other purchase pricerelated items arising from the acquisition of OZ Communications in Devices &Services. Q4 2010 ? EUR 206 million (net) consisting of:- EUR 28 million restructuring charge and other associated items in NokiaSiemens Networks - EUR 85 million restructuring charges in Devices & Services- EUR 147 million gain on sale of wireless modem business in Devices & Services- EUR 116 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networks - EUR 119 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ - EUR 5 million of intangible assets amortization and other purchase pricerelated items arising from the acquisition of OZ Communications, Novarra andMotally in Devices & Services Q4 2010 taxes - EUR 52 million non-cash tax benefit from reassessment ofrecoverability deferred tax assets in Nokia Siemens Networks Non-IFRS results exclude special items for all periods. In addition, non-IFRSresults exclude intangible asset amortization, other purchase price accountingrelated items and inventory value adjustments arising from i) the formation ofNokia Siemens Networks and ii) all business acquisitions completed after June30, 2008. Nokia GroupNokia's first quarter 2011 net sales increased 9% to EUR 10.4 billion, comparedwith EUR 9.5 billion in the first quarter 2010, and decreased 18% compared withEUR 12.7 billion in the fourth quarter 2010. At constant currency, group netsales would have increased 4% year-on-year and decreased 18% sequentially. The following chart sets out the year-on-year and sequential growth rates inour net sales on a reported basis and at constant currency for the periodsindicated. FIRST QUARTER 2011 NET SALES, REPORTED & CONSTANT CURRENCY1 ------------------------------------------------------------------------------ YoY Change QoQ Change-----------------------------------------------------------------------------Group net sales - reported 9% -18%-----------------------------------------------------------------------------Group net sales - constant currency1 4% -18%-----------------------------------------------------------------------------Devices & Services net sales - reported 6% -17%-----------------------------------------------------------------------------Devices & Services net sales - constant currency1 1% -16%-----------------------------------------------------------------------------NAVTEQ net sales - reported 23% -25%-----------------------------------------------------------------------------NAVTEQ net sales - constant currency1 20% -26%-----------------------------------------------------------------------------Nokia Siemens Networks net sales - reported 17% -20%-----------------------------------------------------------------------------Nokia Siemens Networks net sales - constant currency1 15% -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. Nokia's first quarter 2011 reported operating profit was EUR 439 million,compared with an operating profit of EUR 488 million in the first quarter 2010and an operating profit of EUR 884 million in the fourth quarter 2010. Nokia'sfirst quarter 2011 reported operating margin was 4.2%, compared with 5.1% inthe first quarter 2010 and 7.0% in the fourth quarter 2010. Nokia's firstquarter 2011 non-IFRS operating profit was EUR 704 million, compared with EUR820 million in the first quarter 2010 and EUR 1 090 million in the fourthquarter 2010. Nokia's first quarter 2011 non-IFRS operating margin was 6.8%,compared with 8.6% in the first quarter 2010 and 8.6% in the fourth quarter2010. The year-on-year decrease in Nokia's non-IFRS operating margin resultedfrom a decline in non-IFRS operating margins in Devices & Services and NokiaSiemens Networks. The sequential decrease in Nokia's non-IFRS operating marginresulted from a decline in non-IFRS operating margins in all reportablesegments. The following chart sets out Nokia Group's cash flow (for the periodsindicated) and financial position (at the end of the periods indicated), aswell as the year-on-year and sequential growth rates. NOKIA GROUP CASH FLOW AND FINANCIAL POSITION --------------------------------------------------------------------------------- EUR million Q1/2011 Q1/2010 YoY Q4/2010 QoQ Change Change --------------------------------------------------------------------------------Cash generated from operations 182 1 181 -85% 2 492 -93%--------------------------------------------------------------------------------Operating cash flow1 -173 955 2 436 --------------------------------------------------------------------------------Total cash and other liquid 11 056 9 701 14% 12 275 -10% assets --------------------------------------------------------------------------------Net cash and other liquid 6 372 4 952 29% 6 996 -9% assets2 --------------------------------------------------------------------------------Net debt-equity ratio -40% -31% -43% (gearing) -------------------------------------------------------------------------------- Note 1: Net cash from operating activities.Note 2: Total cash and other liquid assets minus interest-bearing liabilities. Year-on-year, the decrease in operating cash flow in the first quarter 2011 wasdue to negative net working capital impacts offset to some extent by lowerincome taxes paid. Sequentially, the decrease in operating cash flow in thefirst quarter 2011 was due to negative net working capital impacts as well aslower underlying profitability. Additionally, on a sequential basis, operatingcash flow was negatively impacted by the timing of certain customer paymentsand