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Nokia 6-K 2012

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic
  4. Graphic

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a -16 or 15d -16 of

the Securities Exchange Act of 1934

 

Report on Form 6-K dated January 26, 2012

(Commission File No. 1-13202)

 

Nokia Corporation

Keilalahdentie 4
02150 Espoo
Finland

(Name and address of registrant’s principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-Fx     Form 40-F: o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes: o     Nox

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes: o     Nox

 

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes: o     Nox

 

Enclosures:

 

Nokia stock exchange release dated January 26, 2012: Nokia Q4 2011 net sales EUR 10.0 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.29)

 

Nokia 2011 net sales EUR 38.7 billion, non-IFRS EPS EUR 0.29 (reported EPS EUR -0.31)

 

 

 



 

 

INTERIM REPORT

 

 

 

Nokia Corporation

 

January 26, 2012 at 13:00 (CET +1)

 

Nokia Q4 2011 net sales EUR 10.0 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.29)

Nokia 2011 net sales EUR 38.7 billion, non-IFRS EPS EUR 0.29 (reported EPS EUR -0.31)

 

·                  Accelerating investment in Lumia range of smartphones, having sold well over 1 million Lumia devices to date

·                  Solid Q4 performance in mobile phones

·                  Strong balance sheet, with net cash and other liquid assets of EUR 5.6 billion at end of Q4 2011

·                  Nokia Board of Directors will propose a dividend of EUR 0.20 per share for 2011 (EUR 0.40 per share for 2010)

 

 

 

Reported and Non-IFRS fourth quarter 2011 results(1)

 

Reported and Non-IFRS full
year 2011 results(1)

 

EUR million

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

2011

 

2010

 

YoY
Change

 

Nokia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

10 005

 

12 651

 

-21

%

8 980

 

11

%

38 659

 

42 446

 

-9

%

Operating profit

 

-954

 

884

 

 

 

-71

 

 

 

-1 073

 

2 070

 

 

 

Operating profit (non-IFRS)

 

478

 

1090

 

-56

%

252

 

90

%

1 825

 

3 204

 

-43

%

EPS, EUR diluted

 

-0.29

 

0.20

 

 

 

-0.02

 

 

 

-0.31

 

0.50

 

 

 

EPS, EUR diluted (non-IFRS)(2)

 

0.06

 

0.22

 

-73

%

0.03

 

100

%

0.29

 

0.61

 

-52

%

Net cash from operating activities

 

634

 

2436

 

-74

%

852

 

-25

%

1 137

 

4 774

 

-76

%

Net cash and other liquid assets(3)

 

5 581

 

6 996

 

-20

%

5 067

 

10

%

5 581

 

6 996

 

-20

%

Devices & Services(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

5 997

 

8 499

 

-29

%

5 392

 

11

%

23 943

 

29 134

 

-18

%

Smart Devices net sales

 

2 747

 

4 396

 

-38

%

2 194

 

25

%

10 820

 

14 874

 

-27

%

Mobile Phones net sales

 

3 040

 

3 948

 

-23

%

2 915

 

4

%

11 930

 

13 696

 

-13

%

Mobile device volume (mn units)

 

113.5

 

123.7

 

-8

%

106.6

 

6

%

417.1

 

452.9

 

-8

%

Smart Devices volume (mn units)

 

19.6

 

28.6

 

-31

%

16.8

 

17

%

77.3

 

103.6

 

-25

%

Mobile Phones volume (mn units)

 

93.9

 

95.0

 

-1

%

89.8

 

5

%

339.8

 

349.2

 

-3

%

Mobile device ASP(5)

 

53

 

69

 

-23

%

51

 

4

%

57

 

64

 

-11

%

Smart Devices ASP(5)

 

140

 

154

 

-9

%

131

 

7

%

140

 

144

 

-3

%

Mobile Phones ASP(5)

 

32

 

42

 

-24

%

32

 

0

%

35

 

39

 

-10

%

Operating profit

 

203

 

1 082

 

-81

%

168

 

22

%

884

 

3 540

 

-75

%

Operating profit (non-IFRS)

 

292

 

1 025

 

-72

%

258

 

13

%

1 683

 

3 403

 

-51

%

Operating margin %

 

3.4

%

12.7

%

 

 

3.1

%

 

 

3.7

%

12.2

%

 

 

Operating margin % (non-IFRS)

 

4.9

%

12.1

%

 

 

4.8

%

 

 

7.0

%

11.7

%

 

 

Location & Commerce(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

306

 

265

 

15

%

282

 

9

%

1 091

 

869

 

26

%

Operating profit

 

-1 205

 

-148

 

 

 

-85

 

 

 

-1 526

 

-663

 

 

 

Operating profit (non-IFRS)

 

29

 

-29

 

 

 

28

 

4

%

48

 

-173

 

 

 

Operating margin %

 

-393.8

%

-55.8

%

 

 

-30.1

%

 

 

-139.9

%

-76.3

%

 

 

Operating margin % (non-IFRS)

 

9.5

%

-10.9

%

 

 

9.9

%

 

 

4.4

%

-19.9

%

 

 

Nokia Siemens Networks(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

3 815

 

3 961

 

-4

%

3 413

 

12

%

14 041

 

12 661

 

11

%

Operating profit

 

67

 

1

 

 

 

-114

 

 

 

-300

 

-686

 

 

 

Operating profit (non-IFRS)

 

176

 

145

 

21

%

6

 

 

 

225

 

95

 

137

%

Operating margin %

 

1.8

%

0.0

%

 

 

-3.3

%

 

 

-2.1

%

-5.4

%

 

 

Operating margin % (non-IFRS)

 

4.6

%

3.7

%

 

 

0.2

%

 

 

1.6

%

0.8

%

 

 

 


Note 1 relating to non-IFRS results: Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i) the formation of Nokia Siemens Networks and ii) all business acquisitions completed after June 30, 2008. More specific information about the exclusions from the non-IFRS results may be found in our complete interim report with tables for Q4 2011 on pages 4-5, 20-22 and 24, and pages 41-43 and 45 for the full years 2011 and 2010.

 

1



 

Nokia believes that these non-IFRS financial measures provide meaningful supplemental information to both management and investors regarding Nokia’s performance by excluding the above-described items that may not be indicative of Nokia’s business operating results. These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure(s), but should be used in conjunction with the most directly comparable IFRS measure(s) in the reported results. A reconciliation of the non-IFRS results to our reported results for Q4 2011 and Q4 2010 can be found in the tables on pages 18 and 20-24 of our complete interim report with tables. A reconciliation of our Q3 2011 non-IFRS results to our reported results can be found on pages 17 and 20-24 of our complete Q3 2011 interim report with tables which was published on October 20, 2011. A reconciliation of our 2011 and 2010 non-IFRS results to our reported results can be found on pages 40-45.

 

Note 2 relating to non-IFRS Nokia EPS: Nokia taxes continued to be unfavorably impacted by Nokia Siemens Networks taxes as no tax benefits are recognized for certain Nokia Siemens Networks deferred tax items. In Q4 2011, the Finnish statutory tax rate change also had a one-quarter negative impact. If Nokia’s estimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS would have been approximately 1.2 Euro cents higher in Q4 2011.

 

Note 3 relating to Nokia net cash and other liquid assets: Calculated as total cash and other liquid assets less interest-bearing liabilities.

 

Note 4 relating to Devices & Services reporting structure: As of April 1, 2011, our Devices & Services business has two operating and reportable segments — Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices — as well as Devices & Services Other.  Prior period results for each quarter and the full year 2010 and Q1 2011 have been regrouped (on an unaudited basis) for comparability purposes according to the new reporting format that became effective on April 1, 2011.

 

Devices & Services prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have also been recasted (on an unaudited basis) for comparability purposes according to the new reporting format that became effective on October 1, 2011. See Note 6 below relating to Location & Commerce.

