STEPHEN ELOP, NOKIA CEO:
The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2
2011. However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started
to have a positive impact on the underlying health of our business. Most importantly, we are making better-than-
expected progress toward our strategic goals.
In Q2, our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales
channel dynamics, which led to greater business stability in the latter weeks of the quarter.
- Most notably we took action in China and Europe to address an inventory build-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 retail interactions 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 product competitiveness. In Q2, both our Smart Devices and Mobile Phones business
units moved forward on their plans.
- In Smart Devices, those who already have viewed our early Windows Phone work are very optimistic about
the devices Nokia will bring to market and about the long-term opportunities. Step by step, beginning this
year, we plan to have a sequence of concentrated product launches in specific countries, systematically
increasing the number of countries and launch partners.
- In Mobile Phones, early results of the Dual SIM product launches are very encouraging, and we are on track
to deliver more products this year.
INTERIM REPORT 3(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
This shift into the execution of our new strategy also has allowed us to identify additional opportunities for
operational improvement. We are accelerating our plans for expense reductions, and we now plan to exceed our
previous target of non-IFRS operating expense reductions in Devices & Services of EUR 1 billion for the full year 2013.
It was also validated during Q2 that Nokia understands how to take advantage of our strong intellectual property
portfolio. We are well positioned to defend against intellectual property claims and to ensure that other industry
participants are properly licensed.
Thus, while our Q2 results were clearly disappointing, we are executing well on the initiatives that are most
important to our longer term competitiveness. Some progress is already evident, and thus we are targeting to end
this year with more net cash and liquid assets than at the end of Q2 2011. We firmly believe that our deliberate and
unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive
forces in our industry and drive Value creation for our shareholders.
NOKIA OUTLOOK
- Nokia targets Nokia Group net cash and other liquid assets at the end of 2011 to 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 for its Devices & Services non-IFRS operating
margin outlook for the third quarter 2011. Nokia expects its non-IFRS Devices & Services operating Margin in the
third quarter 2011 to be slightly above breakeven, ranging either above or below this level by approximately 2
percentage points. This outlook is based on our expectations regarding a number of factors, including:
- Competitive industry dynamics;
- Nokia's actions to intensify its focus on retail sales marketing to drive net sales;
- Improved competitiveness in our Mobile Phones unit due to the ramp up of Dual SIM devices;
- Timing of our new product shipments; and
- The macroeconomic environment.
- Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and Nokia now targets
to exceed its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full
year 2013, compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks net sales to be 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 in Nokia Siemens Networks to be
between -3% and breakeven in the third quarter 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks net sales to grow faster than the
market in 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks non-IFRS operating Margin to be
above breakeven in 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks to reduce its non-IFRS annualized
operating expenses and production overheads by EUR 500 million by the end of 2011, compared to the end of
2009.
- The outlook relating to Nokia Siemens Networks includes the impact of the acquisition of Motorola Solutions'
networks assets. This is an update to the previous outlook that did not include the impact of the acquisition of
Motorola Solutions' networks assets.
INTERIM REPORT 4(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
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 Nokia Siemens 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 price accounting related items arising from the
formation of Nokia Siemens Networks and the acquisition of Motorola's networks assets
- EUR 111 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 3 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra and Motally in Devices & Services
Q2 2010 - EUR 365 million consisting of:
- EUR 114 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from
the formation of Nokia Siemens Networks
- EUR 131 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra and MetaCarta in Devices & Services
Q1 2011 - EUR 265 million consisting of:
- EUR 28 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 117 million of intangible asset amortization and other purchase price accounting related items arising from
the formation of Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra 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.
The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2
2011. However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started
to have a positive impact on the underlying health of our business. Most importantly, we are making better-than-
expected progress toward our strategic goals.
In Q2, our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales
channel dynamics, which led to greater business stability in the latter weeks of the quarter.
- Most notably we took action in China and Europe to address an inventory build-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 retail interactions 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 product competitiveness. In Q2, both our Smart Devices and Mobile Phones business
units moved forward on their plans.
- In Smart Devices, those who already have viewed our early Windows Phone work are very optimistic about
the devices Nokia will bring to market and about the long-term opportunities. Step by step, beginning this
year, we plan to have a sequence of concentrated product launches in specific countries, systematically
increasing the number of countries and launch partners.
- In Mobile Phones, early results of the Dual SIM product launches are very encouraging, and we are on track
to deliver more products this year.
INTERIM REPORT 3(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
This shift into the execution of our new strategy also has allowed us to identify additional opportunities for
operational improvement. We are accelerating our plans for expense reductions, and we now plan to exceed our
previous target of non-IFRS operating expense reductions in Devices & Services of EUR 1 billion for the full year 2013.
