21st Jul 2011 11:31
Nokia / Half-yearly Results 21.07.2011 12:31 Dissemination of a UK Regulatory Announcement, transmitted byDGAP - a company of EquityStory AG.The issuer is solely responsible for the content of this announcement.--------------------------------------------------------------------------- 6.7% Devices & Services non-IFRS operating margin, benefiting from IPR royaltyincome related to the second quarter 2011 and settling prior periods Nokia CorporationInterim ReportJuly 21, 2011 at 13.30 (CET+1) This is a summary of the second quarter 2011 interim report published today.The complete second quarter 2011 interim report with tables is available athttp://www.nokia.com/results/Nokia_results2011Q2e.pdf. Investors should notrely on summaries of our interim reports only, but should review the completeinterim reports with tables. Reported and Non-IFRS second quarter 2011 results1,2 --------------------------------------------------------------------------------EUR million Q2/2011 Q2/2010 YoY Q1/2011 QoQ Change Change--------------------------------------------------------------------------------Nokia --------------------------------------------------------------------------------Net sales 9 275 10 003 -7% 10 399 -11%--------------------------------------------------------------------------------Operating profit -487 295 439 --------------------------------------------------------------------------------Operating profit (non-IFRS) 391 660 -41% 704 -44%--------------------------------------------------------------------------------EPS, EUR diluted -0.10 0.06 0.09 --------------------------------------------------------------------------------EPS, EUR diluted (non-IFRS)3 0.06 0.11 -45% 0.13 -54%--------------------------------------------------------------------------------Net cash from operating activities -176 944 -173 --------------------------------------------------------------------------------Net cash and other liquid assets4 3 891 4 088 -5% 6 372 -39%--------------------------------------------------------------------------------Devices & Services5 --------------------------------------------------------------------------------Net sales 5 467 6 799 -20% 7 087 -23%--------------------------------------------------------------------------------Smart Devices net sales 2 368 3 503 -32% 3 528 -33%--------------------------------------------------------------------------------Mobile Phones net sales 2 551 3 190 -20% 3 407 -25%--------------------------------------------------------------------------------Mobile device volume (million units) 88.5 111.0 -20% 108.5 -18%--------------------------------------------------------------------------------Smart Devices volume (million units) 16.7 25.2 -34% 24.2 -31%--------------------------------------------------------------------------------Mobile Phones volume (million units) 71.8 85.8 -16% 84.3 -15%--------------------------------------------------------------------------------Mobile device ASP6 62 61 2% 65 -5%--------------------------------------------------------------------------------Smart Devices ASP6 142 139 2% 146 -3%--------------------------------------------------------------------------------Mobile Phones ASP6 36 37 -3% 40 -10%--------------------------------------------------------------------------------Operating profit -247 643 690 --------------------------------------------------------------------------------Operating profit (non-IFRS) 369 647 -43% 694 -47%--------------------------------------------------------------------------------Operating margin % -4.5% 9.5% 9.7% --------------------------------------------------------------------------------Operating margin % (non-IFRS) 6.7% 9.5% 9.8% --------------------------------------------------------------------------------NAVTEQ --------------------------------------------------------------------------------Net sales 245 252 -3% 232 6%--------------------------------------------------------------------------------Operating profit -58 -81 -62 --------------------------------------------------------------------------------Operating profit (non-IFRS) 53 50 6% 54 -2%--------------------------------------------------------------------------------Operating margin % -23.7% -32.1% -26.7% --------------------------------------------------------------------------------Operating margin % (non-IFRS) 21.5% 19.8% 23.3% --------------------------------------------------------------------------------Nokia Siemens Networks7 --------------------------------------------------------------------------------Net sales 3 642 3 039 20% 3 171 15%--------------------------------------------------------------------------------Operating profit -111 -179 -142 --------------------------------------------------------------------------------Operating profit (non-IFRS) 40 51 -22% 3 1233%--------------------------------------------------------------------------------Operating margin % -3.0% -5.9% -4.5% --------------------------------------------------------------------------------Operating margin % (non-IFRS) 1.1% 1.7% 0.1% -------------------------------------------------------------------------------- Note 1 relating to January-June 2011 results: Nokia reported net sales were EUR19 674 million and reported earnings per share (diluted) were EUR -0.01 for theperiod from January 1 to June 30, 2011. Further information about the resultsfor the period from January 1 to June 30, 2011 can be found on pages 16, 18,26, 27 and 29 of the complete Q2 2011 interim report with tables. Note 2 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 Q2 2011 on pages 4 and 20-22 and 24. Nokiabelieves that these non-IFRS financial measures provide meaningful supplementalinformation to both management and investors regarding Nokia's performance byexcluding the above-described items that may not be indicative of Nokia'sbusiness operating results. These non-IFRS financial measures should not beviewed in isolation or as substitutes to the equivalent IFRS measure(s), butshould be used in conjunction with the most directly comparable IFRS measure(s)in the reported results. A reconciliation of the non-IFRS results to ourreported results for Q2 2011 and Q2 2010 can be found in the tables on pages17, 20-24 of our complete interim report with tables. A reconciliation of ourQ1 2011 non-IFRS results can be found on pages 11-12 and 14-18 of our completeQ1 2011 interim report with tables which was published on April 21, 2011. Note 3 relating to non-IFRS Nokia EPS: Nokia taxes continued to be unfavorablyimpacted by Nokia Siemens Networks taxes as no tax benefits are recognized forcertain Nokia Siemens Networks deferred tax items. In Q2, this was partiallyoffset by lower Devices & Services taxes. If Nokia's estimated long-term taxrate of 26% had been applied, non-IFRS Nokia EPS would have been approximately0.3 Euro cent higher in Q2 2011. Note 4 relating to Nokia net cash and other liquid assets: Calculated as totalcash and other liquid assets less interest-bearing liabilities. Note 5 relating to Devices & Services reporting structure: Effective from April1, 2011, our Devices & Services business includes two new operating andreportable segments - Smart Devices, which focuses on smartphones, and MobilePhones, which focuses on mass market mobile devices - as well as Devices &Services Other. Prior period results for each quarter and the full year 2010and Q1 2011 have been regrouped (on an unaudited basis) for comparabilitypurposes according to the new reporting format. The regrouped financialinformation can be accessed at: http://www.nokia.com/investors Note 6 relating to average selling prices (ASP): Mobile device ASP representstotal Devices & Services net sales (Smart Devices net sales, Mobile Phones netsales, and Devices & Services Other net sales) divided by total Devices &Services volumes. Devices & Services Other net sales includes net sales ofNokia's luxury phone business Vertu and spare parts, as well as intellectualproperty royalty income. Smart Devices ASP represents Smart Devices net salesdivided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phonesnet sales divided by Mobile Phones volumes. Note 7 relating to the acquired Motorola Solutions networks assets: NokiaSiemens Networks operating results for Q2 2011 include the results of theacquired Motorola Solutions networks assets from April 30, 2011. Accordingly,the results of Nokia Siemens Networks for Q2 2011 are not directly comparableto its results for prior periods. Information that excludes the results of theacquired Motorola assets in Q2 2011 is provided in the discussion of NokiaSiemens Networks operating results. Additionally, our complete interim reportwith tables for Q2 2011 includes additional information on the acquisition ofMotorola Solutions' networks assets on pages 31-32. STEPHEN ELOP, NOKIA CEO:The challenges we are facing during our strategic transformation manifested ina greater than expected way in Q2 2011. However, even within the quarter, Ibelieve our actions to mitigate the impact of these challenges have started tohave a positive impact on the underlying health of our business. Mostimportantly, we are making better-than-expected progress toward our strategicgoals. In Q2, our immediate action to manage unexpected sales and inventory patternsenabled us to create healthier sales channel dynamics, which led to greaterbusiness stability in the latter weeks of the quarter. - Most notably we took action in China and Europe to address an inventorybuild-up that occurred in the first quarter of 2011. - We took a more responsive approach to product pricing around the world. - We have shifted our sales focus and marketing resources more towards retailinteractions with consumers. - We made changes in certain critical sales management. During this time of transition, we expect competitive pressures to continue.However, we have a clear strategy to address the concerns about our productcompetitiveness. In Q2, both our Smart Devices and Mobile Phones business unitsmoved forward on their plans. - In Smart Devices, those who already have viewed our early Windows Phone workare very optimistic about the devices Nokia will bring to market and about thelong-term opportunities. Step by step, beginning this year, we plan to have asequence of concentrated product launches in specific countries, systematicallyincreasing the number of countries and launch partners. - In Mobile Phones, early results of the Dual SIM product launches are veryencouraging, and we are on track to deliver more products this year. This shift into the execution of our new strategy also has allowed us toidentify additional opportunities for operational improvement. We areaccelerating our plans for expense reductions, and we now plan to exceed ourprevious target of non-IFRS operating expense reductions in Devices & Servicesof EUR 1 billion for the full year 2013. It was also validated during Q2 that Nokia understands how to take advantage ofour strong intellectual property portfolio. We are well positioned to defendagainst intellectual property claims and to ensure that other industryparticipants are properly licensed. Thus, while our Q2 results were clearly disappointing, we are executing well onthe initiatives that are most important to our longer term competitiveness.Some progress is already evident, and thus we are targeting to end this yearwith more net cash and liquid assets than at the end of Q2 2011. We firmlybelieve that our deliberate and unwavering commitment to making the changesnecessary at Nokia is the right way to deal with the disruptive forces in ourindustry and drive value creation for our shareholders. NOKIA OUTLOOK - Nokia targets Nokia Group net cash and other liquid assets at the end of 2011to be above the EUR 3.9 billion balance at the end of the second quarter 2011. - Due to limited visibility, Nokia is providing a wider than normal range forits Devices & Services non-IFRS operating margin outlook for the third quarter2011. Nokia expects its non-IFRS Devices & Services operating margin in thethird quarter 2011 to be slightly above breakeven, ranging either above orbelow this level by approximately 2 percentage points. This outlook is based onour expectations regarding a number of factors, including: - Competitive industry dynamics;- Nokia's actions to intensify its focus on retail sales marketing to drive netsales; - Improved competitiveness in our Mobile Phones unit due to the ramp up of DualSIM devices; - Timing of our new product shipments; and- The macroeconomic environment. - Nokia is accelerating its plans to reduce its Devices & Services non-IFRSoperating expenses and Nokia now targets to exceed its previous Devices &Services non-IFRS operating expense reduction target of EUR 1 billion for thefull year 2013, compared to the full year 2010 Devices & Services non-IFRSoperating 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 third quarter 2011. - Nokia and Nokia Siemens Networks expect the non-IFRS operating margin inNokia Siemens Networks to be between -3% and breakeven in the third quarter2011. - 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. - The outlook relating to Nokia Siemens Networks includes the impact of theacquisition of Motorola Solutions' networks assets. This is an update to theprevious outlook that did not include the impact of the acquisition of MotorolaSolutions' networks assets. SECOND QUARTER 2011 FINANCIAL HIGHLIGHTS The non-IFRS results exclude: Q2 2011 - EUR 878 million consisting of:- EUR 68 million restructuring charge and other associated items in NokiaSiemens Networks - EUR 297 million restructuring charge in Devices & Services- EUR 275 million accrued Accenture deal consideration in Devices & Services- EUR 41 million impairment of shares in an associated company in Devices &Services - EUR 83 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networksand the acquisition of Motorola's networks assets - EUR 111 million of intangible asset amortization and other purchase priceaccounting related items arising from the acquisition of NAVTEQ - EUR 3 million of intangible assets amortization and other purchase pricerelated items arising from the acquisition of OZ Communications, Novarra andMotally in Devices & Services Q2 2010 - EUR 365 million consisting of:- EUR 114 million restructuring charge and other associated items in NokiaSiemens