value-added tax refunds, as approximately EUR 600 million of net workingcapital improvements were received in the fourth quarter 2010. In addition tothese factors, in the first quarter 2011 we experienced cash outflows relatedto foreign exchange hedging activities, both operative as well as balancesheet, and this led to year-on-year and sequential declines in operating cashflow. Both total as well as net cash and other liquid assets in the first quarter2011 were higher compared to the first quarter 2010 due to positive overallcash generation. Sequentially, total cash and other liquid assets decreased dueto repayments of short-term borrowings as well as negative overall cashgeneration. On a sequential basis, net cash and other liquid assets decreaseddue to the depreciation of certain currencies against the Euro as well asnegative overall cash generation. The following discussion of our reportable segments reflects our operationalstructure through March 31, 2011. As previously reported, starting April 1,2011 we have a new operational structure, which features two distinct businessunits in our Devices & Services business - Smart Devices and Mobile Phones -and we will present our financial information and segment discussion in linewith the new organizational structure commencing with our Q2 2011 interimreport. Devices & ServicesNet Sales. The following chart sets out our Devices & Services net sales forthe periods indicated, as well as the year-on-year and sequential growth rates,by category. DEVICES & SERVICES NET SALES BY CATEGORY -----------------------------------------------------------------------------EUR million Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change----------------------------------------------------------------------------Mobile phones1 3 532 3 325 6% 4 092 -14%----------------------------------------------------------------------------Converged mobile devices2 3 555 3 338 6% 4 407 -19%----------------------------------------------------------------------------Total 7 087 6 663 6% 8 499 -17%---------------------------------------------------------------------------- Note 1: Series 30 and Series 40-based devices ranging from basic mobile phonesfocused on voice capability to devices with a number of additionalfunctionalities, such as Internet connectivity, including the services andaccessories sold with them. Note 2: Smartphones and mobile computers, including the services andaccessories sold with them. The following chart sets out Devices & Services net sales for the periodsindicated, as well as the year-on-year and sequential growth rates, bygeographic area. DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA ------------------------------------------------------------------------EUR million Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change-----------------------------------------------------------------------Europe 2 082 2 186 -5% 3 088 -33%-----------------------------------------------------------------------Middle East & Africa 1 088 1 005 8% 1 177 -8%-----------------------------------------------------------------------Greater China 1 902 1 458 30% 1 682 13%-----------------------------------------------------------------------Asia-Pacific 1 317 1 363 -3% 1 603 -18%-----------------------------------------------------------------------North America 140 219 -36% 233 -40%-----------------------------------------------------------------------Latin America 558 432 29% 715 -22%-----------------------------------------------------------------------Total 7 087 6 663 6% 8 499 -17%----------------------------------------------------------------------- Year-on-year, the 6% net sales increase resulted primarily from higher ASPs.Sequentially, the 17% net sales decrease reflected lower ASPs, as well as lowerdevice volumes in most regions. At constant currency, Devices & Services netsales would have increased 1% year-on-year and decreased 16% sequentially. Of our total Devices & Services net sales, services contributed EUR 211 millionin the first quarter 2011, compared with EUR 148 million in the first quarter2010 and EUR 201 million in the fourth quarter 2010. Services billings in thefirst quarter 2011 were EUR 338 million, compared with EUR 228 million in thefirst quarter 2010 and EUR 352 million in the fourth quarter 2010. Volume and Market Share. The following chart sets out our Devices & Servicesvolumes for the periods indicated, as well as the year-on-year and sequentialgrowth rates, by category. DEVICES & SERVICES MOBILE DEVICE VOLUMES BY CATEGORY -----------------------------------------------------------------------------million units Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change----------------------------------------------------------------------------Mobile phones1 84.3 86.3 -2% 95.4 -12%----------------------------------------------------------------------------Converged mobile devices2 24.2 21.5 13% 28.3 -14%----------------------------------------------------------------------------Total 108.5 107.8 1% 123.7 -12%---------------------------------------------------------------------------- Note 1: Series 30 and Series 40-based devices ranging from basic mobile phonesfocused on voice capability to devices with a number of additionalfunctionalities, such as Internet connectivity, including the services andaccessories sold with them. Note 2: Smartphones and mobile computers, including the services andaccessories sold with them. In the first quarter 2011, the overall industry