 

Note 5 relating to average selling prices (ASP): Mobile device ASP represents total Devices & Services net sales (Smart Devices net sales, Mobile Phones net sales, and Devices & Services Other net sales) divided by total Devices & Services volumes. Devices & Services Other net sales includes net sales of Nokia’s luxury phone business Vertu and spare parts, as well as intellectual property royalty income. Smart Devices ASP represents Smart Devices net sales divided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phones net sales divided by Mobile Phones volumes.

 

Note 6 relating to Location & Commerce: On June 22, 2011, we announced plans to create a new Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services, which focuses on location based services and local commerce. The Location & Commerce business is an operating and reportable segment beginning October 1, 2011. From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate reportable segment of Nokia. Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for comparability purposes according to the new reporting format that became effective on October 1, 2011. Recasted reported financial information can be accessed at: http://www.nokia.com/investors.

 

Note 7 relating to Nokia Siemens Networks: Nokia Siemens Networks completed the acquisition of Motorola Solutions’ networks assets on April 30, 2011. Accordingly, the fourth quarter and full year 2011 results of Nokia Siemens Networks are not directly comparable to their prior-year comparatives.

 

STEPHEN ELOP, NOKIA CEO:

 

The fourth quarter of 2011 marked a significant step in Nokia’s transformation. Most notably, in Q4 we introduced new mobile phones and smartphones, which resulted from the strategy shift in our Devices & Services business.

 

Overall, we are pleased with the performance of our mobile phones business, which benefited in Q4 from sequential double-digit percentage growth in our dual SIM business, with particular strength in India, Middle East and Africa and South East Asia. In October, we introduced the Asha 200, 201, 300 and 303, which brought new mobile phones into 76 markets around the world.  We are building on this foundation with R&D investments as we continue our journey to connect the next billion to the Internet.

 

Also in October, just six months after signing an agreement with Microsoft, we introduced our first two devices based on the Windows Phones platform — the Nokia Lumia 800 and the Nokia Lumia 710. We brought the new devices to market ahead of schedule, demonstrating that we are changing the clock speed of Nokia. To date, we have introduced Lumia to consumers in Europe, Hong Kong, India, Russia, Singapore, South Korea and Taiwan.

 

We have also started our important re-entry into the North American market. Earlier this month, T-Mobile started selling the Nokia Lumia 710 as a lead device. We also announced the new Nokia Lumia 900 with AT&T, and immediately received a number of industry awards. The Nokia Lumia 900 is our third Lumia device, our first LTE device designed specifically for the North American market, and AT&T is positioning the Lumia 900 as a lead LTE device.

 

2



 

In the war of ecosystems, clearly there are some strong contenders already on the field. And with Lumia, we have demonstrated that we belong on the field.  Our specific intent has been to establish a beachhead in this war of ecosystems, and country by country that is what we are now accomplishing. To date we have sold well over 1 million Lumia devices. From this beachhead of more than 1 million Lumia devices, you will see us push forward with the sales, marketing and successive product introductions necessary to be successful.  We also plan to bring the Lumia series to additional markets including China and Latin America in the first half of 2012.

 

And, while we progressed in the right direction in 2011, we still have a tremendous amount to accomplish in 2012, and thus, it is my assessment that we are in the heart of our transition.

 

Specifically, changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe that we will sell fewer Symbian devices than we previously anticipated.

 

During Q4, we also formed the Location & Commerce business to drive value from our leading mapping and location-based services platform. We conducted annual impairment testing in Q4 in the context of our new structure and plans for the future, and valued the Location & Commerce business at EUR 4.1 billion, resulting in an impairment of goodwill of EUR 1.1 billion. The Location & Commerce business is an important asset that is bringing differentiating location-based services to Nokia, the Windows Phone ecosystem, and other Microsoft products such as Bing. We believe this is the leading location-based services platform with an opportunity to become tremendously powerful as computing goes more mobile, and location increasingly becomes a critical organizing dimension for a person’s experiences.

 

In summary, with a strong balance sheet, our performance in mobile phones and the new excitement around Lumia, we are confident that we are on the right track to build long-term value.

 

NOKIA OUTLOOK

 

·                  Nokia expects its non-IFRS Devices & Services operating margin in the first quarter 2012 to be around breakeven, ranging either above or below by approximately 2 percentage points. This outlook is based on our expectations regarding a number of factors, including:

 

·                  competitive industry dynamics, particularly impacting our Smart Devices business unit;

·                  a greater-than-normal seasonal decline in Devices & Services net sales;

·                  timing, ramp-up, and consumer demand related to our new products;

·                  the macroeconomic environment.

 

·                  Nokia continues to target to reduce Devices & Services non-IFRS operating expenses by more than EUR 1 billion for the full year 2013, compared to the recasted full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.35 billion.

·                  Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS operating margin to be negative in the earlier part of 2012. In the first quarter of 2012, Nokia Siemens Networks expects substantial charges related to its previously announced global restructuring program aimed at maintaining long-term competitiveness and improving profitability. Due to the nature of the restructuring program as well as prevailing uncertain macroeconomic conditions, the timing of improvements in profitability is uncertain and therefore Nokia Siemens Networks’ non-IFRS operating margin in 2012 is expected to be volatile. Thus, Nokia and Nokia Siemens Networks do not believe it is appropriate to give specific full year or quarterly guidance for Nokia Siemens Networks during 2012.

·                  Nokia Siemens Networks continues to target to reduce its non-IFRS annualized operating expenses and production overheads by EUR 1 billion by the end of 2013, compared to the end of 2011.

 

LONGER TERM OUTLOOK AND TARGETS

Nokia believes it is currently not appropriate to provide annual targets for 2012 mainly for the following reasons:

 

·                  2012 is expected to continue to be a year of transition, during which our Devices & Services business will be subject to risks and uncertainties. Those risks and uncertainties include, among others, consumer demand for our Symbian devices; the timing, ramp-up, and consumer demand related to new products, including our Lumia devices; and further pressure on margins as competitors endeavor to capitalize on our platform and product transition;

·                  Nokia Siemens Networks has announced a new strategy which focuses its business on mobile broadband and services, and has launched an extensive global restructuring program.

 

3



 

·                  Additionally, the macroeconomic environment is making it increasingly difficult to estimate our outlook and provide reliable targets.

 

Longer-term, Nokia targets:

 

·                  Devices & Services net sales to grow faster than the market.

·                  Devices & Services non-IFRS operating margin to be 10% or more.

 

Longer-term, Nokia and Nokia Siemens Networks target:

 

·                  Nokia Siemens Networks’ non-IFRS operating margin to be between 5% and 10%.

 

FOURTH QUARTER 2011 FINANCIAL HIGHLIGHTS

 

The non-IFRS results exclude:

 

Q4 2011 — EUR 1 432 million (net) consisting of:

 

·                  EUR 1 090 million partial impairment of goodwill in Location & Commerce

·                  EUR 25 million restructuring charge in Location & Commerce

·                  EUR 119 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ

·                  EUR 100 million restructuring charge and EUR 36 million associated impairments in Devices & Services

·                  EUR 2 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services

·                  EUR 86 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions’ networks assets

·                  EUR 23 million restructuring charge and other associated items in Nokia Siemens Networks

·                  EUR 49 million benefit from a cartel claim settlement

 

Q4 2010 EUR 206 million (net) consisting of:

 

·                  EUR 28 million restructuring charge and other associated items in Nokia Siemens 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 price accounting related items arising from the formation of Nokia Siemens Networks

·                  EUR 119 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ

·                  EUR 5 million of intangible assets amortization and other purchase price related items arising from the acquisition of OZ Communications, Novarra and Motally in Devices & Services

 

Q4 2010 taxes — EUR 52 million non-cash tax benefit from reassessment of recoverability deferred tax assets in Nokia Siemens Networks

 

Q3 2011 — EUR 323 million (net) consisting of:

 

·                  EUR 26 million restructuring charge and other associated items in Nokia Siemens Networks

·                  EUR 59 million restructuring charge and EUR 54 million associated impairments in Devices & Services

·                  EUR 24 million positive Accenture deal closing adjustment in Devices & Services

·                  EUR 94 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions’ networks assets

·                  EUR 113 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ

·                  EUR 1 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services

 

Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i) the formation of Nokia Siemens Networks and ii) all business acquisitions completed after June 30, 2008.

