2013-04-18 12:00:03 CEST
2013-04-18 12:01:10 CEST
REGULATED INFORMATION
Nokia - Interim report (Q1 and Q3)
Nokia Corporation Q1 2013 Interim Report
Nokia Corporation
Interim report
April 18, 2013 at 13.00 (CET+1)
This is a summary of the first quarter 2013 interim report published today. The
complete first quarter 2013 interim report with tables is available at
http://www.results.nokia.com/results/Nokia_results2013Q1e.pdf. Investors should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
FINANCIAL AND OPERATING HIGHLIGHTS
Nokia Group non-IFRS EPS in Q1 2013 was EUR -0.02; reported EPS was EUR -0.07.
- Nokia Group achieved underlying operating profitability for the third
consecutive quarter, with a Q1 non-IFRS operating margin of 3.1%.
- Devices & Services achieved underlying profitability for the second
consecutive quarter, with a Q1 non-IFRS operating margin of 0.1%. Devices &
Services benefitted from a strong focus on cost as well as the reversal of
approximately EUR 50 million of previously recognized inventory related
allowances in Q1.
- Nokia Siemens Networks achieved underlying profitability for the fourth
consecutive quarter, with a Q1 non-IFRS operating margin of 7.0%. Nokia Siemens
Networks benefitted from strong gross margin performance in Q1.
Nokia Group net sales in Q1 2013 were EUR 5.9 billion
- Devices & Services Q1 net sales decreased 25% quarter-on-quarter to EUR 2.9
billion.
- Lumia Q1 volumes increased 27% quarter-on-quarter to 5.6 million units,
reflecting increasing momentum.
- Mobile Phones Q1 volumes decreased 30% quarter-on-quarter to 55.8 million
units, reflecting competitive industry dynamics and an estimated higher than
normal seasonal decline in the market addressable by Mobile Phones.
- Nokia Siemens Networks net sales decreased 30% quarter-on-quarter to EUR 2.8
billion, reflecting industry seasonality.
Nokia Group net cash higher quarter-on-quarter
- Nokia Group ends first quarter 2013 with a strong balance sheet and solid
cash position. Gross cash was EUR 10.1 billion and net cash was EUR 4.5
billion.
- Nokia Group strengthened its net cash position by approximately EUR 120
million sequentially. Nokia Siemens Networks contributed approximately EUR 210
million to the Nokia Group net cash position.
Commenting on the results, Stephen Elop, Nokia CEO, said:"At the highest level, we are pleased that Nokia Group achieved underlying
operating profitability for the third quarter in a row. While operating in a
highly competitive environment, Nokia is executing our strategy with urgency
and managing our costs very well.
We have areas where we are making progress, and areas where we are further
increasing the focus. For example, people are responding positively to the
Lumia portfolio, and our volumes are increasing quarter over quarter. Nokia
Siemens Networks delivered another strong quarter and contributed to an overall
improvement in Nokia Group's cash position. On the other hand, our Mobile
Phones business faces a difficult competitive environment, and we are taking
tactical actions and bringing new innovation to market to address our
challenges.
All of these efforts are aimed at improving our financial performance and
delivering more value to our shareholders."
SUMMARY FINANCIAL INFORMATION
Reported and Non-IFRS
first quarter 2013 results1,2,3
-------------------------------------------------------------
EUR million Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
-------------------------------------------------------------
-------------------------------------------------------------
Nokia
Net sales 5 852 7 354 -20% 8 041 -27%
Operating profit -150 -1 338 427
Operating profit 181 -258 623 -71%
(non-IFRS)
EPS, EUR diluted -0.07 -0.25 0.05
EPS, EUR diluted -0.02 -0.08 0.05
(non-IFRS)4
Net cash from 206 -590 563 -63%
operating
activities
Net cash and 4 480 4 872 -8% 4 360 3%
other liquid
assets5
-------------------------------------------------------------
-------------------------------------------------------------
Devices &
Services6
Net sales 2 888 4 246 -32% 3 854 -25%
Smart Devices 1 164 1 704 -32% 1 225 -5%
net sales
Mobile Phones 1 590 2 311 -31% 2 468 -36%
net sales
Mobile device 61.9 82.7 -25% 86.3 -28%
volume
(mn units)
Smart Devices 6.1 11.9 -49% 6.6 -8%
volume
(mn units)
Mobile Phones 55.8 70.8 -21% 79.6 -30%
volume
(mn units)
Mobile device 47 51 -8% 45 4%
ASP7
Smart Devices 191 143 34% 186 3%
ASP7
Mobile Phones 28 33 -15% 31 -10%
ASP7
Operating -42 -218 263
profit
Operating 4 -126 39 -90%
profit
(non-IFRS)
Operating -1.5% -5.1% 6.8%
margin %
Operating margin % 0.1% -3.0% 1.0%
(non-IFRS)
-------------------------------------------------------------
-------------------------------------------------------------
HERE6
Net sales 216 277 -22% 278 -22%
Operating profit -97 -94 -56
Operating profit -5 36 40
(non-IFRS)
Operating -44.9% -33.9% -20.1%
margin %
Operating -2.3% 12.9% 14.4%
margin %
(non-IFRS)
-------------------------------------------------------------
-------------------------------------------------------------
Nokia Siemens
Networks6
Net sales 2 804 2 947 -5% 3 988 -30%
Operating profit 3 -1 004 252 -99%
Operating profit 196 -146 576 -66%
(non-IFRS)
Operating 0.1% -34.1% 6.3%
margin %
Operating 7.0% -5.0% 14.4%
margin %
(non-IFRS)
-------------------------------------------------------------
Note 1 relating to non-IFRS (also referred to as "underlying") results: In
addition to information on our reported IFRS results, we provide certain
information on a non-IFRS, or underlying business performance, basis. 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. Nokia believes that our non-IFRS results provide meaningful supplemental
information to both management and investors regarding Nokia's underlying
business 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. See note 2 below for
information about the exclusions from our non-IFRS results. More information,
including a reconciliation of our Q1 2013 and Q1 2012 non-IFRS results to our
reported results, can be found in our complete Q1 2013 interim report with
tables on pages 19 and 21-25. A reconciliation of our Q4 2012 non-IFRS results
to our reported results can be found in our complete Q4 interim report with
tables on pages 18 and 20-24 published on January 24, 2013.
Note 2 relating to non-IFRS exclusions:
Q1 2013 - EUR 331 million (net) consisting of:
- EUR 129 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 53 million of net charges related to country
and contract exits based on the strategy that focuses on key markets and
product segments.
- EUR 5 million restructuring charge in HERE
- EUR 72 million restructuring charge in Devices & Services
- EUR 27 million positive item from a cartel claim settlement in Devices &
Services
- EUR 64 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 87 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
Q4 2012 - EUR 196 million (net) consisting of:
- EUR 255 million restructuring charge and other associated items in Nokia
Siemens Networks, including EUR 34 million of net charges related to country
and contract exits based on new strategy that focuses on key markets and
product segments, as well as an impairment of assets of EUR 2 million.