mobile device volumes were 374million units, based on Nokia's preliminary estimate, representing an increaseof 16% year-on-year and a decrease of 7% sequentially. Nokia's preliminaryestimated mobile device market share was 29% in the first quarter 2011, downfrom an estimated 33% in the first quarter 2010 and an estimated 31% in thefourth quarter 2010. Of the total industry mobile device volumes, converged mobile device industryvolumes in the first quarter 2011 increased to 92.3 million units, based onNokia's preliminary estimate, representing an increase of 68% year-on-year and2% sequentially. Nokia's preliminary estimated share of the converged mobiledevice market was 26% in the first quarter 2011, compared with an estimated 41%in the first quarter 2010 and an estimated 31% in the fourth quarter 2010. The following chart sets out our mobile device volumes for the periodsindicated, as well as the year-on-year and sequential growth rates, bygeographic area. DEVICES & SERVICES MOBILE DEVICE VOLUMES BY GEOGRAPHIC AREA ------------------------------------------------------------------------million units Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change-----------------------------------------------------------------------Europe 23.4 23.9 -2% 33.5 -30%-----------------------------------------------------------------------Middle East & Africa 22.2 22.2 0% 22.2 0%-----------------------------------------------------------------------Greater China 23.9 21.1 13% 21.9 9%-----------------------------------------------------------------------Asia-Pacific 27.3 29.2 -7% 31.3 -13%-----------------------------------------------------------------------North America 1.2 2.7 -56% 2.6 -54%-----------------------------------------------------------------------Latin America 10.5 8.7 21% 12.2 -14%-----------------------------------------------------------------------Total 108.5 107.8 1% 123.7 -12%----------------------------------------------------------------------- The 1% year-on-year increase in our global mobile device volumes during thefirst quarter 2011 was driven primarily by an improvement in overall marketconditions, offset by an intense competitive environment and tight componentavailability for certain products. On a sequential basis, the 12% decrease inour global mobile device volumes was primarily due to lower seasonal demand forour devices and an intense competitive environment, offset to some extent byimproved component availability. We expect shortages of certain components tocontinue to impact our mobile device volumes at least through the secondquarter and third quarters of 2011. Average Selling Price. The following chart sets out our Devices & Services ASPfor the periods indicated, as well as the year-on-year and sequential growthrates, by category. DEVICES & SERVICES AVERAGE SELLING PRICE BY CATEGORY -----------------------------------------------------------------------------EUR Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change----------------------------------------------------------------------------Mobile phones1 42 39 9% 43 -2%----------------------------------------------------------------------------Converged mobile devices2 147 155 -6% 156 -6%----------------------------------------------------------------------------Total 65 62 6% 69 -5%---------------------------------------------------------------------------- Note 1: Series 30 and Series 40-based devices ranging from basic mobile phonesfocused on voice capability to devices with a number of additionalfunctionalities, such as Internet connectivity, including the services andaccessories sold with them. Note 2: Smartphones and mobile computers, including the services andaccessories sold with them. The year-on-year 6% increase in our ASP was primarily due to converged mobiledevices representing a greater proportion of our overall mobile device salesand the appreciation of certain currencies against the Euro, offset to someextent by general price erosion. On a sequential basis, the 5% decrease in ourASP was primarily driven by general price erosion, an increased proportion ofsales of lower-priced converged mobile devices, converged mobile devicesrepresenting a smaller proportion of our overall mobile device sales, andforeign exchange hedging, offset to some extent by the appreciation of certaincurrencies against the Euro and an increased proportion of sales ofhigher-priced mobile phones. The 6% year-on-year and sequential decline in our converged mobile devices ASPswas primarily driven by general price erosion and an increase in the proportionof lower-priced converged mobile devices sales during the first quarter 2011.The 9% year-on-year increase in our mobile phones ASPs was primarily driven byan increased proportion of sales of higher-priced mobile phones, offset to someextent by general price erosion. The 2% sequential decrease in our mobilephones ASPs was primarily driven by general price erosion, offset to someextent by an increased proportion of sales of higher-priced mobile phones. Profitability. Devices & Services gross profit (reported and non-IFRS)decreased 4% to EUR 2.1 billion, compared with EUR 2.2 billion in the firstquarter 2010, and decreased 17% compared to EUR 2.5 billion in the fourthquarter 2010. The gross margin (reported and non-IFRS) was 29.1% in the firstquarter 2011, compared with 32.4% in the first quarter 2010 and 29.2% in thefourth quarter 2010. The year-on-year gross margin decline was primarily due tothe appreciation of certain