 

4



 

Nokia Group

Nokia has three businesses that reflect its new operational structure implemented during 2011 — Devices & Services, Location & Commerce and Nokia Siemens Networks.  As of April 1, 2011, Devices & Services has two operating and reportable segments — Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices — as well as Devices & Services Other.  As of October 1, 2011, a new operating and reportable segment, Location & Commerce, was formed by combining the NAVTEQ business with Nokia’s social location services operations, which focuses on location based services and local commerce.  From the third quarter of 2008 until the end of the third quarter of 2011, NAVTEQ was a separate reportable segment of Nokia.

 

Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for comparability purposes according to the new reporting format. Recasted reported financial information can be accessed at: http://www.nokia.com/investors

 

The following chart sets out the year-on-year and sequential growth rates in our net sales on a reported basis and at constant currency for the periods indicated.

 

FOURTH QUARTER 2011 NET SALES, REPORTED & CONSTANT CURRENCY(1)

 

 

 

YoY
Change

 

QoQ
Change

 

Group net sales — reported

 

-21

%

11

%

Group net sales - constant currency(1)

 

-19

%

11

%

Devices & Services net sales — reported

 

-29

%

11

%

Devices & Services net sales - constant currency(1)

 

-26

%

12

%

Nokia Siemens Networks net sales — reported

 

-4

%

12

%

Nokia Siemens Networks net sales - constant currency(1)

 

-5

%

10

%

 


Note 1: Change in net sales at constant currency excludes the impact of changes in exchange rates in comparison to the Euro, our reporting currency.

 

The following chart sets out Nokia Group’s cash flow for the periods indicated and financial position at the end of the periods indicated, as well as the year-on-year and sequential growth rates.

 

NOKIA GROUP CASH FLOW AND FINANCIAL POSITION

 

EUR million

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Net cash from operating activities

 

634

 

2 436

 

-74

%

852

 

-26

%

Total cash and other liquid assets

 

10 902

 

12 275

 

-11

%

10 809

 

1

%

Net cash and other liquid assets(1)

 

5 581

 

6 996

 

-20

%

5 067

 

10

%

 


Note 1: Total cash and other liquid assets minus interest-bearing liabilities.

 

Year-on-year, net cash and other liquid assets decreased by EUR 1.4 billion primarily due to payment of the dividend, cash outflows related to the acquisition of Motorola Solutions’ networks assets, and capital expenditures, partially offset by positive overall net cash from operating activities and a EUR 500 million equity investment in Nokia Siemens Networks by Siemens.

 

Sequentially, net cash and other liquid assets increased by EUR 514 million primarily due to underlying profitability, net working capital improvements in Nokia Siemens Networks, cash inflows related to IPR, positive foreign exchange impact on our cash balances, and the receipt of a platform support payment from Microsoft, partially offset by net cash outflows related to taxes, capital expenditures, and hedging activities.

 

Our broad strategic agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft.  In the fourth quarter 2011, we received the first quarterly platform support payment of USD 250 million (EUR 180 million).  We have a competitive software royalty structure, which includes minimum software royalty commitments. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US Dollars.

 

5



 

Devices & Services

 

As of April 1, 2011, our Devices & Services business has two operating and reportable segments — Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices — as well as Devices & Services Other.  Additionally, in 2011 we announced plans to create a new Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services. The Location & Commerce business is an operating and reportable segment beginning October 1, 2011. Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for comparability purposes according to the new reporting format. Recasted reported financial 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 and sequential growth rates.

 

DEVICES & SERVICES RESULTS SUMMARY

 

 

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Net sales (EUR million)(1)

 

5 997

 

8 499

 

-29

%

5 392

 

11

%

Mobile device volume (million units)

 

113.5

 

123.7

 

-8

%

106.6

 

6

%

Mobile device ASP (EUR)

 

53

 

69

 

-23

%

51

 

4

%

Non-IFRS gross margin (%)

 

25.8

%

29.0

%

 

 

25.7

%

 

 

Non-IFRS operating expenses (EUR million)

 

1 262

 

1 431

 

-12

%

1 126

 

12

%

Non-IFRS operating margin (%)

 

4.9

%

12.1

%

 

 

4.8

%

 

 

 


Note 1: Includes IPR royalty income recognized in Devices & Services Other net sales.

 

Net Sales

The year-on-year decline and sequential increase in our Devices & Services net sales are discussed below in our operating analysis of our Smart Devices and Mobile Phones business units. No non-recurring IPR royalty income was recognized in the fourth quarter 2011, compared with approximately EUR 70 million recognized in the third quarter 2011 and approximately EUR 30 million recognized in the fourth quarter 2010 in Devices & Services Other which benefited our overall Devices & Services results in those quarters.   At constant currency, Devices & Services net sales would have decreased 26% year-on-year and increased 12% sequentially.

 

The following chart sets out the net sales for our Devices & Services business for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area. The IPR royalty income described in the paragraph above has been allocated to the geographic areas contained in this chart.

 

DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA

 

EUR million

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Europe

 

1 922

 

3 088

 

-38

%

1 394

 

38

%

Middle East & Africa

 

1 065

 

1 177

 

-10

%

957

 

11

%

Greater China

 

1 008

 

1 682

 

-40

%

1 240

 

-19

%

Asia-Pacific

 

1 297

 

1 603

 

-19

%

1 197

 

8

%

North America

 

53

 

233

 

-77

%

73

 

-27

%

Latin America

 

652

 

715

 

-9

%

531

 

23

%

Total

 

5 997

 

8 499

 

-29

%

5 392

 

11

%

 

Volume

The following chart sets out the mobile device volumes for our Devices & Services business for the periods indicated, as well as the year—on-year and sequential growth rates, by geographic area.

 

6



 

DEVICES & SERVICES MOBILE DEVICE VOLUMES BY GEOGRAPHIC AREA

 

million units

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Europe

 

25.3

 

33.5

 

-24

%

20.7

 

22

%

Middle East & Africa

 

25.9

 

22.2

 

17

%

26.0

 

0

%

Greater China

 

14.7

 

21.9

 

-33

%

15.9

 

-8

%

Asia-Pacific

 

34.7

 

31.3

 

11

%

32.4

 

7

%

North America

 

0.5

 

2.6

 

-81

%

0.7

 

-29

%

Latin America

 

12.4

 

12.2

 

2

%

10.9

 

14

%

Total

 

113.5

 

123.7

 

-8

%

106.6

 

6

%

 

On a year-on-year basis, the decline in our total Devices & Services volumes in the fourth quarter 2011 was driven by significantly lower Smart Devices volumes. Mobile Phones volumes were approximately flat year-on-year.

 

The sequential increase in our total Devices & Services volumes in the fourth quarter 2011 was driven by higher Mobile Phones and Smart Device volumes supported by an increased seasonal demand for our devices.

 

During the fourth quarter 2011, our overall channel inventory increased on a sequential basis. We ended the fourth quarter 2011 with our sales channel inventories within our normal range of 4-6 weeks.

 

Average Selling Price

On a year-on-year basis, the overall decrease in our Devices & Services ASP in the fourth quarter 2011 was driven primarily by the lower ASP in Mobile Phones and, to a lesser extent, Smart Devices, a higher proportion of Mobile Phones sales, the negative impact from foreign currency hedging and the appreciation of the Euro against certain currencies, partially offset by a positive impact from lower deferral of revenue related to services sold in combination with our devices.

 

On a sequential basis, the overall increase in our Devices & Services ASP in the fourth quarter 2011 was driven primarily by a product mix shift towards Smart Devices, the depreciation of the Euro against certain currencies and a lower deferral of revenue related to services sold in combination with our devices, partially offset by a negative impact from foreign currency hedging, pricing pressure and lower IPR royalty income as the third quarter 2011 ASP benefited from the recognition of non-recurring IPR royalty income discussed above.