- EUR 9 million restructuring charge in HERE
- EUR 2 million restructuring related impairments in Devices & Services
- EUR 75 million net benefit from releases of restructuring provisions in
Devices & Services
- EUR 21 million positive item from a cartel claim settlements in Devices &
Services
- EUR 52 million net gain on sale of Vertu business in Devices & Services
- EUR 79 million net gain on sale of real estate in Devices & Services
- EUR 67 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 87 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
Q1 2012 - EUR 1 080 million consisting of:
- EUR 772 million restructuring charge and other associated items in Nokia
Siemens Networks
- EUR 10 million restructuring charge in HERE
- EUR 91 million restructuring charge 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 120 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.
Q1 2012 taxes - EUR 135 million valuation allowance for Nokia Siemens Networks
deferred tax assets impacting Nokia taxes.
Note 3 relating to changes to historical comparative financials due to revised
IFRS accounting standard, IAS19 Employee Benefits: The historical comparative
financials presented in the interim report include certain changes to
previously reported information. These changes result from the retrospective
application of a revised IFRS accounting standard IAS19, Employee Benefits and
mainly relate to consolidated statements of comprehensive income and financial
position. For more information on the adjustments between the previously
reported information and the adjusted information, please see the related
disclosure starting on page 39 of the complete Q1 2013 interim report with
tables.
Note 4 relating to non-IFRS Nokia EPS: Nokia taxes were unfavorably impacted by
Devices & Services taxes as no tax benefits are recognized for certain Devices& Services deferred tax items. Certain prior year items in Nokia Siemens
Networks also had an unfavorable impact. If Nokia's earlier estimated long-term
tax rate of 26% had been applied, non-IFRS Nokia EPS would have been
approximately 1.7 Euro cent higher in Q1 2013. Going forward on a non-IFRS
basis, until a pattern of tax profitability is reestablished, Nokia expects to
record quarterly tax expense of approximately EUR 50 million related to its
Devices & Services business and approximately EUR 50 million related to its
Nokia Siemens Networks business. Nokia expects to continue to record taxes
related to its HERE business at a 26% rate.
Note 5 relating to Nokia net cash and other liquid assets: Calculated as total
cash and other liquid assets less interest-bearing liabilities. For selected
information on Nokia Group interest-bearing liabilities, please see the table
on page 36 of the complete Q1 2013 interim report with tables.
Note 6 relating to operational and reporting structure: We have three
businesses: Devices & Services, HERE and Nokia Siemens Networks and four
operating and reportable segments: Smart Devices and Mobile Phones within
Devices & Services, HERE and Nokia Siemens Networks. Smart Devices focuses on
smartphones and Mobile Phones focuses on mass market mobile devices, including
Asha full touch smartphones. Devices & Services also contains Devices &
Services Other which includes net sales of our luxury phone business Vertu
through October 12, 2012, spare parts and related cost of sales and operating
expenses, as well as intellectual property (IPR) income and common research and
development expenses. In October 2012, we completed the divestment of Vertu to
EQT VI, a European private equity firm. HERE focuses on the development of
location-based services and local commerce. We introduced HERE as the new brand
for our location and mapping service in November 2012. As of January 1, 2013
our Location & Commerce business and reportable segment was renamed HERE. Nokia
Siemens Networks is one of the leading global providers of telecommunications
infrastructure hardware, software and services, with the focus on the mobile
broadband market. Nokia Siemens Networks' operational organization is based on
two business units: Mobile Broadband and Global Services. The Mobile Broadband
business unit provides mobile operators with radio and core network software
together with the hardware needed to deliver mobile voice and data services.
The Global Services business unit provides mobile operators with a broad range
of services, including professional services, network implementation and
customer care services.
Note 7 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 through October 12, 2012, spare parts, as
well as intellectual property 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. As IPR
income is included in Devices & Services Other net sales, we provide our total
mobile device ASP both including and excluding IPR income. The mobile device
ASP excluding IPR income in the first quarter 2013 was EUR 45, down 10% from
EUR 50 in the first quarter 2012 and up 5% from EUR 43 in the fourth quarter
2012.
NOKIA OUTLOOK
- Nokia expects its Devices & Services non-IFRS operating margin in the second
quarter 2013 to be approximately negative 2 percent, plus or minus four
percentage points. This outlook is based on Nokia's expectations regarding a
number of factors, including:
- competitive industry dynamics continuing to negatively affect the MobilePhones and Smart Devices business units;
- consumer demand for our products, particularly for our Mobile Phones products;
- continued ramp up for our Lumia smartphones;
- expected increases in Devices & Services' operating expenses; and
- the macroeconomic environment.
- In the second quarter 2013 supported by the wider availability of recently
announced Lumia products, Nokia expects the sequential growth in Lumia unit
volumes to be higher than the 27% sequential growth in the first quarter 2013.
- Nokia continues to target to reduce its Devices & Services non-IFRS operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the end
of 2013.
- Nokia expects HERE's non-IFRS operating margin in the second quarter 2013 to
be negative primarily due to lower recognized revenue from internal sales.
- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS
operating margin in the second quarter 2013 to be approximately positive 5
percent, plus or minus four percentage points. This outlook is based on Nokia
Siemens Networks' expectations regarding a number of factors, including:
- competitive industry dynamics;
- product and regional mix; and
- the macroeconomic environment.
- Nokia and Nokia Siemens Networks continue to target to reduce Nokia Siemens
Networks' non-IFRS annualized operating expenses and production overheads by
more than EUR 1 billion by the end of 2013, compared to the end of 2011.
FIRST QUARTER 2013 FINANCIAL AND OPERATING DISCUSSION
NOKIA GROUP
See note 6 to our Summary Financial Information table above concerning our
current operational and reporting structure and note 3 concerning certain
changes to historical comparative financials due to a revised IFRS accounting
standard, IAS19 Employee Benefits. The following discussion includes
information on a non-IFRS, or underlying business performance, basis. See notes
1 and 2 to our Summary Financial Information table above for information about
our underlying non-IFRS results and the non-IFRS exclusions for the periods
discussed below.
The following table sets forth the year-on-year and sequential growth rates in
our net sales on a reported basis and at constant currency for the periods
indicated.
FIRST QUARTER 2013 NET SALES,
REPORTED & CONSTANT CURRENCY1
-------------------------------------------------------------
YoY Change QoQ Change
------------------------------------------------------------
------------------------------------------------------------
Group net sales - reported -20% -27%
Group net sales - constant currency1 -21% -26%
Devices & Services -32% -25%
net sales - reported
Devices & Services -33% -23%
net sales - constant currency1
Nokia Siemens Networks -5% -30%
net sales - reported
Nokia Siemens Networks -4% -28%
net sales - constant currency1
------------------------------------------------------------
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.
At constant currency Nokia Group's net sales would have decreased 21%
year-on-year and 26% sequentially.