It was also validated during Q2 that Nokia understands how to take advantage of our strong intellectual property
portfolio. We are well positioned to defend against intellectual property claims and to ensure that other industry
participants are properly licensed.
Thus, while our Q2 results were clearly disappointing, we are executing well on the initiatives that are most
important to our longer term competitiveness. Some progress is already evident, and thus we are targeting to end
this year with more net cash and liquid assets than at the end of Q2 2011. We firmly believe that our deliberate and
unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive
forces in our industry and drive Value creation for our shareholders.
NOKIA OUTLOOK
- Nokia targets Nokia Group net cash and other liquid assets at the end of 2011 to 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 for its Devices & Services non-IFRS operating
margin outlook for the third quarter 2011. Nokia expects its non-IFRS Devices & Services operating Margin in the
third quarter 2011 to be slightly above breakeven, ranging either above or below this level by approximately 2
percentage points. This outlook is based on our expectations regarding a number of factors, including:
- Competitive industry dynamics;
- Nokia's actions to intensify its focus on retail sales marketing to drive net sales;
- Improved competitiveness in our Mobile Phones unit due to the ramp up of Dual SIM devices;
- Timing of our new product shipments; and
- The macroeconomic environment.
- Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and Nokia now targets
to exceed its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full
year 2013, compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks net sales to be 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 in Nokia Siemens Networks to be
between -3% and breakeven in the third quarter 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks net sales to grow faster than the
market in 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks non-IFRS operating Margin to be
above breakeven in 2011.
- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks to reduce its non-IFRS annualized
operating expenses and production overheads by EUR 500 million by the end of 2011, compared to the end of
2009.
- The outlook relating to Nokia Siemens Networks includes the impact of the acquisition of Motorola Solutions'
networks assets. This is an update to the previous outlook that did not include the impact of the acquisition of
Motorola Solutions' networks assets.
INTERIM REPORT 4(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
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 Nokia Siemens 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 price accounting related items arising from the
formation of Nokia Siemens Networks and the acquisition of Motorola's networks assets
- EUR 111 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 3 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra and Motally in Devices & Services
Q2 2010 - EUR 365 million consisting of:
- EUR 114 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from
the formation of Nokia Siemens Networks
- EUR 131 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra and MetaCarta in Devices & Services
Q1 2011 - EUR 265 million consisting of:
- EUR 28 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 117 million of intangible asset amortization and other purchase price accounting related items arising from
the formation of Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from
the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition
of OZ Communications, Novarra 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.
At the end of the first quarter 2011, our sales channel inventories were slightly above normal levels given then
anticipated volumes. During the second quarter 2011, distributors and operators purchased fewer of our devices across
our portfolio as they reduced their inventories of Nokia devices. The second quarter 2011 ended with our sales channel
inventories near the midpoint of our normal range of 4-6 weeks.
Due to the devastation caused by the earthquake and tsunami in Japan, we had previously expected our component
supply to be adversely impacted in the second and third quarters of 2011. In the second quarter 2011, we were able to
redirect our component requirements to suppliers with production capacity and, in addition, our suppliers in Japan
were able to recover faster than Nokia anticipated. Thus, related to the tragic events in Japan, we did not experience
component constraints in the second quarter 2011, and we do not expect a significant impact in the third quarter 2011
or going forward.
Average Selling Price
On a year-on-year basis, the overall increase in our Devices & Services ASP in the second quarter 2011 was driven by the
recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier
periods recognized in Devices & Services Other and a positive impact from foreign currency exchange hedging, partially
offset by the lower ASP in Mobile Phones 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 was driven by a product mix shift towards Mobile
Phones, the lower ASP in Mobile Phones and Smart Devices, and the appreciation of the Euro against certain currencies,
partially offset by the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter
2011 and earlier periods recognized in Devices & Services Other and a positive impact from foreign currency exchange
hedging.
Gross Margin
On 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 recognition of approximately EUR 430 million of IPR royalty income related to the
second quarter 2011 and earlier periods, recognized in Devices & Services Other, partially offset by gross Margin
declines in both Smart Devices and Mobile Phones and a negative impact from foreign currency hedging.
Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 9% year-on-year and 10%
sequentially due to declines in Devices & Services Other and Smart Devices research and development expenses,
partially offset by an increase in Mobile Phones research and development expenses. Devices & Services Other
includes common research and development expenses. The decreases in Devices & Services Other and Smart
Devices 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 due primarily to investments to
accelerate product development to bring new innovations to the market faster and at lower price-points,
partially offset by a focus on priority 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 on sales 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 cost controls.
Devices & Services non-IFRS other income and expense had a slight negative impact on profitability in the
second quarter 2011 both year-on-year and sequentially due to a variety of individually insignificant changes.