Networks - EUR 116 million of intangible asset amortization and other purchase priceaccounting related items arising from the formation of Nokia Siemens Networks - EUR 131 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 andMetaCarta in Devices & Services Q1 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 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 Group 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. SECOND QUARTER 2011 NET SALES, REPORTED & CONSTANT CURRENCY1 ---------------------------------------------------------------------- YoY QoQ Change Change---------------------------------------------------------------------Group net sales - reported -7% -11%---------------------------------------------------------------------Group net sales - constant currency1 -7% -9%--------------------------------------------------------------------- ---------------------------------------------------------------------Devices & Services net sales - reported -20% -23%---------------------------------------------------------------------Devices & Services net sales - constant currency1 -20% -21%--------------------------------------------------------------------- ---------------------------------------------------------------------NAVTEQ net sales - reported -3% 6%---------------------------------------------------------------------NAVTEQ net sales - constant currency1 1% 9%--------------------------------------------------------------------- ---------------------------------------------------------------------Nokia Siemens Networks net sales - reported 20% 15%---------------------------------------------------------------------Nokia Siemens Networks net sales - constant currency1 21% 16%--------------------------------------------------------------------- Note 1: Change in net sales at constant currency excludes the impact of changesin exchange rates in comparison to the Euro, our reporting currency. 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 Q2/2011 Q2/2010 YoY Q1/2011 QoQ Change Change --------------------------------------------------------------------------------Net cash from operating -176 944 -173 activities --------------------------------------------------------------------------------Total cash and other liquid 9 358 9 463 -1% 11 056 -15% assets --------------------------------------------------------------------------------Net cash and other liquid 3 891 4 088 -5% 6 372 -39% assets -------------------------------------------------------------------------------- Year-on-year, the decrease in net cash from operating activities in the secondquarter 2011 was due to negative net working capital impacts mainly driven bylower net sales and an unfavorable geographic mix, as well as lower underlyingprofitability. These factors were to some extent offset by higher cash inflowsof IPR royalty income related to the second quarter 2011 and earlier periods,cash inflows related to foreign currency hedging activities and lower incometaxes paid. Sequentially, the decrease in net cash from operating activities inthe second quarter 2011 was due to lower underlying profitability, which wasoffset to some extent by less negative net working capital impacts compared tothe previous quarter, higher cash inflows of IPR royalty income related to thesecond quarter 2011 and earlier periods, cash inflows related to foreigncurrency hedging activities and lower income taxes paid. Total as well as net cash and other liquid assets in the second quarter 2011were somewhat lower compared to the second quarter 2010 primarily due topayment of the dividend, cash outflow related to the acquisition of Motorola'snetworks assets and capital expenditure, offset to a large extent by positiveoverall cash generation. Sequentially, total as well as net cash and otherliquid assets decreased primarily due to payment of the dividend. On asequential basis, net cash and other liquid assets decreased also due to cashoutflow related to the acquisition of Motorola's networks assets that wasfinanced mainly by an increase in short-term interest bearing liabilities. Devices & Services Effective from April 1, 2011, our Devices & Services business includes two newoperating and reportable segments - Smart Devices, which focuses onsmartphones, and Mobile Phones, which focuses on mass market mobile devices -as well as Devices & Services Other. Prior period results for each quarter andthe full year 2010 and Q1 2011 have been regrouped (on an unaudited basis) forcomparability purposes according to the new reporting format. The regroupedfinancial information can be accessed at: http://www.nokia.com/investors The following chart sets out a summary of the results for our Devices &Services business for the periods indicated, as well as the year-on-year andsequential growth rates. DEVICES & SERVICES RESULTS SUMMARY --------------------------------------------------------------------------------- Q2/201 Q2/201 YoY Q1/201 QoQ 1 0 Change 1 Change --------------------------------------------------------------------------------Net sales (EUR millions)1 5 467 6 799 -20% 7 087 -23%--------------------------------------------------------------------------------Mobile device volume (million 88.5 111.0 -20% 108.5 -18% units) --------------------------------------------------------------------------------Mobile device ASP (EUR) 62 61 2% 65 -5%--------------------------------------------------------------------------------Non-IFRS gross margin (%) 31.1% 30.2% 29.1% --------------------------------------------------------------------------------Non-IFRS operating expenses (EUR 1 329 1 425 -7% 1 385 -4% millions) --------------------------------------------------------------------------------Non-IFRS operating margin (%) 6.7% 9.5% 9.8% -------------------------------------------------------------------------------- Note 1: Includes IPR royalty income recognized in Devices & Services Other netsales. Net SalesThe year-on-year and sequential declines in our Devices & Services net salesare discussed below in our operating analysis of our Smart Devices and MobilePhones business units. Our overall Devices & Services net sales in the secondquarter 2011 benefited from the recognition of approximately EUR 430 million ofIPR royalty income related to the second quarter 2011 and earlier periodsrecognized in Devices & Services Other net sales. The following chart sets out the net sales for our Devices & Services businessfor the periods indicated, as well as the year-on-year and sequential growthrates, by geographic area. The IPR royalty income described in the paragraphabove has been allocated to the geographic areas contained in this chart. DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA ----------------------------------------------------------------------------EUR million Q2/2011 Q2/2010 YoY Change Q1/2011 QoQ Change---------------------------------------------------------------------------Europe 1 666 2 173 -23% 2 082 -20%---------------------------------------------------------------------------Middle East & Africa 988 934 6% 1 088 -9%---------------------------------------------------------------------------Greater China 913 1 373 -34% 1 902 -52%---------------------------------------------------------------------------Asia-Pacific 1 085 1 543 -30% 1 317 -18%---------------------------------------------------------------------------North America 88 223 -61% 140 -37%---------------------------------------------------------------------------Latin America 727 553 31% 558 30%---------------------------------------------------------------------------Total 5 467 6 799 -20% 7 087 -23%--------------------------------------------------------------------------- VolumeThe 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 Q2/2011 Q2/2010 YoY Change Q1/2011 QoQ Change---------------------------------------------------------------------------Europe 18.4 26.1 -30% 23.4 -21%---------------------------------------------------------------------------Middle East & Africa 20.5 21.0 -2% 22.2 -8%---------------------------------------------------------------------------Greater China 11.3 19.3 -41% 23.9 -53%---------------------------------------------------------------------------Asia-Pacific 24.5 30.8 -20% 27.3 -10%---------------------------------------------------------------------------North America 1.5 2.6 -42% 1.2 25%---------------------------------------------------------------------------Latin America 12.3 11.2 10% 10.5 17%---------------------------------------------------------------------------Total 88.5 111.0 -20% 108.5 -18%--------------------------------------------------------------------------- On a year-on-year and sequential basis, the declines in our total Devices &Services volumes were driven by declines in both our Smart Devices and MobilePhones volumes, with a greater percentage decline in our Smart Devices volumes. At the end of the first quarter 2011, our sales channel inventories wereslightly above normal levels given then anticipated volumes. During the secondquarter 2011, distributors and operators purchased fewer of our devices acrossour portfolio as they reduced their inventories of Nokia devices. The secondquarter 2011 ended with our sales channel inventories near the midpoint of ournormal range of 4-6 weeks. Due to the devastation caused by the earthquake and tsunami in Japan, we hadpreviously expected our component supply to be adversely impacted in the secondand third quarters of 2011. In the second quarter 2011, we were able toredirect our component requirements to suppliers with production capacity and,in addition, our suppliers in Japan were able to recover faster than Nokiaanticipated. Thus, related to the tragic events in Japan, we did not experiencecomponent constraints in the second quarter 2011, and we do not expect asignificant impact in the third quarter 2011 or going forward. Average Selling PriceOn a year-on-year basis, the overall increase in our Devices & Services ASP inthe second quarter 2011 was driven by the recognition of approximately EUR 430million of IPR royalty income related to the second quarter 2011 and earlierperiods recognized in Devices & Services Other and a positive impact fromforeign currency exchange hedging, partially offset by the lower ASP in MobilePhones and Smart Devices, appreciation of the Euro against certain currencies,and a product mix shift towards Mobile Phones. On a sequential basis, the overall decline in our Devices & Services ASP wasdriven by a product mix shift towards Mobile Phones, the lower ASP in MobilePhones and Smart Devices, and the appreciation of the Euro against certaincurrencies, partially offset by the recognition of approximately EUR 430million of IPR royalty income related to the second quarter 2011 and earlierperiods recognized in Devices & Services Other and a positive impact fromforeign currency exchange hedging. Gross MarginOn both a year-on-year and sequential basis, the increase in our Devices &Services gross margin in the second quarter 2011 was driven by the recognitionof approximately EUR 430 million of IPR royalty income related to the secondquarter 2011 and earlier periods, recognized in Devices & Services Other,partially offset by gross margin declines in both Smart Devices and MobilePhones and a negative impact from foreign currency hedging. Operating ExpensesDevices & Services non-IFRS research and development expenses decreased 9%year-on-year and 10% sequentially due to declines in Devices & Services Otherand Smart Devices research and development expenses, partially offset by anincrease in Mobile Phones research and development expenses. Devices & ServicesOther includes common research and development expenses. The decreases inDevices & Services Other and Smart Devices research and development expenseswere due primarily to a focus on priority projects and cost controls. Theincrease in Mobile Phones research and development expenses was due primarilyto investments to accelerate product development to bring new innovations tothe market faster and at lower price-points, partially offset by a focus onpriority projects and cost controls. Devices & Services non-IFRS sales and marketing expenses decreased 3%year-on-year due to lower spending on sales programs and marketing programs.Devices & Services non-IFRS sales and marketing expenses increased 6%sequentially driven by higher spending on marketing programs, while spending onsales programs was flat. Devices & Services non-IFRS administrative and general expenses decreased 12%year-on-year and sequentially, driven by a strong focus on near-term costcontrols. Devices & Services non-IFRS other income and expense had a slight negativeimpact on profitability in the second quarter 2011 both year-on-year andsequentially due to a variety of individually insignificant changes. Reportedother income and expense was significantly adversely impacted in the secondquarter 2011 primarily as a result of restructuring related expenses discussedbelow, which were recognized in Devices & Services Other. Cost Reduction ActivitiesNokia is accelerating its plans to reduce its Devices & Services non-IFRSoperating expenses and now targets to exceed its previous Devices & Servicesnon-IFRS operating expense reduction target of EUR 1 billion for the full year2013, compared to the full year 2010 Devices & Services non-IFRS operatingexpenses of EUR 5.65 billion. This reduction is expected to come from a varietyof different sources and initiatives, including a reduction in the number ofemployees and normal personnel attrition, a reduction in the use of outsourcedprofessionals, reductions in facility costs, and various improvements inefficiencies. Nokia's cost reduction activities include a strategic collaboration withAccenture to outsource Nokia's Symbian software development and supportactivities to Accenture. Approximately 2 800 Nokia employees are expected totransfer to Accenture at closing, which is expected to take place in the earlypart of October 2011. In addition, we also announced plans to reduce our globalworkforce by about 4 000 employees by the end of 2012, as well as plans toconsolidate the company's research and product development sites so that eachsite has a clear role and mission. During the second quarter 2011, Devices & Services recognized charges relatedto our cost reduction activities of EUR 572 million, and