The following table sets forth Nokia Group's reported 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 Q1/2013 Q1/2012 YoY Q4/2012 QoQ Change Change
-------------------------------------------------------------------------
Net cash from 206 -590 563 -63%
operating activities
-------------------------------------------------------------------------
NSN contribution (approximate) 270 410 -34% 740 -64%
-------------------------------------------------------------------------
Total cash and 10 102 9 793 3% 9 909 2%
other liquid assets
-------------------------------------------------------------------------
NSN contribution 2 753 1 535 79% 2 420 14%
-------------------------------------------------------------------------
Net cash and 4 480 4 872 -8% 4 360 3%
other liquid assets1
-------------------------------------------------------------------------
NSN contribution 1 484 256 480% 1 270 17%
-------------------------------------------------------------------------
Note 1: Total cash and other liquid assets minus interest-bearing liabilities.
In the first quarter 2013, Nokia Group total cash and other liquid assets
increased by EUR 193 million and Nokia Group net cash and other liquid assets
increased by EUR 120 million.
The items below are the primary drivers of the increase in Nokia Group net cash
and other liquid assets in the first quarter 2013 of EUR 120 million:
- Nokia Group level net profit adjusted for non-cash items of positive EUR 323
million;
- Nokia Group level net working capital related cash outflows of approximately
EUR 170 million, which included approximately EUR 250 million of restructuring
related cash outflows;
- Nokia Group excluding Nokia Siemens Networks level net working capital
related outflows of approximately EUR 300 million, which included approximately
EUR 120 million of restructuring related outflows. The net working capital
change in Nokia Group excluding Nokia Siemens Networks is primarily due to a
reduction of payables, partially offset by a reduction of receivables;
- Nokia Siemens Networks level net working capital related inflows of
approximately EUR 140 million, which included approximately EUR 130 million of
restructuring related outflows. The net working capital change in Nokia Siemens
Networks is primarily due to a reduction of receivables, which more than offset
the reduction of payables;
- Nokia Group level net financial income and expense related cash inflow of
approximately EUR 80 million,
- Nokia Group level cash tax net outflows of approximately EUR 30 million;
- Nokia Group level CAPEX of approximately EUR 120 million; and
- Nokia Group level proceeds from the sale of fixed assets of approximately EUR
40 million.
In the first quarter 2013, due to the settlement of an intragroup balance,
Nokia Siemens Networks had a cash outflow related to net working capital of
approximately EUR 170 million and Nokia Group excluding Nokia Siemens Networks
had a cash inflow related to net working capital of approximately EUR 170
million. At the Nokia Group level the net impact was zero.
In the first quarter 2013, we received a quarterly platform support payment of
USD 250 million (approximately EUR 188 million) from Microsoft. Our agreement
with Microsoft includes platform support payments from Microsoft to us as well
as software royalty payments from us to Microsoft. Under the terms of the
agreement governing the platform support payments, the amount of each quarterly
platform support payment is USD 250 million. We have a competitive software
royalty structure, which includes annual minimum software royalty commitments
that vary over the life of the agreement. Software royalty payments, with
minimum commitments are paid quarterly. 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. Over the life of the
agreement the total amount of the platform support payments is expected to
slightly exceed the total amount of the minimum software royalty commitment
payments. In accordance with the terms of the agreement, the platform support
payments and annual minimum software royalty commitment payments continue for a
corresponding period of time.
In the first quarter 2013, Nokia received a claim from Indian tax authorities
relating to withholding tax amounting to EUR 225 million plus applicable
interests. Nokia reiterates its position that its operations are in compliance
with local laws as well as the bilaterally negotiated tax treaty between the
Governments of India and Finland, and that it will defend itself vigorously
against the claim.
DEVICES & SERVICES
The following table sets forth 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
---------------------------------------------------------------------
Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
--------------------------------------------------------------------
Net sales (EUR million)1 2 888 4 246 -32% 3 854 -25%
--------------------------------------------------------------------
Mobile device volume 61.9 82.7 -25% 86.3 -28%
(million units)
--------------------------------------------------------------------
Mobile device ASP (EUR) 47 51 -8% 45 4%
--------------------------------------------------------------------
Non-IFRS gross margin (%) 25.1% 24.4% 23.9%
--------------------------------------------------------------------
Non-IFRS operating 711 1 122 -37% 882 -19%
expenses (EUR million)
--------------------------------------------------------------------
Non-IFRS operating 0.1% -3.0% 1.0%
margin (%)
--------------------------------------------------------------------
Operating margin (%) -1.5% -5.1% 6.8%
--------------------------------------------------------------------
Note 1: Includes IPR income recognized in Devices & Services Other net sales.
The year-on-year and sequential changes in our Devices & Services net sales,
volumes, average selling prices and gross margin are discussed below under our
Smart Devices and Mobile Phones business units.
Smartphone Volumes
In the first quarter 2013, Devices & Services total smartphone volumes were
11.1 million units, composed of:
- 5.0 million Asha full touch smartphones in Mobile Phones
- 5.6 million Lumia smartphones in Smart Devices
- 0.5 million Symbian smartphones in Smart Devices
Devices & Services Other
Year-on-year Devices & Services Other net sales were lower in the first quarter
2013 primarily due to the divestment of Vertu. In addition to the divestment of
Vertu, the sequential Devices & Services Other net sales were lower in the
first quarter 2013 due to the absence of a non-recurring IPR income of
approximately EUR 50 million that was recognized in the fourth quarter 2012.
Following the divestment of Vertu in October 2012, Devices & Services Other net
sales are comprised of IPR income and sales of spare parts. Within Devices &
Services Other, we estimate that our current annual IPR income run-rate is
approximately EUR 0.5 billion.
Channel Inventory
We ended the first quarter 2013 slightly above the high end of our normal 4 to
6 week channel inventory range. On an absolute unit basis channel inventories
decreased sequentially.
Net Sales and Volumes by Geographic Area
The following table sets forth 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. IPR income is allocated to the geographic
areas contained in this chart.
DEVICES & SERVICES NET SALES
BY GEOGRAPHIC AREA
----------------------------------------------------------------
EUR million Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
---------------------------------------------------------------
---------------------------------------------------------------
Europe 895 1 352 -34% 1 210 -26%
Middle East & Africa 501 737 -32% 745 -33%
Greater China 256 577 -56% 213 20%
Asia-Pacific 724 945 -23% 941 -23%
North America 101 93 9% 196 -48%
Latin America 411 542 -24% 549 -25%
---------------------------------------------------------------
Total 2 888 4 246 -32% 3 854 -25%
---------------------------------------------------------------
The following table sets forth 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.
DEVICES & SERVICES MOBILE DEVICE
VOLUMES BY GEOGRAPHIC AREA
----------------------------------------------------------------
million units Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
---------------------------------------------------------------
---------------------------------------------------------------
Europe 11.8 15.8 -25% 19.4 -39%
Middle East & Africa 15.5 21.4 -28% 21.8 -29%
Greater China 3.4 9.2 -63% 4.6 -26%
Asia-Pacific 23.1 26.1 -11% 28.7 -20%
North America 0.4 0.6 -33% 0.7 -43%
Latin America 7.7 9.6 -20% 11.1 -31%
---------------------------------------------------------------
Total 61.9 82.7 -25% 86.3 -28%
---------------------------------------------------------------
On a year-on-year basis, net sales decreased in all regions except North
America where the increase was primarily due to our Smart Devices business
unit. The largest relative year-on-year decline in net sales was in Greater
China followed by Europe and Middle East and Africa. In Greater China and
Europe the net sales declines were primarily due to our Smart Devices business
unit whereas in the Middle East and Africa the net sales decline was primarily
due to our Mobile Phones business unit.