currencies against the Euro, as well as the absenceof a positive impact from foreign exchange hedging, which improved our grossmargin in the first quarter 2010. The impact of these factors was offset tosome extent by an increased proportion of sales of higher margin mobile devicesin the first quarter 2011, compared with the first quarter 2010. Sequentially,the gross margin decline was primarily due to general price erosion beinghigher than cost erosion, offset to a large extent by the smaller negativeone-quarter impact from foreign exchange hedging as well as an increasedproportion of sales of higher margin mobile devices in the first quarter 2011. Devices & Services reported operating profit decreased 17% to EUR 690 million,compared with EUR 831 million in the first quarter 2010, and decreased 32%compared with EUR 1 018 million in the fourth quarter 2010. The reportedoperating margin was 9.7% in the first quarter 2011, compared with 12.5% in thefirst quarter 2010 and 12.0% in the fourth quarter 2010. Devices & Servicesnon-IFRS operating profit decreased 14% to EUR 694 million compared with EUR804 million in the first quarter 2010, and decreased 28% compared with EUR 961million in the fourth quarter 2010. The non-IFRS operating margin was 9.8% inthe first quarter 2011, compared with 12.1% in the first quarter 2010 and 11.3%in the fourth quarter 2010. The year-on-year decrease in non-IFRS operatingprofit was driven primarily by the lower gross margin. Sequentially, thedecrease in non-IFRS operating profit was primarily due to lower net sales,offset to some extent by lower operating expenses. We are targeting to reduce our Devices & Services non-IFRS operating expensesby EUR 1 billion for the full year 2013, compared to the full year 2010 Devices& Services non-IFRS operating expenses of EUR 5.65 billion. This reduction isexpected to come from a variety of different sources and initiatives, includinga reduction in the number of employees and normal personnel attrition, areduction in the use of outsourced professionals, reductions in facility costs,and various improvements in efficiencies. Due to the transition process,generally all current employees can stay on the payroll through the end of theyear 2011, even those possibly impacted by the reductions. NAVTEQNet Sales. First quarter 2011 NAVTEQ reported net sales increased 23%year-on-year to EUR 232 million, compared with EUR 189 million in the firstquarter 2010, and decreased 25% compared to EUR 309 million in the fourthquarter 2010. The year-on-year increase in net sales was primarily driven byimproved sales of map licenses to mobile device customers as well as improvedvehicle sales and higher navigation uptake rates in the automotive industryoffset to some extent by lower personal navigation devices (PNDs) sales.Sequentially, the decrease in net sales was primarily driven by lower seasonalsales in all business segments. At constant currency, NAVTEQ net sales wouldhave increased 20% year-on-year and decreased 26% sequentially. Profitability. In the first quarter 2011, NAVTEQ's gross profit (reported andnon-IFRS) increased 22% to EUR 195 million, compared with EUR 160 million inthe first quarter 2010, and decreased 28% compared with EUR 271 million in thefourth quarter 2010. NAVTEQ's gross margin (reported and non-IFRS) decreased to84.1%, compared to (reported and non-IFRS) 84.7% in the first quarter 2010, anda reported and non-IFRS gross margin of 87.7% in the fourth quarter 2010.Sequentially, the non-IFRS gross margin decline was due to a higher proportionof sales to lower-margin automotive and wireless customers in the first quarter2011. In the first quarter 2011, NAVTEQ's reported operating loss was EUR 62 million,compared with a EUR 77 million loss in the first quarter 2010 and a EUR 19million loss in the fourth quarter 2010. The reported operating margin was-26.7% in the first quarter 2011, compared with -40.7% in the first quarter2010 and -6.1% in the fourth quarter 2010. NAVTEQ's non-IFRS operating profitwas EUR 54 million, compared with EUR 41 million in the first quarter 2010 andEUR 100 million in the fourth quarter 2010. The non-IFRS operating margin was23.3% in the first quarter 2011, compared with 21.7% in the first quarter 2010and 32.4% in the fourth quarter 2010. The year-on-year increase in NAVTEQ'snon-IFRS operating margin was primarily due to higher net sales, offset to someextent by higher operating expenses. Sequentially, the decrease in NAVTEQ'snon-IFRS operating margin was primarily driven by lower net sales and grossmargin, offset to some extent by lower operating expenses. Nokia Siemens NetworksNet Sales. The following chart sets out Nokia Siemens Networks net sales forthe periods indicated, as well as the year-on-year and sequential growth rates,by geographic area. NOKIA SIEMENS NETWORKS NET SALES BY GEOGRAPHIC AREA ------------------------------------------------------------------------EUR million Q1/2011 Q1/2010 YoY Change Q4/2010 QoQ Change-----------------------------------------------------------------------Europe 1 001 1 065 -6% 1 357 -26%-----------------------------------------------------------------------Middle East & Africa 307 297 3% 423 -27%-----------------------------------------------------------------------Greater China 322 275 17% 508 -37%-----------------------------------------------------------------------Asia-Pacific 988 632 56% 978 1%-----------------------------------------------------------------------North America 169 153 10% 226 -25%-----------------------------------------------------------------------Latin America 384 296 30% 469 -18%-----------------------------------------------------------------------Total 3 171 2 718 17% 3 961 -20%----------------------------------------------------------------------- The year-on-year 17% increase in net sales was primarily driven by growth inboth the product and services businesses in most regions. The sequential 20%decrease in net sales was primarily driven by a seasonally weakerinfrastructure market in the first quarter 2011. Of total Nokia SiemensNetworks net sales, services contributed EUR 1.6 billion in the first quarter2011, compared to EUR 1.3 billion in the first quarter 2010 and EUR 1.8 billionin the fourth quarter 2010. At constant currency, Nokia Siemens Networks netsales would have increased 15% year-on-year and decreased 21% sequentially. Profitability. Nokia Siemens Networks reported gross profit increased 8% to EUR847 million compared with EUR 782 million in the first quarter 2010, anddecreased 19% compared with EUR 1 042 million in the fourth quarter 2010. Thereported gross margin was 26.7% in the first quarter 2011, compared with 28.8%in the first quarter 2010 and 26.3% in the fourth quarter 2010. Nokia SiemensNetworks non-IFRS gross profit in the first quarter 2011 increased to EUR 854million, marginally higher compared with EUR 853 million in the first quarter2010, and down 18% compared with EUR 1 045 million in the fourth quarter 2010.The non-IFRS gross margin was 26.9% in the first quarter 2011, compared with31.4% in the first quarter 2010 and 26.4% in the fourth quarter 2010. The loweryear-on-year non-IFRS gross margin in the first quarter 2011 was primarily dueto a continued intense pricing environment in the infrastructure market,particularly in relation to network infrastructure modernization projects. Thehigher sequential non-IFRS gross margin in the first quarter 2011 was primarilydue to improved efficiency in project execution and a more favorable regionalmix, somewhat offset by seasonally weaker net sales. Nokia Siemens Networks first quarter 2011 reported operating loss was EUR 142million, compared with a reported operating loss of EUR 226 million in thefirst quarter 2010 and a reported operating profit of EUR 1 million in thefourth quarter 2010. The reported operating margin was -4.5% in the firstquarter 2011, compared with -8.3% in the first quarter 2010 and 0.0% in thefourth quarter 2010. Nokia Siemens Networks non-IFRS operating profit was EUR 3million in the first quarter 2011, compared with a non-IFRS operating profit ofEUR 15 million in the first quarter 2010 and a non-IFRS operating profit of EUR145 million in the fourth quarter 2010. The non-IFRS operating margin was 0.1%in the first quarter 2011, compared with 0.6% in the first quarter 2010 and3.7% in the fourth quarter 2010. The year-on-year decline in Nokia SiemensNetworks non-IFRS operating profit was primarily due to the lower gross margin,which was offset to some extent by higher net sales. The sequential decrease inNokia Siemens Networks non-IFRS operating profit was primarily due to lower netsales, offset to some extent by lower operating expenses in the first quarter2011. Q1 2011 OPERATING HIGHLIGHTSNokia/Devices & Services- On February 11, 2011, we announced a new strategy, including changes to ourleadership and operational structure designed to accelerate our speed ofexecution in an intensely competitive mobile products market. The main elementsof our new strategy are as follows. - Smartphones: We are forming a broad strategic partnership with Microsoft tocombine our respective complementary assets and expertise with the ambition tobuild a new global mobile ecosystem for smartphones. Under our strategicagreement with Microsoft, the signing of which was announced on April 21, 2011,we plan to adopt, and license from Microsoft, Windows Phone as our primarysmartphone platform. We expect the transition to Windows Phone as our primarysmartphone platform to take about two years. During the transition, we willcontinue to leverage our investment in our Symbian platform for the benefit ofNokia, our customers and consumers, as well as developers. - Mobile phones: In mobile phones, we are renewing our strategy to focus oncapturing volume and value growth by leveraging our innovation and strength indeveloping growth markets to connect the next billion people to their firstInternet and application experience. Nokia recognizes that there is asignificant opportunity to bring people everywhere affordable mobile productsthat enable simple and efficient web browsing, as well as give access to mapsand other applications and innovations. - Next-generation disruptive technologies: Under our new strategy, MeeGobecomes an open-source, mobile operating system project. MeeGo will placeincreased emphasis on longer-term market exploration of next-generationdevices, platforms and user experiences. - Nokia's new strategy is supported by changes in Nokia's leadership,operational structure and approach to focus on speed, accountability andresults. - Effective February 11, 2011, the Nokia Leadership Team replaced the GroupExecutive Board and consists of the following members: Stephen Elop (ChiefExecutive Officer), Esko Aho (Corporate Relations and Responsibility), JuhaAkras (Human Resources), Jerri DeVard (Chief Marketing Officer), Colin Giles(Sales), Richard Green (Chief Technology Officer), Jo Harlow (Smart Devices),Timo Ihamuotila (Chief Financial