Nokia expects torecognize additional charges in future quarters. Smart Devices The following chart sets out a summary of the results for our Smart Devicesbusiness unit for the periods indicated, as well as the year-on-year andsequential growth rates. SMART DEVICES RESULTS SUMMARY --------------------------------------------------------------------------------- Q2/2011 Q2/2010 YoY Q1/2011 QoQ Change Change --------------------------------------------------------------------------------Net sales (EUR millions)1 2 368 3 503 -32% 3 528 -33%--------------------------------------------------------------------------------Smart Devices volume (million 16.7 25.2 -34% 24.2 -31% units) --------------------------------------------------------------------------------Smart Devices ASP (EUR) 142 139 2% 146 -3%--------------------------------------------------------------------------------Gross margin (%) 25.7% 32.2% 29.8% --------------------------------------------------------------------------------Operating expenses (EUR 752 848 -11% 835 -10% millions) --------------------------------------------------------------------------------Contribution margin (%) -6.2% 8.1% 6.2% -------------------------------------------------------------------------------- Note 1: Does not include IPR royalty income. IPR royalty income is recognizedin Devices & Services Other net sales. Net SalesSmart Devices net sales decreased both year-on-year and sequentially in thesecond quarter 2011 primarily due to significantly lower volumes and, to alesser extent, lower ASP. VolumeThe year-on-year and sequential decreases in our Smart Devices volumes weredriven by the strong momentum of competing smartphone platforms relative to ourSymbian devices, particularly in Europe and China, as well as pricing tacticsby certain competitors. In addition, the sequential decrease in our SmartDevices volumes was driven by distributors and operators purchasing fewer ofour smartphones during the second quarter 2011 as they reduced theirinventories of those devices which were slightly above normal levels at the endof the first quarter 2011, particularly in China. Average Selling PriceSmart Devices ASP increased year-on-year driven by the shipment of new Symbiandevices, partially offset by pressure from competing smartphone platforms,tactical pricing actions, and price aggressive competitors. Smart Devices ASP decreased sequentially driven by pressure from competingsmartphone platforms, tactical pricing actions, and price aggressivecompetitors, partially offset by the shipment of new Symbian devices. Gross MarginThe year-on-year and sequential declines in our Smart Devices gross margin inthe second quarter 2011 were driven by lower volumes, greater price erosionthan cost erosion, and tactical pricing actions for specific products due tothe competitive environment, partially offset by a gross margin benefit due tolower deferral of revenue related to map services sold in combination withdevices. Mobile Phones The following chart sets out a summary of the results for our Mobile Phonesbusiness unit for the periods indicated, as well as the year-on-year andsequential growth rates. MOBILE PHONES RESULTS SUMMARY --------------------------------------------------------------------------------- Q2/2011 Q2/2010 YoY Q1/2011 QoQ Change Change --------------------------------------------------------------------------------Net sales (EUR millions)1 2 551 3 190 -20% 3 407 -25%--------------------------------------------------------------------------------Mobile Phones volume (million 71.8 85.8 -16% 84.3 -15% units) --------------------------------------------------------------------------------Mobile Phones ASP (EUR) 36 37 -3% 40 -10%--------------------------------------------------------------------------------Gross margin (%) 25.1% 27.8% 27.9% --------------------------------------------------------------------------------Operating expenses (EUR 420 374 12% 386 9% million) --------------------------------------------------------------------------------Contribution margin (%) 8.6% 16.1% 16.5% -------------------------------------------------------------------------------- Note 1: Does not include IPR royalty income. IPR royalty income is recognizedin Devices & Services Other net sales. Net SalesOn a year-on-year basis, our Mobile Phones net sales in the second quarter 2011decreased primarily due to lower volumes and, to a less extent, lower ASP. On asequential basis, our Mobile Phones net sales decreased due to lower volumesand lower ASP. VolumeThe year-on-year and sequential declines in our Mobile Phones volumes weredriven by distributors and operators purchasing fewer of our mobile phonesduring the second quarter 2011 as they reduced their inventories of thosedevices which were slightly above normal levels at the end of the first quarter2011. In addition, our lack of Dual SIM phones, a growing part of the market,until late in the second quarter 2011 adversely impacted our Mobile Phonesvolumes during that quarter. Mobile Phones volumes were also adversely affectedby continued pressure from a variety of price aggressive competitors. Average Selling PriceThe year-on-year and sequential declines in our Mobile Phones ASP in the secondquarter 2011 were driven by a recalibration of our prices as general pricecompetition across all price categories increased following a relatively benignpricing environment over the previous three quarters. On a year-on-year andsequential basis, Mobile Phones ASP was also negatively impacted by a productmix shift towards lower-priced mobile phones, reflecting the market trendtowards increasingly affordable smartphones. This was moderated somewhat on ayear-on-year basis by the solid performance of QWERTY products in MobilePhones' portfolio. Gross MarginThe year-on-year decline in our Mobile Phones gross margin was primarily due togeneral declines across the majority of the portfolio, partially offset by thestrong performance of certain new products such as the Nokia C3, C1-01, C2-01,and X2-00. Gross margin was negatively impacted due to greater price erosionthan cost erosion across the portfolio, driven by a recalibration of our pricesin the second quarter of 2011 following a relatively benign pricing environmentover the previous three quarters. Lower volumes also contributed to the grossmargin decline. The sequential decline in our Mobile Phones gross margin was primarily due togreater price erosion than cost erosion across the portfolio, driven by arecalibration of our prices following a relatively benign pricing environmentover the previous three quarters. In addition, the gross margin was negativelyimpacted by lower volumes and tactical pricing actions for specific productsdue to the competitive environment. NAVTEQ On June 22, 2011, we announced plans to create a new Location & Commercebusiness which will combine NAVTEQ and Nokia's social location servicesoperations from Devices & Services. The Location & Commerce business will be anoperating and reportable segment beginning October 1, 2011. In addition to abroad portfolio of products and services for the wider internet ecosystem, theLocation & Commerce business will create