On a sequential basis, net sales decreased in all regions except Greater China
where the increase was primarily due to our Smart Devices business unit. The
largest relative sequential declines in net sales were in North America
followed by Middle East and Africa and Europe. The sequential net sales decline
in North America was primarily due to our Smart Devices business unit, whereas
in Middle East and Africa and Europe the net sales declines were primarily due
to our Mobile Phones business unit.
At constant currency Devices & Services' net sales would have decreased 33%
year-on-year and 23% sequentially.
Non-IFRS Operating Expenses
Devices & Services non-IFRS operating expenses decreased 37% year-on-year and
19% sequentially in the first quarter 2013. On a year-on-year basis, operating
expenses related to Mobile Phones and Smart Devices decreased 43% and 24%,
respectively, in the first quarter 2013. On a sequential basis, operating
expenses related to Mobile Phones decreased by 23%, while Smart Devices
operating expenses decreased 13% in the first quarter 2013. In addition to the
factors described below, the year-on-year and sequential changes were affected
by the proportionate allocation of operating expenses being affected by the
relative mix of sales and gross profit performance between Mobile Phones and
Smart Devices. This resulted in higher and lower relative allocations to Smart
Devices and Mobile Phones, respectively.
Devices & Services non-IFRS research and development expenses decreased 37%
year-on-year in the first quarter 2013. On a sequential basis, Devices &
Services non-IFRS research and development expenses decreased 15% in the first
quarter 2013. The year-on-year decline was primarily due to ramping down
Symbian and MeeGo research and development efforts, reductions in certain
Mobile Phones related activities and overall cost controls. On a sequential
basis, the decline was primarily due to overall cost controls.
Devices & Services non-IFRS sales and marketing expenses decreased 36%
year-on-year in the first quarter 2013. On a year-on-year basis, marketing
expenses declined primarily due to tight cost control and headcount reductions,
lower product specific marketing and a lower cost base as a result of business
divestments. On a sequential basis, Devices & Services non-IFRS sales and
marketing expenses decreased 26% in the first quarter 2013. Sequentially,
marketing expenses decreased primarily due to seasonality, headcount reductions
and tight cost control.
Devices & Services non-IFRS administrative and general expenses decreased 38%
year-on-year in the first quarter 2013 and were flat sequentially. The
year-on-year decrease was primarily related to cost savings in support
functions and business divestments, partially offset by shared function cost
categorization.
In the first quarter 2013, Devices & Services non-IFRS other income and expense
had a positive year-on-year and negative sequential impact on profitability.
On a reported basis, in the first quarter 2013 Devices & Services other income
and expense was negatively affected due to restructuring costs for changes in
the IT organization, offset by a positive item from a cartel settlement. In the
fourth quarter 2012, other income was positively affected primarily as a result
of gains from real estate sales, business divestments, a positive item from a
cartel settlement, and restructuring-related provision releases, which were
recognized in Devices & Services Other.
Non-IFRS Operating Margin
The higher year-on-year Devices & Services non-IFRS operating margin in the
first quarter 2013 was primarily due to lower operating expenses as a
percentage of net sales and higher gross margin.
The sequentially lower Devices & Services non-IFRS operating margin in the
first quarter 2013 was primarily due to higher operating expenses as a
percentage of net sales partially offset by higher gross margin.
Operating Margin
The higher year-on-year Devices & Services operating margin in the first
quarter 2013 was primarily due to lower operating expenses as a percentage of
net sales, lower other income and expenses (net other expense in both first
quarter 2013 and first quarter 2012) as a percentage of net sales and higher
gross margin.
The sequentially lower Devices & Services operating margin in the first quarter
2013 was primarily due to other income and expenses (net other expense in first
quarter 2013 and net other income in fourth quarter 2012) as a percent of net
sales as well as higher operating expenses as a percentage of net sales,
partially offset by higher gross margin.
Cost Reduction Activities and Planned Operational Adjustments
The following table sets forth a summary of our Devices & Services cost
reduction activities and planned operational adjustments.
DEVICES & SERVICES RESTRUCTURING SUMMARY
--------------------------------------------------------------------------------
-
EUR (million) Q1/2013 Cumulative up Q2/2013 2013 Total
(approxim to Q1/2013 (approximat (approximat (approximat
ate) (approximate) e estimate) e estimate e estimate)
--------------------------------------------------------------------------------
Restructuring 72 1 400 Not Not 1 600
related provided provided
charges
--------------------------------------------------------------------------------
Restructuring 110 1 200 50 300 1 400
related cash
outflows
--------------------------------------------------------------------------------
Nokia continues to target to reduce its Devices & Services non-IFRS operating
expenses to an annualized run rate of approximately EUR 3.0 billion by the end
of 2013.
At the end of the first quarter 2013, Devices & Services and Corporate Common
had approximately 31 600 employees, a reduction of approximately 15 500
compared to the end of the first quarter 2012, and approximately 1 600 compared
to the end of the fourth quarter 2012.
SMART DEVICES
The following table sets forth 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
--------------------------------------------------------------------
Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
-------------------------------------------------------------------
Net sales (EUR million)1 1 164 1 704 -32% 1 225 -5%
-------------------------------------------------------------------
Smart Devices volume 6.1 11.9 -49% 6.6 -8%
(million units)
-------------------------------------------------------------------
Smart Devices ASP (EUR) 191 143 34% 186 3%
-------------------------------------------------------------------
Gross margin (%) 20.7% 15.6% 18.0%
-------------------------------------------------------------------
Operating expenses 420 556 -24% 481 -13%
(EUR million)2
-------------------------------------------------------------------
Contribution margin (%)2 -16.2% -18.3% -21.6%
-------------------------------------------------------------------
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year and sequential changes in operating expenses were
affected by the proportionate allocation of operating expenses being affected
by the relative mix of sales and gross profit performance between Mobile Phones
and Smart Devices, resulting in higher relative allocations to Smart Devices in
the first quarter 2013. Accordingly, first quarter 2013 operating expenses are
not directly comparable to first and fourth quarters 2012 operating expenses.
Net Sales
Both on a year-on-year and sequential basis, the declines in our Smart Devices
net sales in the first quarter 2013 were due to lower volumes partially offset
by higher ASPs.
Volume
During the first quarter 2013 we shipped 6.1 million Smart Devices units, of
which 5.6 million units were Lumia products and 0.5 million units were Symbian
products. In the first quarter 2013, approximately two-thirds of our Lumia
volumes were Windows Phone 8-based products.