 

Gross Margin

On a year-on-year basis, the decline in our Devices & Services non-IFRS gross margin in the fourth quarter 2011 was driven by gross margin declines in both Smart Devices and Mobile Phones, partially offset by higher IPR royalty income.

 

On a sequential basis, the slight increase in our Devices & Services non-IFRS gross margin in the fourth quarter 2011 was driven primarily by gross margin improvements in Mobile Phones, almost entirely offset by the gross margin decline in Smart Devices and lower IPR royalty income.

 

Operating Expenses

Devices & Services non-IFRS research and development expenses decreased 16% year-on-year due to declines in Smart Devices and Devices & Services Other research and development expenses, partially offset by a year-on-year increase in Mobile Phones research and development expenses. The decreases in Smart Devices and Devices & Services Other research and development expenses were due primarily to a focus on priority projects and cost controls. The increase in Mobile Phones research and development expenses was primarily due to investments in product development to bring new innovations to the market in support of our strategy to bring internet to the next billion, partially offset by a focus on priority projects and cost controls.

 

On a sequential basis, Devices & Services non-IFRS research and development expenses increased by 12% primarily due to an increase in Mobile Phones research and development expenses as we invested to support our Internet for the next billion strategy.

 

Devices & Services non-IFRS sales and marketing expenses decreased 5% year-on-year, primarily due to lower sales, and increased 19% sequentially. The sequential increase was primarily driven by higher marketing expenses, particularly relating to our new smartphone launches in Smart Devices.

 

7



 

Devices & Services non-IFRS administrative and general expenses decreased 28% year-on-year and 22% sequentially. In the fourth quarter 2011, Devices & Services non-IFRS other income and expense had a slight positive year-on-year and sequential impact on profitability. Reported other income and expense was significantly adversely impacted in the fourth quarter 2011 primarily as a result of restructuring-related expenses discussed below, which were recognized in Devices & Services Other, partially offset by a benefit related to a cartel claim settlement.

 

Cost Reduction Activities and Planned Operational Adjustments

We are continuing to target to reduce our Devices & Services non-IFRS operating expenses by more than EUR 1 billion for the full year 2013, compared to the recasted full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.35 billion. This reduction is expected to come from a variety of different sources and initiatives, including a planned reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.

 

During the fourth quarter 2011, Devices & Services recognized net charges of EUR 136 million related to restructuring activities, which included restructuring charges and associated impairments. As of the end of the fourth quarter 2011, we had recognized cumulative charges of EUR 797 million related to restructuring activities in 2011. While the total extent of the restructuring activities is still to be determined, we currently anticipate cumulative charges in Devices & Services of around EUR 900 million before the end of 2012. We also believe total cash outflows related to our Devices & Services restructuring activities will be below the level of the cumulative charges related to these restructuring activities.

 

Smart Devices

 

The following chart sets out a summary of the results for our Smart Devices business unit for the periods indicated, as well as the year-on-year and sequential growth rates.

 

SMART DEVICES RESULTS SUMMARY

 

 

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Net sales (EUR millions)(1)

 

2 747

 

4 396

 

-38

%

2 194

 

25

%

Smart Devices volume (million units)

 

19.6

 

28.6

 

-31

%

16.8

 

17

%

Smart Devices ASP (EUR)

 

140

 

154

 

-9

%

131

 

7

%

Gross margin (%)

 

19.9

%

28.7

%

 

 

20.7

%

 

 

Operating expenses (EUR millions)

 

732

 

899

 

-19

%

656

 

12

%

Contribution margin (%)

 

-7.0

 

11.6

%

 

 

-8.7

%

 

 

 


Note 1: Does not include IPR royalty income. IPR royalty income is recognized in Devices & Services Other net sales.

 

Net Sales

The year-on-year decline in our Smart Devices net sales in the fourth quarter 2011 was primarily due to significantly lower volumes. On a sequential basis, the increase in our Smart Devices net sales in the fourth quarter 2011 was due to the higher volumes and ASP.

 

Volume

The year-on-year decline in our Smart Devices volumes in the fourth quarter 2011 continued to be driven by the strong momentum of competing smartphone platforms relative to our Symbian devices in all regions, particularly in Europe.

 

On a sequential basis, the increase in our Smart Devices volumes in the fourth quarter 2011 was primarily driven by the broader availability throughout the quarter of the Nokia N9 and the shipments during the quarter of the Nokia Lumia 800 and 710 in selected markets, as well as increased seasonal demand for our devices.

 

Average Selling Price

The year-on-year decline in our Smart Devices ASP in the fourth quarter 2011 was driven primarily by a higher proportion of sales of lower priced Symbian devices and price erosion due to the competitive environment, as well as the negative impact from foreign currency hedging. Our ASP in the fourth quarter 2011 benefited from the

 

8



 

sales of the higher priced Nokia N9 and Nokia Lumia devices and a lower deferral of revenue related to services sold in combination with our devices.

 

Sequentially, the increase in our Smart Devices ASP in the fourth quarter 2011 was driven primarily by a positive mix shift towards our newer higher priced smartphones, the depreciation of the Euro against certain currencies and the lower deferral of revenue related to services sold in combination with our devices, partially offset by price erosion and the negative impact from foreign currency hedging.

 

Gross Margin

The year-on-year decline in our Smart Devices gross margin in the fourth quarter 2011 was driven primarily by greater price erosion than cost erosion due to the competitive environment and the Symbian related allowances discussed below, partially offset by the lower deferral of revenue related to services sold in combination with our devices and the positive impact from foreign currency hedging.

 

On a sequential basis, the decline in our Smart Devices gross margin in the fourth quarter 2011 was driven primarily by the Symbian related allowances discussed below, greater price erosion than cost erosion, and the negative impact from foreign currency hedging, which partially offset the positive impact from the lower deferral of revenue related to services sold in combination with our devices and lower fixed manufacturing costs.

 

Following the announcement of our strategic partnership with Microsoft in February 2011, our strategy included the expectation to sell approximately 150 million more Symbian devices in the years to come. However, changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths, which has contributed to a faster decline of our Symbian volumes than we anticipated.  We expect this trend to continue in 2012. To maximize the value of the Symbian asset going forward, we expect to continue shipping Symbian devices in specific regions and distribution channels, as well as to continue to provide software support to our Symbian customers through 2016. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe we will sell fewer Symbian devices than previously anticipated. Thus, in the fourth quarter 2011, we recognized allowances for excess component inventory and future purchase commitments related to Symbian.

 

Mobile Phones

 

The following chart sets out a summary of the results for our Mobile Phones business unit for the periods indicated, as well as the year-on-year and sequential growth rates.

 

MOBILE PHONES RESULTS SUMMARY

 

 

 

Q4/2011

 

Q4/2010

 

YoY
Change 

 

Q3/2011

 

QoQ
Change

 

Net sales (EUR millions)(1)

 

3 040

 

3 948

 

-23

%

2 915

 

4

%

Mobile Phones volume (million units)

 

93.9

 

95.0

 

-1

%

89.8

 

5

%

Mobile Phones ASP (EUR)

 

32

 

42

 

-24

%

32

 

0

%

Gross margin (%)

 

27.7

%

28.5

%

 

 

23.6

%

 

 

Operating expenses (EUR million)

 

429

 

410

 

5

%

404

 

6

%

Contribution margin (%)

 

13.5

%

18.1

%

 

 

10.1

%

 

 

 


Note 1: Does not include IPR royalty income. IPR royalty income is recognized in Devices & Services Other net sales.

 

Net Sales

On a year-on-year basis, our Mobile Phones net sales in the fourth quarter 2011 decreased due to the lower ASP.  On a sequential basis, the increase in our Mobile Phones net sales in the fourth quarter 2011 was due to higher volumes.