integrated social location offeringsin support of Nokia's strategic goal in smartphones, including Nokia productswith Windows Phone, as well as support for bringing the internet to the nextbillion. The following chart sets out a summary of the results for NAVTEQ for theperiods indicated, as well as the year-on-year and sequential growth rates. NAVTEQ RESULTS SUMMARY --------------------------------------------------------------------------------- Q2/201 Q2/201 YoY Q1/201 QoQ 1 0 Change 1 Change --------------------------------------------------------------------------------Net sales (EUR millions) 245 252 -3% 232 6%--------------------------------------------------------------------------------Non-IFRS gross margin (%) 82.9% 81.4% 84.1% --------------------------------------------------------------------------------Non-IFRS operating expenses (EUR 151 153 -1% 142 6% millions) --------------------------------------------------------------------------------Non-IFRS operating margin (%) 21.5% 19.8% 23.3% -------------------------------------------------------------------------------- Net SalesThe year-on-year decrease in NAVTEQ net sales was primarily driven by changesin the foreign currency exchange rate and lower sales of map licenses to mobiledevice customers, partially offset by higher sales of map licenses to vehiclecustomers due to higher consumer uptake of vehicle navigation systems.Sequentially, the increase in NAVTEQ net sales was primarily driven byseasonally higher sales in all customer categories except for mobile devices.At constant currency, NAVTEQ net sales would have increased 1% year-on-year and9% sequentially. Gross MarginOn a year-on-year basis, the increase in NAVTEQ non-IFRS gross margin wasprimarily due to reduced royalty payments to data suppliers. Sequentially, thedecline in NAVTEQ non-IFRS gross margin was primarily due to the annual resetof a royalty contract with a data supplier. Operating ExpensesNAVTEQ non-IFRS research and development expenses were flat year-on-year drivenby increased spending on the development of location content, offset by changesin foreign currency exchange rates. NAVTEQ non-IFRS research and developmentexpenses increased 4% sequentially driven by the timing of projects andincreased spending on the development of location content. NAVTEQ non-IFRS sales and marketing expenses decreased 6% year-on-year drivenby changes in foreign currency exchange rates. NAVTEQ non-IFRS sales andmarketing expenses increased 10% sequentially driven by seasonal increases inmarketing expenses related to map update marketing campaigns. NAVTEQ non-IFRS administrative and general expenses were flat year-on-yeardriven by changes in foreign currency exchange rates and lower occupancy costs,offset by costs related to the forming of the planned Location & Commercebusiness. NAVTEQ non-IFRS administrative and general expenses increased 13%sequentially driven by costs related to the forming of the planned Location &Commerce business. Nokia Siemens Networks Nokia Siemens Networks operating results for the second quarter 2011 reflectthe inclusion of the acquired Motorola Solutions networks assets from April 30,2011. Accordingly, the results of Nokia Siemens Networks for the second quarter2011 are not directly comparable to its results for prior periods. The following chart sets out a summary of the results for Nokia SiemensNetworks for the periods indicated, as well as the year-on-year and sequentialgrowth rates. NOKIA SIEMENS NETWORKS RESULTS SUMMARY --------------------------------------------------------------------------------- Q2/201 Q2/201 YoY Q1/201 QoQ 1 0 Change 1 Change --------------------------------------------------------------------------------Net sales (EUR millions) 3 642 3 039 20% 3 171 15%--------------------------------------------------------------------------------Non-IFRS gross margin (%) 26.6% 30.8% 26.9% --------------------------------------------------------------------------------Non-IFRS operating expenses (EUR 931 898 4% 852 9% millions) --------------------------------------------------------------------------------Non-IFRS operating margin (%) 1.1% 1.7% 0.1% -------------------------------------------------------------------------------- Net SalesThe following chart sets out Nokia Siemens Networks net sales for the periodsindicated, as well as the year-on-year and sequential growth rates, bygeographic area. NOKIA SIEMENS NETWORKS NET SALES BY GEOGRAPHIC AREA ----------------------------------------------------------------------------EUR millions Q2/2011 Q2/2010 YoY Change Q1/2011 QoQ Change---------------------------------------------------------------------------Europe 1 122 1 136 -1% 1 001 12%---------------------------------------------------------------------------Middle East & Africa 389 400 -3% 307 27%---------------------------------------------------------------------------Greater China 403 357 13% 322 25%---------------------------------------------------------------------------Asia-Pacific 973 594 64% 988 -2%---------------------------------------------------------------------------North America 311 181 72% 169 84%---------------------------------------------------------------------------Latin America 444 371 20% 384 16%---------------------------------------------------------------------------Total 3 642 3 039 20% 3 171 15%--------------------------------------------------------------------------- Nokia Siemens Networks completed the acquisition of Motorola Solutions'networks assets on April 29, 2011. As of April 30, 2011, responsibility for supporting customers of MotorolaSolutions' GSM, CDMA, WCDMA, WiMAX and LTE products and services wastransferred to Nokia Siemens Networks. Approximately 6900 employees aretransferring to Nokia Siemens Networks, as well as responsibility forsupporting 50 operators across 52 countries. The acquisition covers a number ofresearch and development facilities, including sites in the United States,China, Russia, India and the UK. The acquisition is expected to strengthenNokia Siemens Networks' market position in key geographic markets, inparticular North America and Japan, as well as with some of the world's majorservice providers. The 20% year-on-year increase in Nokia Siemens Networks net sales in the secondquarter 2011 was primarily driven by growth in both the product and servicesbusinesses in most regions, as well as the contribution from the acquiredMotorola networks assets. Excluding the acquired Motorola networks assets,Nokia Siemens Networks net sales would have increased 13% year-on-year. The 15% sequential increase in Nokia Siemens Networks net sales in the secondquarter 2011 was driven by a seasonally stronger infrastructure market in mostregions as well as the contribution from the acquired Motorola networks assets.Excluding the acquired Motorola networks assets, Nokia Siemens Networks netsales would have increased 8% sequentially. At constant currency, Nokia Siemens Networks net sales would have increased 21%year-on-year and increased 16% sequentially. Gross MarginThe lower year-on-year Nokia Siemens Networks non-IFRS gross margin in thesecond quarter 2011 was primarily due to lower software