The year-on-year decline in our Smart Devices volumes in the first quarter 2013
continued to be driven by the strong momentum of competing smartphone platforms
and our portfolio transition from Symbian products to Lumia products. The
decline was primarily due to lower Symbian volumes, partially offset by higher
Lumia volumes.
On a sequential basis, the decrease in our Smart Devices volumes in the first
quarter 2013 was primarily due to lower Symbian volumes, partially offset by
higher Lumia volumes as we started shipping the Lumia 620 in significant
volumes and broadened the geographical distribution of the Lumia 920 and Lumia
820. On a geographical basis, Lumia volumes increased sequentially in all
regions except for North America.
Average Selling Price
The year-on-year increase in our Smart Devices ASP in the first quarter 2013
was primarily due to a positive mix shift towards sales of our Lumia products
which carry a higher ASP than our Symbian products, partially offset by our
pricing actions which commenced in the second quarter 2012 primarily related to
our Windows Phone 7-based Lumia products.
Sequentially, the increase in our Smart Devices ASP in the first quarter 2013
was primarily due to a positive mix shift towards sales of our Windows Phone
8-based Lumia products, partially offset by price erosion. The ASP of our Lumia
products in the first quarter 2013 was EUR 182, compared to EUR 192 in the
fourth quarter 2012.
Gross Margin
The year-on-year increase in our Smart Devices gross margin in the first
quarter 2013 was primarily due to the positive mix shift towards higher gross
margin products, the reversal of approximately EUR 50 million of previously
recognized inventory related allowances related to our Windows Phone 7-based
Lumia products, cost erosion of materials we use in our products and lower
Symbian fixed costs per unit. This was partially offset by the pricing actions
we commenced in the second quarter 2012 primarily related to our Windows Phone
7-based Lumia products, as well as a net negative impact related to foreign
currency fluctuations and higher warranty costs. From an operating system
perspective, the year-on-year increase in our Smart Devices gross margin in the
first quarter 2013 was due to a higher gross margin for our Lumia products, as
well as for our Symbian products.
On a sequential basis, the increase in our Smart Devices gross margin in the
first quarter 2013 was primarily due to a positive product mix shift towards
higher gross margin products, as well as the reversal of approximately EUR 50
million of previously recognized inventory related allowances related to our
Windows Phone 7-based Lumia products. This was partially offset by greater
price erosion than cost erosion, a net negative impact related to foreign
currency fluctuations and higher warranty costs.
During the first quarter 2013 our Windows Phone 8-based Lumia products
generated a gross margin, somewhat above the overall Smart Devices gross margin
of 20.7%.
Increases or decreases to Smart Devices inventory related allowances may be
required in the future depending on several factors, including consumer demand
and continued ramp up particularly related to our new Lumia products.
MOBILE PHONES
The following table sets forth 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
--------------------------------------------------------------------------------
Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
-------------------------------------------------------------------------------
Net sales (EUR million)1 1 590 2 311 -31% 2 468 -36%
-------------------------------------------------------------------------------
Mobile Phones volume (million units) 55.8 70.8 -21% 79.6 -30%
-------------------------------------------------------------------------------
Mobile Phones ASP (EUR) 28 33 -15% 31 -10%
-------------------------------------------------------------------------------
Gross margin (%) 22.9% 25.9% 22.2%
-------------------------------------------------------------------------------
Operating expenses (EUR million)2 267 472 -43% 346 -23%
-------------------------------------------------------------------------------
Contribution margin (%)2 5.5% 4.6% 8.2%
-------------------------------------------------------------------------------
Note 1: Does not include IPR income. IPR income is recognized in Devices &
Services Other net sales.
Note 2: The year-on-year and sequential changes in operating expenses were
affected by the proportionate allocation of operating expenses being affected
by the relative mix of sales and gross profit performance between Mobile Phones
and Smart Devices, resulting in lower relative allocations to Mobile Phones in
the first quarters 2013. Accordingly, first quarter 2013 operating expenses are
not directly comparable to first and fourth quarter 2012 operating expenses.
Net Sales
Both on a year-on-year and sequential basis, the declines in our Mobile Phones
net sales in the first quarter 2013 were due to lower volumes and lower ASPs.
Volume
During the first quarter 2013 we shipped 55.8 million Mobile Phones units, of
which 5.0 million were Asha full touch smartphones.
On a year-on-year basis, our Mobile Phones volumes in the first quarter 2013
were negatively affected by competitive industry dynamics, including intense
smartphone competition at increasingly lower price points and intense
competition at the low end of our product portfolio as well as an estimated
higher than normal seasonal decline in the market addressable by Mobile Phones.
Compared to the first quarter 2012, our Mobile Phones volumes declined across
our portfolio, most notably for our non-full touch devices that we sell to our
customers for above EUR 30. These declines were partially offset by sales
volumes of Asha full touch smartphones in the first quarter 2013 that were not
part of our portfolio in the first quarter 2012.
On a sequential basis, our Mobile Phones volumes in the first quarter 2013 were
negatively affected by competitive industry dynamics, including intense
competition at the low end of our product portfolio and smartphone competition
at increasingly lower price points affecting the rest of our Mobile Phones
portfolio, as well as estimated higher than normal seasonal decline in the
market addressable by Mobile Phones. Compared to the fourth quarter 2012 our
Mobile Phones volumes declined across our portfolio, most notably for lower
priced devices that we sell to our customers for below EUR 30.
Asha full touch smartphones Q1 volumes decreased 46% quarter-on-quarter to 5.0
million units, reflecting intense competitive industry dynamics as well as
lower seasonal demand.
During the first quarter 2013, our Mobile Phones channel inventory declined in
absolute unit volumes.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the first quarter 2013 was
primarily due to general price erosion and an increased proportion of sales of
lower priced devices, partially offset by a net positive impact related to
foreign currency fluctuations.
The sequential decline in our Mobile Phones ASP in the first quarter 2013 was
primarily due to general price erosion, a net negative impact related to
foreign currency fluctuations and a higher proportion of sales of lower priced
devices.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in the first quarter
2013 was primarily due to a negative product mix shift towards lower gross
margin devices, as well as the net negative impact related to foreign currency
fluctuations, partially offset by lower freight costs.
On a sequential basis, the increase in our Mobile Phones gross margin in the
first quarter 2013 was primarily due to lower warranty costs, partially offset
by higher price erosion than cost erosion and higher fixed costs per unit
because of lower sales volumes.
HERE
In November 2012, Nokia introduced HERE as the new brand for its location and
mapping service. As of January 1, 2013 our Location & Commerce business and
reportable segment was renamed HERE.
The following table sets forth a summary of the results for HERE for the
periods indicated, as well as the year-on-year and sequential growth rates.