 

9



 

Volume

Mobile Phones volumes in the fourth quarter 2011 were approximately flat year-on-year. This was primarily driven by our reduced portfolio of higher priced mobile phones compared to the fourth quarter 2010, almost entirely offset by a portfolio renewal, such as the broad availability of dual SIM devices, and higher volumes at lower price points in the fourth quarter 2011.

 

On a sequential basis, the increase in our Mobile Phones volumes in the fourth quarter 2011 was primarily driven by the broader availability of our dual SIM devices as well as the ongoing product renewal across the mobile phones portfolio, and to a lesser extent from higher seasonal demand for our mobile products.

 

Average Selling Price

The year-on-year decline in our Mobile Phones ASP in the fourth quarter 2011 was primarily driven by an increased proportion of sales of lower priced devices, the negative impact from foreign currency hedging and the appreciation of the Euro against certain currencies.

 

On a sequential basis, our Mobile Phones ASP was unchanged with relatively stable prices across the portfolio. The negative impact from foreign currency hedging in the fourth quarter 2011 was offset by the deprecation of the Euro compared to certain currencies and the lower deferral of revenue related to services sold in combination with our devices.

 

Gross Margin

The year-on-year decline in our Mobile Phones gross margin in the fourth quarter 2011 was primarily due to greater price erosion than cost erosion and the appreciation of the Euro against certain currencies partially offset by a positive mix shift towards higher margin mobile phones, the positive impact from foreign currency hedging, and the lower deferral of revenue related to services sold in combination with our devices.

 

The sequential increase in our Mobile Phones gross margin in the fourth quarter 2011 primarily reflected the positive impact from foreign currency hedging, greater cost erosion than price erosion, the lower deferral of revenue related to services sold in combination with our devices, lower warranty costs and more efficient utilization of manufacturing capacity, partially offset by the depreciation of the Euro against certain currencies.

 

Location & Commerce

 

On June 22, 2011, we announced plans to create a new Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services. The Location & Commerce business is an operating and reportable segment beginning October 1, 2011. In addition to a broad portfolio of products and services for the wider internet ecosystem, the Location & Commerce business is creating integrated social location offerings in support of Nokia’s strategic goal in smartphones, including the Nokia experience with Windows Phone, as well as support for bringing the internet to the next billion. From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate reportable segment of Nokia. Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for comparability purposes according to the new reporting format that became effective on October 1, 2011. Recasted reported financial information can be accessed at: http://www.nokia.com/investors.

 

The following chart sets out a summary of the results for Location & Commerce for the periods indicated, as well as the year-on-year and sequential growth rates.

 

LOCATION & COMMERCE RESULTS SUMMARY

 

 

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Net sales (EUR millions)

 

306

 

265

 

15

%

282

 

9

%

Non-IFRS gross margin (%)

 

77.8

%

82.6

%

 

 

81.6

%

 

 

Non-IFRS operating expenses (EUR millions)

 

206

 

246

 

-16

%

201

 

2

%

Non-IFRS operating margin (%)

 

9.5

%

-10.9

%

 

 

9.9

%

 

 

 

10



 

Net Sales

The year-on-year increase in Location & Commerce net sales in the fourth quarter 2011 was primarily driven by higher recognition of deferred revenue related to sales of map platform licenses to Smart Devices and, to a lesser extent, by higher sales of map content licenses to vehicle customers due to higher consumer uptake of vehicle navigation systems, partially offset by lower sales to portable navigation devices (PND) customers.

 

Sequentially, the increase in Location & Commerce net sales in the fourth quarter 2011 was primarily due to seasonally strong sales of map content licenses in the vehicle segment due to higher consumer uptake of vehicle navigation systems and increased sales of updates.

 

Gross Margin

On a sequential basis, the decline in Location & Commerce non-IFRS gross margin in the fourth quarter 2011 was primarily due to an increased proportion of lower gross margin sales and a shift of research and development operating expenses to cost of sales as a result of the divestiture of the media advertising business.

 

On a year-on-year basis, the decline in Location & Commerce non-IFRS gross margin in the fourth quarter 2011 was primarily due to a shift of research and development operating expenses to cost of sales as a result of the divestiture of the media advertising business.

 

Operating Expenses

Location & Commerce non-IFRS research and development expenses decreased 16% year-on-year reflecting a shift in expenses from research and development to costs of sales related to the divestiture of the media advertising business. Location & Commerce non-IFRS research and development expenses increased 1% sequentially primarily driven by the timing of projects related to product development.

 

Location & Commerce non-IFRS sales and marketing expenses decreased 22% year-on-year primarily driven by lower spending on product marketing. Location & Commerce non-IFRS sales and marketing expenses increased 6% sequentially, primarily driven by seasonal increases in marketing expenses related to map update marketing campaigns.

 

Location & Commerce non-IFRS administrative and general expenses decreased 5% year-on-year primarily driven by a focus on cost controls. Location & Commerce non-IFRS administrative and general expenses increased 13% sequentially primarily driven by increased depreciation related to the closure of offices.

 

In the fourth quarter 2011, we conducted our annual impairment testing to assess if events or changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable.  As a result, we recorded a charge to operating profit of EUR 1 090 million for the impairment of goodwill in our Location & Commerce business. The impairment charge is based on our estimate that the recoverable amount of Location & Commerce is EUR 4.1 billion. After the impairment charge, the carrying amount of goodwill for Location & Commerce is EUR 3.3 billion. The impairment negatively impacted our reported EPS by EUR 0.29.

 

The impairment charge is the result of an evaluation of the projected financial performance of our Location & Commerce business. This takes into consideration the market dynamics in digital map data and related location-based content markets, including our estimate of the market moving long-term from fee-based towards advertising-based models especially in some more mature markets. It also reflects recently announced results and related competitive factors in the local search and advertising market resulting in lower estimated growth prospects from our location-based assets integrated with different advertising platforms. After consideration of all relevant factors, we reduced the net sales projections for Location & Commerce which, in turn, reduced projected profitability and cash flows.

 

The Location & Commerce business is an important asset that is bringing differentiating location-based services to Nokia, the Windows Phone ecosystem, and other Microsoft products such as Bing. We believe this is the leading location-based services platform with an opportunity to become tremendously powerful as computing goes more mobile.

 

11



 

Nokia Siemens Networks

 

Nokia Siemens Networks completed the acquisition of Motorola Solutions’ networks assets on April 30, 2011. Accordingly, the results of Nokia Siemens Networks for the fourth quarter 2011 are not directly comparable to its results for the fourth quarter 2010.

 

The following chart sets out a summary of the results for Nokia Siemens Networks for the periods indicated, as well as the year-on-year and sequential growth rates.

 

NOKIA SIEMENS NETWORKS RESULTS SUMMARY

 

 

 

Q4/2011

 

Q4/2010

 

YoY
Change 

 

Q3/2011

 

QoQ
Change

 

Net sales (EUR millions)

 

3 815

 

3 961

 

-4

%

3 413

 

12

%

Non-IFRS gross margin (%)

 

29.2

%

26.4

%

 

 

26.8

%

 

 

Non-IFRS operating expenses (EUR millions)

 

943

 

881

 

7

%

936

 

1

%

Non-IFRS operating margin (%)

 

4.6

%

3.7

%

 

 

0.2

%

 

 

 

Net Sales

The following chart sets out Nokia Siemens Networks net sales for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area.