Reported other income and expense was significantly adversely impacted in the second quarter 2011 primarily
INTERIM REPORT 8(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
as a result of restructuring related expenses discussed below, which were recognized in Devices & Services
Other.
Cost Reduction Activities
Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and now targets to exceed
its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full year 2013,
compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion. This reduction is
expected to come from a variety of different sources and initiatives, including a 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.
Nokia's cost reduction activities include a strategic collaboration with Accenture to outsource Nokia's Symbian
software development and support activities to Accenture. Approximately 2 800 Nokia employees are expected
to transfer to Accenture at closing, which is expected to take place in the early part of October 2011. In addition,
we also announced plans to reduce our global workforce by about 4 000 employees by the end of 2012, as well
as plans to consolidate the company's research and product development sites so that each site has a clear role
and mission.
During the second quarter 2011, Devices & Services recognized charges related to our cost reduction activities of
EUR 572 million, and Nokia expects to recognize additional charges in future quarters.
anticipated volumes. During the second quarter 2011, distributors and operators purchased fewer of our devices across
our portfolio as they reduced their inventories of Nokia devices. The second quarter 2011 ended with our sales channel
inventories near the midpoint of our normal range of 4-6 weeks.
Due to the devastation caused by the earthquake and tsunami in Japan, we had previously expected our component
supply to be adversely impacted in the second and third quarters of 2011. In the second quarter 2011, we were able to
redirect our component requirements to suppliers with production capacity and, in addition, our suppliers in Japan
were able to recover faster than Nokia anticipated. Thus, related to the tragic events in Japan, we did not experience
component constraints in the second quarter 2011, and we do not expect a significant impact in the third quarter 2011
or going forward.
Average Selling Price
On a year-on-year basis, the overall increase in our Devices & Services ASP in the second quarter 2011 was driven by the
recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier
periods recognized in Devices & Services Other and a positive impact from foreign currency exchange hedging, partially
offset by the lower ASP in Mobile Phones 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 was driven by a product mix shift towards Mobile
Phones, the lower ASP in Mobile Phones and Smart Devices, and the appreciation of the Euro against certain currencies,
partially offset by the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter
2011 and earlier periods recognized in Devices & Services Other and a positive impact from foreign currency exchange
hedging.
Gross Margin
On 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 recognition of approximately EUR 430 million of IPR royalty income related to the
second quarter 2011 and earlier periods, recognized in Devices & Services Other, partially offset by gross Margin
declines in both Smart Devices and Mobile Phones and a negative impact from foreign currency hedging.
Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 9% year-on-year and 10%
sequentially due to declines in Devices & Services Other and Smart Devices research and development expenses,
partially offset by an increase in Mobile Phones research and development expenses. Devices & Services Other
includes common research and development expenses. The decreases in Devices & Services Other and Smart
Devices 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 due primarily to investments to
accelerate product development to bring new innovations to the market faster and at lower price-points,
partially offset by a focus on priority 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 on sales 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 cost controls.
Devices & Services non-IFRS other income and expense had a slight negative impact on profitability in the
second quarter 2011 both year-on-year and sequentially due to a variety of individually insignificant changes.
Reported other income and expense was significantly adversely impacted in the second quarter 2011 primarily
INTERIM REPORT 8(35)
Nokia Corporation July 21, 2011 at 13:30 (CET +1)
as a result of restructuring related expenses discussed below, which were recognized in Devices & Services
Other.
Cost Reduction Activities
Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and now targets to exceed
its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full year 2013,
compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion. This reduction is
expected to come from a variety of different sources and initiatives, including a 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.
Nokia's cost reduction activities include a strategic collaboration with Accenture to outsource Nokia's Symbian
software development and support activities to Accenture. Approximately 2 800 Nokia employees are expected
to transfer to Accenture at closing, which is expected to take place in the early part of October 2011. In addition,
we also announced plans to reduce our global workforce by about 4 000 employees by the end of 2012, as well
as plans to consolidate the company's research and product development sites so that each site has a clear role
and mission.
During the second quarter 2011, Devices & Services recognized charges related to our cost reduction activities of
EUR 572 million, and Nokia expects to recognize additional charges in future quarters.
22/7 2011 09:30 vouskootia 0
44235 http://www.business.dk/tech-mobil/apple-penge-redder-nokia-fra-afgrunden
Apple og Iphone redder Nokia fra afgrunden
(=Nokia casher ind paa patenter - hvor meget de faar skriver journalisten dog ikke?)
Apple og Iphone redder Nokia fra afgrunden
(=Nokia casher ind paa patenter - hvor meget de faar skriver journalisten dog ikke?) ? approximately EUR 430 million of IPR royalty income related to the second quarter
2011
2011