HERE RESULTS SUMMARY
----------------------------------------------------------------------------
Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
---------------------------------------------------------------------------
Net sales (EUR million) 216 277 -22% 278 -22%
---------------------------------------------------------------------------
External net sales (EUR million) 164 166 -1% 204 -20%
---------------------------------------------------------------------------
Internal net sales (EUR million) 52 111 -53% 74 -30%
---------------------------------------------------------------------------
Non-IFRS gross margin (%) 75.5% 77.7% 82.0%
---------------------------------------------------------------------------
Non-IFRS operating 168 174 -3% 189 -11%
expenses (EUR million)
---------------------------------------------------------------------------
Non-IFRS operating -2.3% 12.9% 14.4%
margin (%)
---------------------------------------------------------------------------
Operating margin (%) -44.9% -33.9% -20.1%
---------------------------------------------------------------------------
Net Sales
In the first quarter 2013, the year-on-year decrease in external HERE net sales
was primarily due to lower net sales to our personal navigation device
customers as well as lower advertising revenue, partially offset by higher
sales of map content licenses to vehicle customers due to higher consumer
uptake of vehicle navigation systems and higher platform sales.
In the first quarter 2013, the sequential decrease in external HERE net sales
was primarily due to lower seasonal sales to our personal navigation device and
vehicle customers.
In the first quarter 2013, the year-on-year and sequential declines in internal
HERE net sales were due to declines in sales, including lower recognition of
deferred revenue, primarily related to our Smart Devices business unit.
Gross Margin
Both on a year-on-year and sequential basis, the decreases in HERE non-IFRS
gross margin in the first quarter 2013 were primarily due to lower net sales to
our personal navigation device customers as well as lower internal sales.
Operating Expenses
HERE non-IFRS research and development expenses decreased 2% year-on-year due
to cost reduction actions. On a sequential basis, research and development
expenses decreased 11% in the first quarter 2013 primarily due to decreased
product development spending.
HERE non-IFRS sales and marketing expenses decreased 13% year-on-year primarily
due to cost reduction actions. On a sequential basis, sales and marketing
expenses decreased 21% in the first quarter 2013 primarily due to lower
seasonal marketing spend and the absence of marketing investments in the HERE
brand launch in the fourth quarter 2012.
HERE non-IFRS administrative and general expenses were approximately flat
year-on-year and sequentially in the first quarter 2013.
HERE non-IFRS other income and expense for the first quarter 2013 was
approximately zero, compared to expense of EUR 6 million in the first quarter
2012 and income of EUR 1 million in the fourth quarter 2012.
Non-IFRS Operating Margin
The year-on-year decrease in HERE non-IFRS operating margin in the first
quarter 2013 was primarily due to higher operating expenses as a percentage of
net sales and lower gross margin.
The sequential decrease in HERE non-IFRS operating margin in the first quarter
2013 was primarily due to higher operating expenses as a percentage of net
sales and lower gross margin.
Operating Margin
The year-on-year decrease in HERE operating margin in the first quarter 2013
was primarily due to higher operating expenses as a percentage of net sales,
lower gross margin, partially offset by lower other income and expenses as a
percentage of net sales.
The sequential decrease in HERE operating margin in the first quarter 2013 was
primarily due to higher operating expenses as a percentage of net sales and
lower gross margin.
NOKIA SIEMENS NETWORKS
The following table sets forth 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
---------------------------------------------------------------------
Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
--------------------------------------------------------------------
Net sales (EUR million) 2 804 2 947 -5% 3 988 -30%
--------------------------------------------------------------------
Non-IFRS gross margin (%) 34.0% 26.6% 36.0%
--------------------------------------------------------------------
Non-IFRS operating 763 936 -18% 843 -9%
expenses (EUR million)
--------------------------------------------------------------------
Non-IFRS operating 7.0% -5.0% 14.4%
margin (%)
--------------------------------------------------------------------
Operating margin (%) 0.1% -34.1% 6.3%
--------------------------------------------------------------------
Net Sales
The following table sets forth 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 million Q1/2013 Q1/2012 YoY Q4/2012 QoQ
Change Change
---------------------------------------------------------------
---------------------------------------------------------------
Europe 731 930 -21% 1 058 -31%
Middle East & Africa 259 270 -4% 388 -33%
Greater China 223 209 7% 416 -46%
Asia-Pacific 872 877 -1% 1 176 -26%
North America 424 283 50% 426 0%
Latin America 295 378 -22% 524 -44%
---------------------------------------------------------------
Total 2 804 2 947 -5% 3 988 -30%
---------------------------------------------------------------
In the first quarter 2013, Global Services represented approximately 51% of
Nokia Siemens Networks net sales, compared to approximately 52% in the first
quarter 2012 and approximately 50% in the fourth quarter 2012. In the first
quarter 2013, Mobile Broadband represented approximately 44% of Nokia Siemens
Networks net sales, compared to approximately 41% in the first quarter 2012 and
approximately 45% in the fourth quarter 2012.
The year-on-year decrease in Nokia Siemens Networks' net sales in the first
quarter 2013 was primarily due to divestments of businesses not consistent with
Nokia Siemens Networks' strategic focus as well as the exiting of certain
customer contracts. Excluding these two factors, Nokia Siemens Networks' net
sales in the first quarter 2013 declined by approximately 1% as lower net sales
of Global Services were almost entirely offset by higher net sales in Mobile
Broadband. The year-on-year decline in Global Services was primarily due to
lower net sales in Professional Services and Care. The year-on-year increase in
Mobile Broadband was primarily due to higher LTE net sales, partially offset by
lower WCDMA and Voice and IP transformation net sales.
On a regional basis, the year-on-year decline was primarily due to lower net
sales in Europe and Latin America which both saw lower net sales in Mobile
Broadband, partially offset by higher net sales in North America which saw
growth in both Mobile Broadband and Global Services net sales.
The sequential decrease in Nokia Siemens Networks' net sales in the first
quarter 2013 was primarily due to lower sales of both Mobile Broadband and
Global Services consistent with industry seasonality as well as the absence of
non-recurring IPR income of approximately EUR 30 million that was recognized in
the fourth quarter 2012. The sequential decline in Mobile Broadband was due to
lower sales in GSM, WCDMA and Voice and IP transformation net sales. The
sequential decline in Global Services was due to lower net sales in Network
Implementation and Professional Services.
On a regional basis, Mobile Broadband and Global Services net sales declined
sequentially in all regions except for North America. North America was
approximately flat on a sequential basis, due to an increase in Mobile
Broadband net sales, almost completely offset by a decline in Global Services
net sales.
At constant currency, Nokia Siemens Networks' net sales would have decreased 4%
year-on-year and 28% sequentially. Excluding divestments of businesses not
consistent with Nokia Siemens Networks' strategic focus and the exiting of
certain customer contracts, Nokia Siemens Networks' net sales were
approximately flat on a constant currency basis in the first quarter of 2013
compared to the first quarter 2012.
Gross Margin
On a year-on-year basis, the increase in Nokia Siemens Networks' non-IFRS gross
margin in the first quarter 2013 was primarily due to a higher gross margin in
Mobile Broadband and Global Services, as well as a higher proportion of Mobile
Broadband within the total sales mix.