Officer), Mary McDowell (Mobile Phones), KaiOistamo (Chief Development Officer), Tero Ojanpera (Services & DeveloperExperience, acting), Louise Pentland (Chief Legal Officer) and Niklas Savander(Markets). - The first quarter 2011 was the last under our old operational structure. Asof April 1, 2011, Nokia has a new operational structure, which features twodistinct business units in Devices & Services business: Smart Devices andMobile Phones. They are focusing on Nokia's key business areas: smartphones andmass-market mobile phones. Each unit has profit-and-loss responsibility andend-to-end accountability for the full consumer experience. - Nokia announced the Nokia X1-00, an affordable Series 30-based, music-centricmobile phone equipped with a memory card slot and offering up to 61 daysstandby time on a single charge. Shipments started during April 2011. - Nokia announced the Nokia Astound, a sleek stainless-steel design featuringan 8-megapixel camera with dual-LED flash and 720p HD video capture, a 3.5-inchcapacitive touch AMOLED display and free turn-by-turn navigation. The NokiaAstound became available exclusively from T-Mobile USA in early April, 2011. - Nokia started shipments of the Nokia E7, a business smartphone equipped witha full keyboard and 4 inch touchscreen display featuring Nokia ClearBlacktechnology for improved outdoor visibility. - Since the end of the quarter, Nokia has announced the Nokia E6 and the NokiaX7, two new smartphones aimed at business people and entertainment enthusiastsrespectively. The two devices are the first Nokia smartphones shipping withSymbian Anna, the latest version of the Symbian software featuring new iconsand usability enhancements such as improved text input, a faster browser andrefreshed Ovi Maps. - Nokia continued to develop its Ovi services. Highlights for the quarterincluded: - Store continued to see increased downloads of applications and content. Inearly April 2011 the Store reached up to 5 million downloads a day, comparedwith more than 4 million a day reported in January 2011, boosted by downloadson the latest Symbian devices. Increased demand for apps from the approximate200-million-strong Symbian consumer base has seen the Ovi Store catalog grow tomore than 40 000 apps, with about 1 000 added per week. This momentum hasresulted in 158 developers from 41 countries now each surpassing the onemillion download milestone for their apps. Nokia's new monetizationopportunities for developers are tailored for local markets and includeintegrated operator billing with 112 operators in 36 markets, more than 25times more operator billing integrations than Nokia's nearest competitor. - Maps continued to scale, driven by the release of a new version of Mapsduring February 2011 and the increasing number of Nokia smartphones in themarket enabled for free navigation. In particular, owners of Nokia smartphoneswith the new Symbian software - the Nokia N8, Nokia C6-01, Nokia C7 and NokiaE7 - are spending more time navigating online. Online usage of Maps was highestamong our consumers in China, India and Russia. - Nokia announced plans to establish a new manufacturing site near Hanoi innorthern Vietnam. Nokia plans an initial investment of approximately EUR 200million, with further sizeable investments thereafter. The site would furtherexpand Nokia's manufacturing network, which currently consists of ten majorfacilities in nine countries. NAVTEQ- NAVTEQ announced an expansion of the NAVTEQ LocationPoint Advertising networkwith new publishers worldwide including Appello, Co-Pilot Live, NAVIGON,Ndrive, Poynt, RIM, Samsung and Telmap. - NAVTEQ launched real-time traffic for United Arab Emirates, bringing thescope of the company's NAVTEQ Traffic offering to 23 countries on 5 continents. - NAVTEQ announced its selection by Nissan to provide specialized locationcontent, such as electric charging stations, for the company's 100% electricNissan Leaf. - NAVTEQ announced that Hyundai chose NAVTEQ's Advanced Driver AssistanceSystem (ADAS) content for its new navigation platform allowing it to provide a'green' routing option in addition to the traditional shortest and fastestroutes. - NAVTEQ launched NAVTEQ Destination Maps, which enable orientation, routingand guidance in interior spaces. - NAVTEQ extended its relationship with Panasonic, powering their newest lineof LINUX series digital cameras which uses POI data from the NAVTEQ mapallowing users to geotag photos and images - NAVTEQ announced its selection to power the first line-fit navigation systemin India with the Tata Aria. Nokia Siemens Networks- Nokia Siemens Networks announced that a new purchase price of USD 975 millionhas been agreed for the sale of Motorola Solutions' network assets to NokiaSiemens Networks. All necessary regulatory approvals have been received,including unconditional approval from the Ministry of Commerce in China, andNokia Siemens Networks aims to close the transaction on April 29, 2011. - Nokia Siemens Networks launched Liquid Radio at CTIA in US, a unique radioaccess architecture, involving the deployment of Active Antennae, which enablesa more economic use of network resources through sharing and redistributingcapacity based on user demand. It is supported by the new Single RAN Advanced,Smart WLAN as well as LTE-Advanced carrier aggregation. - In mobile broadband, Nokia Siemens Networks announced LTE-technologypartnership with Telefonica O2 Germany as well as agreements to provide an LTEradio network and services to SK Telecom in Korea, 