sales, an unfavorableregional net sales mix and new network infrastructure modernization projects incertain regions. On a year-on-year basis, the acquired Motorola networks assetshad a positive impact on the non-IFRS gross margin of approximately 30 basispoints. The lower sequential Nokia Siemens Networks non-IFRS gross margin in the secondquarter 2011 was primarily due to the negative impact of certain networkmodernization projects, which more than offset the improved regional mix andthe positive impact of approximately 30 basis points from the acquired Motorolanetworks assets. Operating ExpensesExcluding the acquired Motorola networks assets, Nokia Siemens Networksnon-IFRS operating expenses would have decreased 6% year-on-year and decreased1% sequentially. Nokia Siemens Networks non-IFRS research and development expenses increased 6%year-on-year and 9% sequentially. Excluding the acquired Motorola networksassets, Nokia Siemens Networks non-IFRS research & development expenses wouldhave decreased by 6% year-on-year and 3% sequentially driven by ongoing costinitiatives which more than offset increased investments in strategicinitiatives in radio technology. Nokia Siemens Networks non-IFRS sales and marketing expenses decreased 1%year-on-year and increased 7% sequentially. Excluding the acquired Motorolanetworks assets, Nokia Siemens Networks non-IFRS sales and marketing expenseswould have decreased 6% year-on-year and increased 2% sequentially. Theyear-on-year decline was driven by lower pre-sales activities as well asongoing cost savings initiatives. The sequential increase was driven primarilyby pre-sales activities. Nokia Siemens Networks non-IFRS administrative and general expenses increased7% year-on-year and 15% sequentially. Excluding the acquired Motorola networksassets, Nokia Siemens Networks non-IFRS administrative and general expenseswould have decreased 2% year-on-year and increased 4% sequentially. Theyear-on-year decline was driven by ongoing cost initiatives. On a sequentialbasis, the increase was primarily due to higher revenues. Nokia Siemens Networks non-IFRS other income and expense decreased year-on-yearand was flat sequentially due to a variety of individually insignificantchanges. Operating MarginThe lower year-on-year Nokia Siemens Networks non-IFRS operating margin in thesecond quarter 2011 primarily reflected the lower gross margin and increasedoperating expenses and integration costs related to the acquired Motorolanetworks assets. Sequentially, the increase in Nokia Siemens Networks non-IFRSoperating margin reflected the higher net sales, offset to some extent byincreased operating expenses and integration costs related to the acquiredMotorola networks assets. On a year-on-year and sequential basis, the acquired Motorola networks assetshad a negative impact on the non-IFRS operating margin of approximately 50basis points. The impact would have been positive excluding integration-relateditems. Since the end of the quarter, Nokia Siemens Networks has confirmed that areview for assessing private equity interest in the company had been completed.The two current shareholders, Nokia and Siemens, believe they are in the bestposition to further enhance the value of Nokia Siemens Networks and have thusreaffirmed their commitment to the company. Together with Siemens, Nokia isevaluating alternatives that would create an industry leading company withbest-in-class profitability and which is viable on a stand-alone basis. SECOND QUARTER 2011 OPERATING HIGHLIGHTS Nokia- We announced the appointment of Michael Halbherr as Executive Vice Presidentto lead the new Location & Commerce business, which will combine NAVTEQ andNokia's social location services operations from Devices & Services as ofOctober 1, 2011. As of July 1, Halbherr is a member of the Nokia LeadershipTeam, reporting to CEO Stephen Elop. The Location & Commerce business willdevelop a new class of integrated social location products and services forconsumers, as well as platform services and local commerce services for devicemanufacturers, application developers, internet services providers, merchants,and advertisers. - To deliver on its new strategy, Nokia announced plans to align its globalworkforce and consolidate site operations, including plans to reduce its globalworkforce by about 4 000 employees by the end of 2012, with the majority ofreductions in Denmark, Finland and the UK. Devices & Services- We signed a definitive agreement with Microsoft on a partnership that willresult in a new global mobile ecosystem, utilizing the very complementaryassets of both companies. - We announced that we have signed a patent license agreement with Apple. Theagreement resulted in settlement of all patent litigation between thecompanies, including the withdrawal by Nokia and Apple of their respectivecomplaints to the US International Trade Commission. - We started shipping the Nokia E6 and the Nokia X7, two new smartphones aimedat business people and entertainment enthusiasts respectively. The two devicesare the first Nokia smartphones running on Symbian Anna, the latest Symbiansoftware, with new icons and usability enhancements such as improved textinput, a faster browser and refreshed Ovi Maps. - We started shipping Nokia N8s, E7s, C7s and C6-01s with the new Symbian Annasoftware, and announced that, by the end of August, existing owners of thesedevices can also download Symbian Anna. - Nokia and Accenture finalized an agreement for Nokia to outsource Symbiansoftware development and support activities to Accenture. Under the agreement,Accenture will provide Symbian based software development and support servicesto Nokia through 2016. Approximately 2 800 Nokia employees located in China,Finland, India, United Kingdom and the United States, are expected to transferto Accenture at closing, which is expected to take place in the early part ofOctober, 2011. - Nokia introduced the Nokia N9, a pure touch smartphone. The outcome of ourMeeGo efforts, the Nokia N9 comes in a unibody polycarbonate design thatenables superior antenna performance for better reception, better voice qualityand fewer dropped calls; and a smarter all-round experience with NFC forsharing and pairing to accessories. The Nokia N9 also introduces an innovativenew design where the home key - typically located at the bottom of the device -is replaced by a simple gesture: a swipe. - We started shipping the Nokia C2-00, our first Dual SIM mobile phone whichenables users to use two SIM cards in the same device, meaning calls and textmessages can come to either number when the phone is on. The Nokia C2-00 is aSeries 40-based device. - We started shipping the Dual SIM Nokia X1-01, a Series 30-based phoneoptimized for music playback through a powerful built-in speaker. - We further expanded our Dual SIM portfolio with the introduction of the NokiaC2-03, which has unique Dual SIM capabilities. The device enables users topersonalize up to five SIM cards, while it also features our Easy Swaptechnology which makes switching SIM cards simple and quick. - Along with two other new models we introduced in the quarter - the NokiaC2-02 and Nokia C2-06 - the Nokia C2-03 features the