 

NOKIA SIEMENS NETWORKS NET SALES BY GEOGRAPHIC AREA

 

EUR millions

 

Q4/2011

 

Q4/2010

 

YoY
Change

 

Q3/2011

 

QoQ
Change

 

Europe

 

1 272

 

1 357

 

-6

%

1 074

 

18

%

Middle East & Africa

 

394

 

423

 

-7

%

301

 

31

%

Greater China

 

438

 

508

 

-14

%

302

 

45

%

Asia-Pacific

 

909

 

978

 

-7

%

978

 

-7

%

North America

 

293

 

226

 

30

%

304

 

-4

%

Latin America

 

509

 

469

 

9

%

454

 

12

%

Total

 

3 815

 

3 961

 

-4

%

3 413

 

12

%

 

The year-on-year decrease in Nokia Siemens Networks’ net sales in the fourth quarter 2011 was driven primarily by a decline in sales of infrastructure equipment, which more than offset the contribution from the acquired Motorola Solutions networks assets and a slight increase in sales of services. Excluding the acquired Motorola Solutions networks assets, net sales would have decreased by 11% year-on-year. The sequential increase in Nokia Siemens Networks’ net sales in the fourth quarter 2011 was driven primarily by industry seasonality. Services represented slightly over 50% of Nokia Siemens Networks’ net sales in the fourth quarter 2011.

 

At constant currency, Nokia Siemens Networks’ net sales would have decreased 5% year-on-year and increased 10% sequentially.

 

Gross Margin

The higher year-on-year and sequential Nokia Siemens Networks’ non-IFRS gross margin in the fourth quarter 2011 was primarily due to higher software sales, improved performance in services and the contribution from the acquired Motorola assets.

 

Operating Expenses

 

Nokia Siemens Networks’ non-IFRS research and development expenses increased 10% year-on-year primarily due to the addition of research and development operations relating to the acquired Motorola Solutions networks assets as well as investments in strategic initiatives. On a sequential basis, Nokia Siemens Networks’ non-IFRS research and development expenses increased 2% driven by higher seasonal revenues, largely offset by cost control initiatives and focus on strategic investments.

 

Nokia Siemens Networks’ non-IFRS sales and marketing expenses increased 1% year-on-year primarily due to the addition of sales and marketing operations relating to the acquired Motorola Solutions networks assets, partially offset

 

12



 

by cost control initiatives. On a sequential basis, Nokia Siemens Networks non-IFRS sales and marketing expenses decreased 1% reflecting cost control initiatives.

 

Nokia Siemens Networks’ non-IFRS administrative and general expenses increased 8% year-on-year, reflecting the higher net sales and the addition of Motorola Solutions’ network assets. Sequentially, Nokia Siemens Networks non-IFRS administrative and general expenses decreased 1%.

 

The year-on-year improvement in Nokia Siemens Networks’ non-IFRS other income for the fourth quarter 2011 primarily reflected lower indirect tax provisions as well as lower allowances for doubtful accounts. Sequentially, Nokia Siemens Networks’ non-IFRS other income decreased primarily due to higher indirect tax provisions and some write-offs.

 

Operating Margin

The higher year-on-year Nokia Siemens Networks non-IFRS operating margin in the fourth quarter 2011 primarily reflected the higher gross margin, partially offset by increased operating expenses.

 

The sequential increase in Nokia Siemens Networks’ non-IFRS operating margin in the fourth quarter 2011 primarily reflected the high net sales and gross margin, as well strong operating expense control.

 

Strategy Update and Global Restructuring Program

On November 23, 2011, Nokia Siemens Networks announced its strategy to focus on mobile broadband and services and the launch of an extensive global restructuring program.

 

Nokia Siemens Networks plans to realign its business to focus on mobile broadband (including optical), customer experience management and services. Nokia Siemens Networks’ services organization will further strengthen its global delivery system. Business areas not consistent with the new strategy are planned to be divested or managed for value. Quality and innovation will continue to be priorities for the company, with ongoing investment in both areas.

 

Nokia Siemens Networks targets to reduce its non-IFRS annualized operating expenses and production overheads by EUR 1 billion by the end of 2013, compared to the end of 2011. While these savings are expected to come largely from organizational streamlining, the company will also target areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses, and a significant reduction of suppliers in order to further lower costs and improve quality.

 

Nokia Siemens Networks plans to reduce its global workforce by approximately 17 000 by the end of 2013. These planned reductions are expected to be driven by aligning the company’s workforce with its new strategy as well as through a range of productivity and efficiency measures. These planned measures are expected to include elimination of the company’s matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of Motorola’s wireless assets, efficiencies in service operations, and company-wide process simplification.

 

Nokia Siemens Networks will begin the process of engaging with employee representatives in accordance with country-specific legal requirements to find socially responsible means to address these reduction needs. More information will be shared in impacted countries as the process proceeds. In order to reduce the impact of the planned reductions, Nokia Siemens Networks intends to launch locally led programs at the most affected sites to provide re-training and re-employment support.

 

In the first quarter of 2012, Nokia Siemens Network expects substantial charges related to this restructuring program.

 

FOURTH QUARTER 2011 OPERATING HIGHLIGHTS

 

Devices & Services

 

·                  Nokia announced the Nokia Lumia 800 and Nokia Lumia 710, the first two Nokia smartphones based on Windows Phone. The Lumia range is designed to bring consumers attractive industrial design, a fast social and Internet experience, leading imaging capabilities as well as signature Nokia experiences optimized for Windows Phone,

 

13



 

such as Nokia Drive and Mix Radio. By the end of the quarter, the Nokia Lumia 800, which features a 3.7 inch AMOLED ClearBlack curved display, was on sale in France, Germany, Hong Kong, India, Italy, the Netherlands, Russia, Singapore, Spain, Taiwan and the United Kingdom. Since the end of the year, the Lumia 800 has also gone on sale in Denmark, South Korea, Sweden and Switzerland. By the end of the fourth quarter, the Lumia 710 was on sale in Hong Kong, India, Italy, Russia, Singapore and Taiwan. Since the end of the year, the Lumia 710 has also gone on sale in Germany, Spain and the United States, where it is being offered exclusively through T-Mobile.

·                  Since the end of the quarter, Nokia has announced the Nokia Lumia 900, the first of Nokia’s Windows Phone-based range to feature high-speed LTE connectivity, and which will go on sale in early 2012 in the United States exclusively through AT&T.

·                 Nokia announced four new Series 40-based mobile phones: the Nokia Asha 300, Asha 303, Asha 200 and Asha 201. Each phone supports Nokia’s aim to connect the next billion consumers with devices which offer high-quality, stylish designs, with the best access to social networks and the Internet. The Nokia Asha 300, Asha 303 and Asha 200 — also Nokia’s latest dual SIM device — started shipping during the fourth quarter of 2011, while the Nokia Asha 201 is expected to begin shipping in the first quarter of 2012.

·                  Nokia announced and started shipments of the Nokia 603, an affordable no-compromise smartphone featuring simple pairing, sharing and tag reading with NFC and running on the latest Symbian Belle platform. Nokia also launched the Nokia Luna Bluetooth Headset designed as an in-ear device with NFC pairing capabilities.

·                  Nokia announced and began shipments of two high performance audio headsets, the Nokia Purity HD Stereo Headset by Monster and the in-ear Nokia Purity Stereo Headset by Monster.

 

Location & Commerce

 

·                  Location & Commerce made available Nokia Maps and Nokia Drive for Nokia’s new Lumia smartphones. Nokia Maps is a mobile application that gives people new ways to discover and explore the world around them, as well as enabling them to search for addresses and places of interest. Nokia Drive is a dedicated in-car navigation application, equivalent to a fully-fledged PND, including voice-guided navigation in multiple languages for more than 100 countries, 2D and 3D map views and day and night modes.

·                  Location & Commerce launched Nokia Pulse, an application that enables people to instantly share their location or other information with family, friends or any other pre-defined group.

·                  Location & Commerce commercially released Nokia Maps 3.08 for Symbian, providing better and faster ways to find places and the best way to get there.

·                  Location & Commerce launched Nokia Maps 3D at maps.nokia.com/3D with search, routing and sharing functionality.

·                  Location & Commerce began powering Yahoo! Maps.

·                  NAVTEQ was selected by Ford Motor Company to be its exclusive map supplier for the SYNC MyFord Touch navigation system. The agreement positions NAVTEQ as the map data provider for the system in North America, Latin America, the Middle East, Russia and Europe.

·                  NAVTEQ divested its media advertising business to Matchbin, a provider of content management, advertising and local marketplace solutions for media companies.