On a sequential basis, the decrease in Nokia Siemens Networks' non-IFRS gross
margin in the first quarter 2013 was due to a lower gross margin in Global
Services as well as the absence of non-recurring IPR income of approximately
EUR 30 million that was recognized in the fourth quarter 2012, partially offset
by higher gross margin in Mobile Broadband.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses decreased
16% year-on-year in the first quarter 2013 primarily due to reduced investments
in business activities that are not consistent with the company's focused
strategy as well as increased research and development efficiency, partially
offset by investments in areas that are consistent with the company's focused
strategy most notably LTE. Sequentially, Nokia Siemens Networks' non-IFRS
research and development expenses decreased 8% primarily due to lower incentive
expenses.
Year-on-year, Nokia Siemens Networks' non-IFRS sales and marketing expenses
decreased 22% in the first quarter 2013 primarily due to structural cost
savings. On a sequential basis, Nokia Siemens Networks non-IFRS sales and
marketing expenses decreased 15% in the first quarter 2013 primarily due to
lower incentive expenses and seasonally lower marketing spend.
Nokia Siemens Networks' non-IFRS administrative and general expenses decreased
21% year-on-year in the first quarter 2013 primarily due to structural cost
savings. On a sequential basis, Nokia Siemens Networks non-IFRS administrative
and general expenses decreased 5% in the first quarter 2013, primarily due to
lower incentive expenses.
Nokia Siemens Networks' non-IFRS other income and expense for the first quarter
2013 was an income of EUR 7 million, compared to income of EUR 6 million in the
first quarter 2012 and expense of EUR 16 million in the fourth quarter 2012.
On a sequential basis, this was primarily due to a net negative impact related
to foreign currency fluctuations.
Non-IFRS Operating Margin
In the first quarter 2013, non-IFRS operating margin for Mobile Broadband was
higher than non-IFRS operating margin for Global Services.
The year-on-year increase in Nokia Siemens Networks non-IFRS operating margin
in the first quarter 2013 was primarily due to higher gross margin and lower
operating expenses as a percentage of net sales.
On a year-on-year basis, non-IFRS operating margin increased for both Mobile
Broadband and Global Services.
The sequential decrease in Nokia Siemens Networks non-IFRS operating margin in
the first quarter 2013 was primarily due to higher operating expenses as a
percentage of net sales and lower gross margin.
On a sequential basis, non-IFRS operating margin decreased for both Mobile
Broadband and Global Services.
Operating Margin
The year-on-year increase in Nokia Siemens Networks operating margin in the
first quarter 2013 was primarily due to lower other income and expenses as a
percentage of net sales, higher gross margin and lower operating expenses as a
percentage of net sales.
The sequential decrease in Nokia Siemens Networks operating margin in the first
quarter 2013 was primarily due to higher operating expenses as a percentage of
net sales and lower gross margin, partially offset by lower other income and
expenses as a percentage of net sales.
Global Restructuring Program
The following table sets forth a summary of Nokia Siemens Networks' cost
reduction activities and planned operational adjustments.
NOKIA SIEMENS NETWORKS RESTRUCTURING SUMMARY
--------------------------------------------------------------------------------
-
EUR (million) Q1/2013 Cumulative up Q2/2013 2013 2014 Total
(approx to Q1/2013 (approximat (approxim (appro (approxim
i- (approxi- e estimate) ate xi- ate
mate) mate) estimate mate estimate)
estima
te)
--------------------------------------------------------------------------------
Restructuring 129 1 400 Not Not Not 1 400
related provided provided provid
charges ed
--------------------------------------------------------------------------------
Restructuring 130 800 200 550 200 1 400
related cash
outflows
--------------------------------------------------------------------------------
As Nokia Siemens Networks executes its restructuring plans, the company is
continuing to consider options as part of its transformation and restructuring
program which may impact restructuring related charges and related cash
outflows in the remainder of 2013.
Nokia and Nokia Siemens Networks continue to target to reduce Nokia Siemens
Networks' non-IFRS annualized operating expenses and production overheads by
more than EUR 1 billion by the end of 2013, compared to the end of 2011. In
conjunction with this restructuring program, Nokia and Nokia Siemens Networks
estimates total restructuring related charges of approximately EUR 1.4 billion
as well as total restructuring related cash outflows of approximately EUR 1.4
billion. This is an update to the earlier estimate of approximately EUR 1.3
billion for both restructuring related charges as well as restructuring related
cash outflows.
At the end of the first quarter 2013, Nokia Siemens Networks had approximately
56 700 employees, a reduction of approximately 11 900 compared to the end of
the first quarter 2012, and approximately 1 700 compared to the end of the
fourth quarter 2012.
Q1 OPERATING HIGHLIGHTS
DEVICES & SERVICES OPERATING HIGHLIGHTS
SMART DEVICES
- Nokia started shipping the Nokia Lumia 620, a compact smartphone with a
colorful design that brings Windows Phone 8 to a more youthful audience.
- Nokia announced the Lumia 520, its most affordable Windows Phone 8
smartphone, delivering experiences normally found only in high-end smartphones,
such as the same digital camera lenses found on the flagship Nokia Lumia 920,
Nokia Music for free music out of the box and even offline, and the HERE
location suite.
- Nokia announced and started shipping the Nokia Lumia 720, a midrange Windows
8 smartphone with high-end camera performance featuring a large f/1.9 aperture
and exclusive Carl Zeiss optics designed to deliver clear pictures day and
night. The sleek and stylish smartphone comes with the latest high-end Nokia
Lumia experiences, including Nokia Music, the HERE location suite, and the
option to add wireless charging with a snap-on wireless charging cover.
- Nokia's Lumia range of smartphones continued to attract businesses, including
Foxtons, London's leading estate agent, which has chosen the Nokia Lumia 820 as
its business smartphone; Mall of America, the United States' largest retail and
entertainment complex, which is switching from BlackBerry to the Nokia Lumia
920 because of the tight integration with Microsoft services and built-in
Microsoft Office suite; and The Coca-Cola Company, whose sales associates in
Vietnam and Cambodia are using Nokia Lumia smartphones for order processing,
equipment validation and market execution improvement.
- The Windows Phone Store continued to strengthen in terms of the quantity and
quality of applications. Windows Phone offers more than 135 000 applications
and games. Key new applications that arrived in Store during the quarter
included Pandora, United Airlines and Temple Run.
MOBILE PHONES
- Nokia announced the Nokia 301, the most affordable Nokia device to offer
video streaming; it also comes with new smart camera features inspired by the
digital camera lenses on Nokia's Lumia smartphones.
- Nokia announced the Nokia Asha 310, which provides Dual SIM and Wi-Fi in the
same device, a first for Nokia smartphones.
- Nokia announced the Nokia 105, its most affordable phone to date, retailing
at a recommended price of EUR 15. The Nokia 105 is the ideal device for the
first-time phone buyer, featuring a bright color screen with clear menus and
essentials like FM radio, multiple alarm clocks, speaking clock and flashlight.
The dust- and splash-proof, pillowed keymat and battery life of up to 35 days
also make it ideal for people in search of a reliable back-up phone.