7 000 LTE base stations toTelecom Italia and an LTE solution to Mosaic Telecom in US. - Nokia Siemens Networks was the first to demonstrate easy upgrade to 400Goptical transport and one of the first telecommunications equipment vendors toparticipate in the large-scale TD-LTE trial with China Mobile. - In services, Nokia Siemens Networks announced the expansion of its GlobalNetwork Solutions Center in Chennai, India, increasing the number ofsubscribers it supports ten-fold. Additionally, Nokia Siemens Networks won acombined network and energy management deal with Vodafone Tanzania and renewedits contract with Protelindo in Indonesia. - In the customer experience management field, Nokia Siemens Networks won dealswith Zain Kuwait for subscriber data management, with Telenor Hungary forautomated mobile device setting and with Vodafone Malta for bill shockprevention. - Nokia Siemens Networks presented several new cloud-based solutions includingan application development platform provided to Indosat in Indonesia and acommunication platform to Cubio in Finland. For more information on the operating highlights mentioned above, please referto related press announcements at the following links: www.nokia.com/press,www.navteq.com/about/press.html, www.nokiasiemensnetworks.com/press FORWARD-LOOKING STATEMENTSIt should be noted that certain statements herein which are not historicalfacts are forward-looking statements, including, without limitation, thoseregarding: A) the expected plans and benefits of our strategic partnership withMicrosoft to combine complementary assets and expertise to form a global mobileecosystem and to adopt Windows Phone as our primary smartphone platform; B) thetiming and expected benefits of our new strategy, including expectedoperational and financial benefits and targets as well as changes in leadershipand operational structure; C) the timing of the deliveries of our products andservices; D) our ability to innovate, develop, execute and commercialize newtechnologies, products and services; E) expectations regarding marketdevelopments and structural changes; F) expectations and targets regarding ourindustry volumes, market share, prices, net sales and margins of products andservices; G) expectations and targets regarding our operational priorities andresults of operations; H) expectations and targets regarding collaboration andpartnering arrangements; I) the outcome of pending and threatened litigation;J) expectations regarding the successful completion of acquisitions orrestructurings on a timely basis and our ability to achieve the financial andoperational targets set in connection with any such acquisition orrestructuring; and K) statements preceded by 'believe,' 'expect,' 'anticipate,''foresee,' 'target,' 'estimate,' 'designed,' 'plans,' 'will' or similarexpressions. These statements are based on management's best assumptions andbeliefs in light of the information currently available to it. Because theyinvolve risks and uncertainties, actual results may differ materially from theresults that we currently expect. Factors that could cause these differencesinclude, but are not limited to: 1) our ability to succeed in creating acompetitive smartphone platform for high-quality differentiated winningsmartphones or in creating new sources of revenue through our partnership withMicrosoft; 2) the expected timing of the planned transition to Windows Phone asour primary smartphone platform and the introduction of mobile products basedon that platform; 3) our ability to maintain the viability of our currentSymbian smartphone platform during the transition to Windows Phone as ourprimary smartphone platform; 4) our ability to realize a return on ourinvestment in MeeGo and next generation devices, platforms and userexperiences; 5) our ability to build a competitive and profitable globalecosystem of sufficient scale, attractiveness and value to all participants andto bring winning smartphones to the market in a timely manner; 6) our abilityto produce mobile phones in a timely and cost efficient manner withdifferentiated hardware, localized services and applications; 7) our ability toincrease our speed of innovation, product development and execution to bringnew competitive smartphones and mobile phones to the market in a timely manner;8) our ability to retain, motivate, develop and recruit appropriately skilledemployees; 9) our ability to implement our strategies, particularly our newmobile product strategy; 10) the intensity of competition in the variousmarkets where we do business and our ability to maintain or improve our marketposition or respond successfully to changes in the competitive environment; 11)our ability to maintain and leverage our traditional strengths in the mobileproduct market if we are unable to retain the loyalty of our mobile operatorand distributor customers and consumers as a result of the implementation ofour new strategy or other factors; 12) our success in collaboration andpartnering arrangements with third parties, including Microsoft; 13) thesuccess, financial condition and performance of our suppliers, collaborationpartners and customers; 14) our ability to source sufficient quantities offully functional quality components, subassemblies and software on a timelybasis without interruption and on favorable terms, including the disruption ofproduction and/or deliveries from any of our suppliers as a result of adverseconditions in the geographic areas where they are located; 15) our ability tomanage