 

Nokia Siemens Networks

 

·                  On November 23, 2011, Nokia Siemens Networks announced a new strategy, including changes to its organizational structure and a significant restructuring program aimed at making the company a leader in mobile broadband and services and improving the company’s competitiveness and profitability.

·                  As part of its new strategy, Nokia Siemens Networks is focusing on mobile broadband and services, and as such has announced a number of planned divestments, with the sale of its Microwave Transport business to DragonWave, its fixed line Broadband Access business to ADTRAN and its WiMAX unit to NewNet Communications Technologies.

·                  Nokia Siemens Networks announced a number of mobile broadband deals, including: working with SKY in Brazil to launch 4G TD-LTE wireless networks for the first time in Latin America; developing the GSM network and expanding 3G/HSPA+ for Polkomtel in Poland; and upgrading the GSM network in the Moscow region for Russian operator Megafon, paving the way for transition to LTE.

·                  Nokia Siemens Networks continued to conduct a number of LTE trials, including collaborating with 02 in the UK to provide LTE services on a trial basis to select users in London, working with Saudi Telecom Company to ensure network availability for the upsurge in traffic during the holy Hajj pilgrimage, and successfully completing Indonesia’s first 1800 MHz LTE trial for Indosat. In Japan, Nokia Siemens Networks implemented its Circuit Switched Fallback (CSFB) technology to enable CDMA and LTE technologies to work together in KDDI’s network.

 

14


 


 

·                  In optical, Nokia Siemens Networks worked with Italy’s Fastweb using Liquid Transport architecture to deploy the country’s first 100G optical fiber network between Milan and Rome. The company also announced a deal to deliver the world’s longest 40G link, without intermediate amplifiers, in the 354 kilometre under-sea link upgrade for PT Telkom in Indonesia.

·                  In services, Nokia Siemens Networks opened a new Service Delivery Center in Mexico, the company’s fifth worldwide, to provide network planning and optimization services for operators in Latin America, with the intention of extending these capabilities to other regions in due course.

·                  Nokia Siemens Networks was selected by Bharti Airtel to implement a pan-Indian Customer Experience Management platform to enrich data services experience; and to deliver a superior mobile broadband experience to Bharti customers in 16 African countries. In Egypt, Nokia Siemens Networks is upgrading Vodafone’s subscriber data management system, enabling the operator to offer a range of customized services.

 

For more information, please refer to related press announcements at the following links: www.nokia.com/press and www.nokiasiemensnetworks.com/press

 

NOKIA IN THE FOURTH QUARTER 2011

 

(The following discussion is of Nokia’s reported results. Comparisons are given to the fourth quarter 2010 results, unless otherwise indicated.)

 

Nokia’s net sales decreased 21% to EUR 10 005 million (EUR 12 651 million). Net sales of Smart Devices decreased 38% to EUR 2 747 million (EUR 4 396 million). Net sales of Mobile Phones decreased 23% to EUR 3 040 million (EUR 3 948 million). Net sales of the total Devices & Services business decreased 29% to EUR 5 997 million (EUR 8 499 million). Net sales of Location & Commerce increased 15% to EUR 306 million (EUR 265 million). Net sales of Nokia Siemens Networks decreased 4% to EUR 3 815 million (EUR 3 961 million).

 

Nokia’s gross profit decreased to EUR 2 904 million (gross profit of EUR 3 727 million), representing a gross margin of 29.0% (29.5%). Gross profit of Smart Devices decreased to EUR 546 million (EUR 1 263 million), representing 19.9% of Smart Devices net sales (28.7%).  Gross profit of Mobile Phones decreased to EUR 842 million (EUR 1 125 million), representing 27.7% of Mobile Phones net sales (28.5%).  Gross profit in the total Devices & Services business decreased to EUR 1 550 million (gross profit of EUR 2 467 million), representing a gross margin of 25.8% (29.0%). Gross profit in Location & Commerce was EUR 238 million (gross profit of EUR 219 million), representing a gross margin of 77.8% (82.6%). Gross profit in Nokia Siemens Networks was EUR 1 116 million (gross profit EUR 1 042 million), representing a gross margin of 29.3% (26.3%).

 

Nokia’s operating profit decreased to an operating loss of EUR 954 million (operating profit of EUR 884 million), representing an operating margin of -9.5% (7.0%). Contribution of Smart Devices decreased to EUR -191 million (EUR 510 million), representing -7.0% of Smart Devices net sales (11.6%).  Contribution of Mobile Phones decreased to EUR 410 million (EUR 716 million), representing 13.5% of Mobile Phones net sales (18.1%).  Operating profit in the total Devices & Services business decreased to EUR 203 million (operating profit of EUR 1 082 million), representing an operating margin of 3.4% (12.7%). Operating loss in Location & Commerce was EUR 1 205 million (operating loss of EUR 148 million). Operating profit in Nokia Siemens Networks was EUR 67 million (operating profit EUR 1 million), representing an operating margin of 1.8% (0.0%). Group Common Functions expense totaled EUR 19 million (EUR 43 million).

 

In the period from October to December 2011, net financial expense was EUR 21 million (EUR 65 million). Loss before tax was EUR 974 million (profit before tax EUR 833 million). Loss was EUR 1 076 million (profit EUR 742 million), based on a loss of EUR 1 072 million (profit EUR 745 million) attributable to equity holders of the parent and a loss of EUR 4 million (loss of EUR 3 million) attributable to non-controlling interests. Earnings per share was EUR -0.29 (basic) and EUR -0.29 (diluted), compared with EUR 0.20 (basic) and EUR 0.20 (diluted) in the fourth quarter 2010.

 

15



 

CONSOLIDATED INCOME STATEMENT, EUR million

(unaudited)

 

 

 

Reported

 

Reported

 

Non-IFRS

 

Non-IFRS

 

 

 

10-12/2011

 

10-12/2010

 

10-12/2011

 

10-12/2010

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

10 005

 

12 651

 

10 005

 

12 653

 

Cost of sales

 

-7 101

 

-8 924

 

-7 103

 

-8 921

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

2 904

 

3 727

 

2 902

 

3 732

 

Research and development expenses

 

-1 401

 

-1 539

 

-1 311

 

-1 402

 

Selling and marketing expenses

 

-986

 

-1 018

 

-873

 

-911

 

Administrative and general expenses

 

-267

 

-310

 

-257

 

-291

 

Impairment of goodwill

 

-1 090

 

 

 

 

Other income

 

87

 

207

 

38

 

60

 

Other expenses

 

-201

 

-183

 

-21

 

-98

 

 

 

 

 

 

 

 

 

 

 

Operating loss/profit

 

-954

 

884

 

478

 

1 090

 

Share of results of associated companies

 

1

 

14

 

1

 

14

 

Financial income and expenses

 

-21

 

-65

 

-21

 

-65

 

 

 

 

 

 

 

 

 

 

 

Loss/profit before tax

 

-974

 

833

 

458

 

1 039

 

Tax

 

-102

 

-91

 

-184

 

-186

 

 

 

 

 

 

 

 

 

 

 

Loss/profit

 

-1 076

 

742

 

274

 

853

 

 

 

 

 

 

 

 

 

 

 

Loss/profit attributable to equity holders of the parent

 

-1 072

 

745

 

226

 

817

 

Loss/profit attributable to non-controlling interests

 

-4

 

-3

 

48

 

36

 

 

 

-1 076

 

742

 

274

 

853

 

 

 

 

 

 

 

 

 

 

 

Earnings per share EUR

 

 

 

 

 

 

 

 

 

(for loss/profit attributable to the equity holders of the parent)

 

 

 

 

 

 

 

 

 

Basic

 

-0.29

 

0.20

 

0.06

 

0.22

 

Diluted

 

-0.29

 

0.20

 

0.06

 

0.22

 

 

 

 

 

 

 

 

 

 

 

Average number of shares (1 000 shares)

 

 

 

 

 

 

 

 

 

Basic

 