new Nokia Browser, whichis designed to provide a more personal and affordable internet experience. TheNokia Browser, which is available in 87 languages, compresses data and can thusreduce the cost of surfing the web. All three new models also feature NokiaMaps for Series 40, which provides an advanced, cost-efficient maps experience.The new Nokia Maps for Series 40 is similar to that available on oursmartphones in that people can view maps and plan routes when the phone is inoffline mode. - We launched photorealistic 3D models of certain metropolitan areas for theweb version of Ovi Maps. This immersive and free feature adds a new dimensionto the Ovi Maps experience and enables people to explore places in a completelydifferent way. - Store continued to see increased downloads of applications and content duringthe quarter. By early July 2011, the Store was attracting more than 6.5 milliondownloads a day, compared with up to 5 million a day reported in April 2011,boosted by downloads on the latest Symbian devices. Increased demand for appsfrom the approximately 225 million-strong Symbian consumer base has seen theStore catalog grow to more than 50 000 apps. - We announced plans to make Qt core to our mobile phones strategy. Fordevelopers, this means a dramatic increase in the distribution and monetizationopportunities for Qt apps. - We announced the release of Qt SDK 1.1 offering one integrated developmentenvironment for creating both consumer applications on Nokia's Symbian platformas well as for desktop applications such as Windows 7, Mac OSX and Linux. Usingthe Qt SDK to build their apps, developers have a complete, easy-to-use tooldesigned to reduce application creation time for Nokia touch-screen devices. NAVTEQ- NAVTEQ launched its LocationPoint mobile ad network in South Africa.- NAVTEQ announced the availability of real-time traffic in Russia and UnitedArab Emirates. The UAE launch coincided with the data being made available onNokia smartphones. - NAVTEQ announced it is supplying map data for new GPS-enabled digital camerasfrom Fujifilm and Olympus Imaging. - NAVTEQ previewed its TPEG-based traffic services which will significantlyreduce costs of delivering traffic and other dynamic data. - NAVTEQ expanded its presence in India with the opening of a second productioncenter and the launch of NAVTEQ Natural Guidance for India. Nokia Siemens Networks- Nokia Siemens Networks completed the acquisition of certain wireless networkinfrastructure assets of Motorola Solutions, paying USD 975 million in cash, onApril 29, 2011. The acquisition is expected to strengthen the company'sposition in North America and Japan, adding approximately 6 900 employeesacross 52 countries. - Nokia Siemens Networks announced several key mobile broadband deals,including a LTE roll-out for LG U+ in Korea, HSPA+ as part of 3G modernizationand expansion for Celcom in Klang Valley, Malaysia, as well as 3G/HSPA networkequipment and related turnkey services for TelCell in the Netherlands Antilles.The company signed a system integration deal with MegaFon to build acountry-wide IP mobile backhaul network in Russia and an exclusive packet coredeal with Optus in Australia. In addition, FASTWEB, an Italian broadbandprovider, selected Nokia Siemens Networks and Juniper Networks to buildadditional network capacity and deliver a Multiservice IP backbone. - SK Telecom in Korea selected Nokia Siemens Networks to provide a 100G-readyoptical network system and INOVENTICA, a Russian infrastructure serviceprovider, will use the company's DWDM optical transport network to offer cloudcomputing services. - Nokia Siemens Networks announced it has invested in ClariPhy Inc., a leadingU.S.-based semiconductor developer for next-generation platforms. - In services, Nokia Siemens Networks announced the start of operations for itsGlobal Network Operations Center (GNOC) in Sao Paulo, Brazil. In China,Shanghai Unicom awarded the company a five-year contract for networkmaintenance services. China Unicom's subsidiary in Anhui province will deployNokia Siemens Networks' Energy Solutions to reduce by 20% total mobile basestation site power consumption. - In the customer experience management field, Nokia Siemens Networks expandedits portfolio with CEM 2.0, which helps operators fully utilize data to improvethe customer experience and their business results. The company announced ZainKuwait is now deploying two CEM platforms, Serve atOnce Traffica and ServeatOnce Intelligence. - Nokia Siemens Networks has signed a contract with Yutong Bus in China toprovide a machine-to-machine (M2M) service platform and develop telematicsapplications based on a cost efficient Software-as-a-Service (SaaS) model. - Nokia Siemens Networks has expanded its Liquid Radio architecture with thelaunch of a new, high power radio module for its Flexi Multiradio Base Stationfamily at CommunicAsia 2011 in Singapore. 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 STATEMENTS It 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 is able to successfully integrate the acquired assets ofMotorola Solutions' networks business, retain existing customers of theacquired business, cross-sell Nokia Siemens Networks' products and services tocustomers of the acquired business and otherwise realize the expected synergiesand benefits of the acquisition; 33) Nokia Siemens Networks' ability to timelyintroduce new products, services, upgrades and technologies; 34) Nokia SiemensNetworks' success in the telecommunications infrastructure services market andNokia Siemens Networks' ability to effectively and profitably adapt itsbusiness and operations in a timely manner to the increasingly diverse serviceneeds of its customers; 35) developments under large, multi-year contracts orin relation to major customers in the networks infrastructure and relatedservices business; 36) the management of our customer financing exposure,particularly in the networks infrastructure and related services business; 37)whether ongoing or any additional governmental investigations into allegedviolations of law by some former employees of Siemens AG may involve and affectthe carrier-related assets and employees transferred by Siemens AG to NokiaSiemens Networks; 38) any impairment of Nokia Siemens Networks customerrelationships resulting from ongoing or any additional governmentalinvestigations involving the Siemens carrier-related operations transferred toNokia Siemens Networks; as well as the risk factors specified on pages 12-39 ofNokia's annual report Form 20-F for the year ended December 31, 2010 under Item3D. 'Risk Factors.' Other unknown or unpredictable factors or underlyingassumptions subsequently proving to be incorrect could cause actual results todiffer materially 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 - July 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 third quarter 2011 results on October 20, 2011. www.nokia.comNews Source: NASDAQ OMX 21.07.2011 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: IRLSE Ticker: 0HAFSequence Number: 842Time of Receipt: Jul 21, 2011 12:30:53 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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