efficiently our manufacturing, service creation, delivery and logisticswithout interruption; 16) our ability to ensure the timely delivery ofsufficient volumes of products that meet our and our customers' and consumers'requirements and manage our inventory and timely adapt our supply to meetchanging demands for our products; 17) any actual or even alleged defects orother quality, safety and security issues in our products; 18) any actual oralleged loss, improper disclosure or leakage of any personal or consumer datacollected or made available to us or stored in or through our products; 19) ourability to successfully manage costs, including our ability to achieve targetedcosts reductions and to effectively and timely execute related restructuringmeasures, including personnel reductions; 20) our ability to effectively andsmoothly implement the new operational structure for our devices and servicesbusiness effective April 1, 2011; 21) the development of the mobile and fixedcommunications industry and general economic conditions globally andregionally; 22) exchange rate fluctuations, including, in particular,fluctuations between the euro, which is our reporting currency, and the USdollar, the Japanese yen and the Chinese yuan, as well as certain othercurrencies; 23) our ability to protect the technologies, which we or othersdevelop or that we license, from claims that we have infringed third parties'intellectual property rights, as well as our unrestricted use on commerciallyacceptable terms of certain technologies in our products and services; 24) ourability to protect numerous Nokia, NAVTEQ and Nokia Siemens Networks patented,standardized or proprietary technologies from third-party infringement oractions to invalidate the intellectual property rights of these technologies;25) the impact of changes in government policies, trade policies, laws orregulations and economic or political turmoil in countries where our assets arelocated and we do business; 26) any disruption to information technologysystems and networks that our operations rely on; 27) unfavorable outcome oflitigations; 28) allegations of possible health risks from electromagneticfields generated by base stations and mobile products and lawsuits related tothem, regardless of merit; 29) our ability to achieve targeted costs reductionsand increase profitability in Nokia Siemens Networks and to effectively andtimely execute related restructuring measures; 30) Nokia Siemens Networks'ability to maintain or improve its market position or respond successfully tochanges in the competitive environment; 31) Nokia Siemens Networks' liquidityand its ability to meet its working capital requirements; 32) whether NokiaSiemens Networks' acquisition of the majority of Motorola's wireless networkinfrastructure assets will be completed in a timely manner, or at all, and, ifcompleted, whether Nokia Siemens Networks is able to successfully integrate theacquired business, cross-sell its existing products and services to customersof the acquired business and realize the expected synergies and benefits of theplanned acquisition; 33) Nokia Siemens Networks' ability to timely introducenew products, services, upgrades and technologies; 34) Nokia Siemens Networks'success in the telecommunications infrastructure services market and NokiaSiemens Networks' ability to effectively and profitably adapt its business andoperations in a timely manner to the increasingly diverse service needs of itscustomers; 35) developments under large, multi-year contracts or in relation tomajor customers in the networks infrastructure and related services business;36) the management of our customer financing exposure, particularly in thenetworks infrastructure and related services business; 37) whether ongoing orany additional governmental investigations into alleged violations of law bysome former employees of Siemens AG may involve and affect the carrier-relatedassets and employees transferred by Siemens AG to Nokia Siemens Networks; 38)any impairment of Nokia Siemens Networks customer relationships resulting fromongoing or any additional governmental investigations involving the Siemenscarrier-related operations transferred to Nokia Siemens Networks; as well asthe risk factors specified on pages 12-39 of Nokia's annual report Form 20-Ffor the year ended December 31, 2010 under Item 3D. 'Risk Factors.' Otherunknown or unpredictable factors or underlying assumptions subsequently provingto be incorrect could cause actual results to differ materially from those inthe forward-looking statements. Nokia does not undertake any obligation topublicly update or revise forward-looking statements, whether as a result ofnew information, future events or otherwise, except to the extent legallyrequired. Nokia, Helsinki - April 21, 2011 Media and Investor Contacts:Corporate Communications, tel. +358 7180 34900Investor Relations Europe, tel. +358 7180 34927Investor Relations US, tel. +1 914 368 0555 - Nokia plans to publish its second quarter 2011 results on July 21, 2011.- Nokia's Annual General Meeting will be held on May 3, 2011. www.nokia.comNews Source: NASDAQ OMX 21.04.2011 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: FRLSE Ticker: 0HAFSequence Number: 776Time of Receipt: Apr 21, 2011 12:00:04 End of Announcement DGAP News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a company of EquityStory AG.The issuer is solely responsible for the content of this announcement.
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