3 710 158

 

3 709 072

 

3 710 157

 

3 709 072

 

Diluted

 

3 710 158

 

3 713 000

 

3 715 950

 

3 713 000

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization, total

 

380

 

430

 

173

 

190

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense, total

 

9

 

15

 

9

 

15

 

 

16



 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IFRS EUR million

(10-12/2011  10-12/2010 and 1-12/2011 unaudited; 1-12/2010 audited)

 

 

 

10-12/2011

 

10-12/2010

 

1-12/2011*

 

1-12/2010

 

 

 

 

 

 

 

 

 

 

 

Loss/profit

 

-1 076

 

742

 

-1 488

 

1 343

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

Translation differences

 

384

 

161

 

9

 

1 302

 

Net investment hedge losses

 

-119

 

-21

 

-37

 

-389

 

Cash flow hedges

 

45

 

83

 

116

 

-141

 

Available-for-sale investments

 

24

 

-3

 

70

 

9

 

Other increase/decrease, net

 

-29

 

-43

 

-16

 

45

 

Income tax related to components of other comprehensive income

 

21

 

-2

 

-16

 

126

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

326

 

175

 

126

 

952

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/expense

 

-750

 

917

 

-1 362

 

2 295

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/expense attributable to

 

 

 

 

 

 

 

 

 

equity holders of the parent

 

-782

 

886

 

-1 083

 

2 776

 

non-controlling interests

 

32

 

31

 

-279

 

-481

 

 

 

-750

 

917

 

-1 362

 

2 295

 

 

17



 

DEVICES & SERVICES, EUR million

(unaudited)

 

 

 

Reported
10-12/2011

 

Special
items & PPA
10-12/2011

 

Non-IFRS
10-12/2011

 

Reported
10-12/2010

 

Special items
& PPA
10-12/2010

 

Non-IFRS
10-12/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (1)

 

5 997

 

 

5 997

 

8 499

 

2

 

8 501

 

Cost of sales

 

-4 447

 

 

-4 447

 

-6 032

 

 

-6 032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

1 550

 

 

1 550

 

2 467

 

2

 

2 469

 

% of net sales

 

25.8

 

 

 

25.8

 

29.0

 

 

 

29.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses (2)

 

-601

 

2

 

-599

 

-713

 

3

 

-710

 

% of net sales

 

10.0

 

 

 

10.0

 

8.4

 

 

 

8.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

-587

 

 

-587

 

-616

 

 

-616

 

% of net sales

 

9.8

 

 

 

9.8

 

7.2

 

 

 

7.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative and general expenses

 

-76

 

 

-76

 

-105

 

 

-105

 

% of net sales

 

1.3

 

 

 

1.3

 

1.2

 

 

 

1.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses (3)

 

-83

 

87

 

4

 

49

 

-62

 

-13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

203

 

89

 

292

 

1 082

 

-57

 

1 025

 

% of net sales

 

3.4

 

 

 

4.9

 

12.7

 

 

 

12.1

 

 


(1) Deferred revenue related to acquisitions of EUR 2 million in Q4/10.

 

(2) Amortization of acquired intangible assets of EUR 2 million in Q4/11 and EUR 3 million in Q4/10.

 

(3) Restructuring charges of EUR 100 million, impairment of assets EUR 36 million and a benefit from a cartel claim settlement of EUR 49 million in Q4/11. Restructuring charges of EUR 85 million and gain on sale of wireless modem business of EUR 147 million in Q4/10.

 

18



 

LOCATION & COMMERCE, EUR million

(unaudited)

 

 

 

Reported
10-12/2011

 

Special items
& PPA
10-12/2011

 

Non-IFRS
10-12/2011

 

Reported
10-12/2010

 

Special
items & PPA
10-12/2010

 

Non-IFRS
10-12/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

306

 

 

306

 

265

 

 

265

 

Cost of sales

 

-68

 

 

-68

 

-46

 

 

-46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

238

 

 

238

 

219

 

 

219

 

% of net sales

 

77.8

 

 

 

77.8

 

82.6

 

 

 

82.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses (1)

 

-241

 

89

 

-152

 

-270

 

89

 

-181

 

% of net sales

 

78.8

 

 

 

49.7

 

101.9

 

 

 

68.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses (2)

 

-66

 

30

 

-36

 

-75

 

29

 

-46

 

% of net sales

 

21.6

 

 

 

11.8

 

28.3

 

 

 

17.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative and general expenses (3)

 

-18

 

 

-18

 

-20

 

1

 

-19

 

% of net sales

 

5.9

 

 

 

5.9

 

7.5

 

 

 

7.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses (4)

 

-1 118

 

1 115

 

-3

 

-2

 

 

-2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss/profit

 

-1 205

 

1 234

 

29

 

-148

 

119

 

-29

 

% of net sales

 

-393.8

 

 

 

9.5

 

-55.8

 

 

 

-10.9

 

 


(1) Amortization of acquired intangibles of EUR 89 million in Q4/11 and EUR 89 million in Q4/10.

 

(2) Amortization of acquired intangibles of EUR 30 million in Q4/11 and EUR 29 million in Q4/10.

 

(3) Amortization of acquired intangibles of EUR 1 million in Q4/10.

 

(4) Restructuring charges of EUR 25 million and impairment of goodwill EUR 1 090 million in Q4/11.

 

19


 

 


 

NOKIA SIEMENS NETWORKS, EUR million

(unaudited)

 

 

 

Reported 10-
12/2011

 

Special
items &
PPA
10-12/2011

 

Non-IFRS
10-12/2011

 

Reported 10-
12/2010

 

Special
items & PPA
10-12/2010

 

Non-IFRS
10-12/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

3 815

 

 

3 815

 

3 961

 

 

3 961

 

Cost of sales (1)

 

-2 699

 

-2

 

-2 701

 

-2 919

 

3

 

-2 916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

1 116

 

-2

 

1 114

 

1 042

 

3

 

1 045

 

% of net sales

 

29.3

 

 

 

29.2

 

26.3

 

 

 

26.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses (2)

 

-559

 

-1

 

-560

 

-556

 

46

 

-510

 

% of net sales

 

14.7

 

 

 

14.7

 

14.0

 

 

 

12.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses (3)

 

-333

 

83

 

-250

 

-325

 

77

 

-248

 

% of net sales

 

8.7

 

 

 

6.6

 

8.2

 

 

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative and general expenses (4)

 

-143

 

10

 

-133

 

-141

 

18

 

-123

 

% of net sales

 

3.7

 

 

 

3.5

 

3.6

 

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses (5)

 

-14

 

19

 

5

 

-19

 

 

-19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

67

 

109

 

176

 

1

 

144

 

145

 

% of net sales

 

1.8

 

 

 

4.6

 

0.0

 

 

 

3.7

 

 


(1) Reversal of restructuring charges of EUR 2 million in Q4/11 and restructuring charges of EUR 3 million in Q4/10.

 

(2) Reversal of restructuring charges of EUR 7 million and amortization of acquired intangibles of EUR 6 million in Q4/11.

Restructuring charges of EUR 1 million and amortization of acquired intangibles of EUR 45 million in Q4/10.

 

(3) Restructuring charges of EUR 4 million and amortization of acquired intangibles of EUR 79 million in Q4/11.

Restructuring charges of EUR 6 million and amortization of acquired intangibles of EUR 71 million in Q4/10.

 

(4) Restructuring charges of EUR 9 million and amortization of acquired intangibles EUR 1 million in Q4/11.

Restructuring charges EUR 18 million in Q4/10.

 

(5) Restructuring charges of EUR 19 million in Q4/11.

 

20



 

GROUP COMMON FUNCTIONS, EUR million

(unaudited)

 

 

 

Reported
10-12/2011

 

Special
items &
PPA
10-12/2011

 

Non-IFRS
10-12/2011

 

Reported
10-12/2010

 

Special
items & PPA
10-12/2010

 

Non-IFRS
10-12/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

-1