HERE OPERATING HIGHLIGHTS
In the first quarter 2013, HERE continued to strengthen its offering on Nokia's
Lumia range as well as broaden the experiences available across the Windows
Phone 8 ecosystem:
- HERE further integrated its location-based experiences to enable people to
seamlessly transition from driving to walking to public transit thanks to
improved app-to-app linking and syncing of favorites from here.com to any HERE
experience. HERE now also offers unique capabilities for users to customize
their home screen as a personal location dashboard.
- With LiveSight technology, HERE introduced innovation that is aimed at
changing the way people interact with maps, and their world. After first
showcasing the technology in the HERE City Lens application, HERE also
announced that it is extending LiveSight to HERE Maps. LiveSight recognizes
what people see through their phone's camera and layers that view with
relevant, place-based information.
- HERE further strengthened the Windows Phone 8 ecosystem by making its suite
of location-based experiences available for non-Nokia Windows Phone 8 devices.
HERE offers HERE Drive, HERE Maps and HERE Transit to owners of non-Nokia
Windows Phone 8 devices in Canada, France, Germany, Italy, Mexico, Spain, the
United Kingdom and the United States.
HERE also continued to broaden access to its maps content and the HERE Platform
through several new partnerships, including:
- Mozilla, which as a first collaborative step with HERE now has HTML5-based
HERE Maps for the new Firefox OS.
- Toyota Motor Europe, which selected the HERE platform's Local Search for
Automotive to power its next generation Touch & Go navigation and infotainment
systems. Local Search for Automotive is a specifically designed solution
developed to fulfill the requirements of the automotive industry. This
announcement marks a significant advancement in our longstanding partnership
with Toyota and includes plans to collaborate with Nokia to study more services
that leverage the HERE Location Platform.
- More than 10 companies decided to adopt the HERE Location platform, including
Terra in Brazil and Tiscali and SEAT Pagine Gialle in Italy, demonstrating that
the platform is gaining momentum across industries.
- Wetter.com, Europe's largest German language weather portal with 13 million
unique visitors, which is laying information from radar stations and satellite
imagery on top of their HERE-powered map. For instance, this enables people to
pinpoint where it is raining with great precision.
- Garmin, which is the first customer to launch Natural Guidance in the U.S.
market and did so at the Consumer Electronics Show. Natural Guidance provides
directions in a more humanized way with recognizable landmarks, buildings,
traffic lights and stop signs, such as "turn right after the church" or "turn
left at the traffic light."
- HERE continued to strengthen its long lasting relationships within the
automotive industry, with a number of companies deciding that they would
continue to benefit from our automotive grade quality maps by selecting HERE as
their partner for Map Updates. These included FujitsuTEN Australia Limited, KIA
Europe, Mitsubishi Motor Corporation (MMC), Nissan Mexico, Subaru Canada and
Volkswagen Europe.
NOKIA SIEMENS NETWORKS OPERATING HIGHLIGHTS
- Nokia Siemens Networks Finance B.V. issued EUR 800 million Senior Notes. Most
of the net proceeds from the offering of the Notes have been used to prepay
certain existing debt of Nokia Siemens Networks, with the remaining proceeds to
be used for general corporate purposes.
- Nokia Siemens Networks continued its mobile broadband deal momentum into
2013, adding commercial LTE deals in the first quarter, including: implementing
a 4G (LTE) network for Movistar Chile and expanding its 3G network; delivering
US Cellular's second wave of 4G (LTE) services; launching New Zealand's first
4G service with Vodafone and upgrading its 2G and 3G networks; launching voice
services for Bharti Airtel's 4G TD-LTE customers in Pune, India; enabling
Polkomtel to provide voice services with LTE in Poland; extending Orange's
network in Switzerland and preparing it for 4G roll-out; modernizing and
expanding E-Plus Group's GSM and HSPA+ networks in Germany; being selected by
BH Telecom to expand and modernize its mobile network across the northern and
eastern parts of Bosnia and Herzegovina; providing GSM-Railway (GSM-R)
infrastructure for Polish Railways; implementing a 4G (LTE) network for SFR and
upgrading its existing GSM and 3G networks in major French cities; conducting a
successful 4G (LTE) trial with Vodacom Tanzania; and becoming sole supplier to
DOCOMO PACIFIC, a subsidiary of the Japanese telecommunications operator NTT
DOCOMO, for an end-to-end 4G LTE network in the U.S. territory of Guam.
- Nokia Siemens Networks continues to invest to stay at the forefront of mobile
broadband, and at Mobile World Congress in February, announced Liquid
Applications, the biggest base station transformation since the launch of GSM
22 years ago. Liquid applications turns base stations into an intelligent part
of a mobile operator's network to serve and deliver local content. Nokia
Siemens Networks also announced a collaboration with IBM to deliver this new
platform, which allows mobile operators to create a truly unique mobile
experience, relieve the ever-increasing strain on network infrastructure and
bring new Liquid Broadband solutions to market. Nokia Siemens Networks and SK
Telecom are working together to evaluate Liquid Applications in the operator's
LTE network.
- In February, Nokia Siemens Networks extended its small cell portfolio with
new Flexi Zone Micro and Pico base stations for hot spots complemented by new
service offerings that together deliver optimal coverage and capacity, and
launched Smart Wi-Fi to seamlessly integrate wireless local area networks
(WLAN) with mobile networks. Nokia Siemens Networks also introduced a range of
new features to its Liquid Radio Software Suites to help operators address
constantly changing capacity demands. The improved set of features can help
release 35% of GSM spectrum for use by WCDMA and LTE, and ensure that LTE
networks and spectrum are fully utilized.
- Nokia Siemens Networks was recognized by Global TD-LTE Initiative (GTI) for
its global advances and deployments, winning the TD-LTE Market Development
Award 2013, with TD-LTE innovations allowing operators to use their valuable
spectrum more effectively, serve more customers profitably, and converge TD-LTE
and FDD LTE to meet steep data demand.
- In January, Nokia Siemens Networks enabled the world's first live TV
broadcast via TD-LTE with China Mobile. The TD-LTE network, solely built by
Nokia Siemens Networks, exceeded requirements to transmit high-definition (HD)
video and images from cameras on the move, providing the best live TV
experience, matching a relay via satellite.
- Nokia Siemens Networks and Panasonic Mobile Communications were selected by
NTT DOCOMO in Japan to develop next-generation mobile broadband network
architecture for LTE-A (long term evolution-advanced), and as part of a
multi-year agreement that will provide high-capacity base stations and Remote
Radio Heads (RRH) for small cells roll-out.
- In services, Nokia Siemens Networks unveiled a suite of products and services
at Mobile World Congress, to simplify operations for mobile operators as
underlying networks become increasingly complex. Nokia Siemens Networks was
selected by Lebanese telecommunications operator, touch, to simplify its
operations and improve its customer experience. To achieve this, the operator
has selected Nokia Siemens Networks' unique operations support systems (OSS)
portfolio and its related integration services. The solution will transform
touch's service operations cost-efficiently and pave the way for the operator
to achieve service assurance.
RISKS AND FORWARD-LOOKING STATEMENTS
It should be noted that Nokia and its business are exposed to various risks and
uncertainties and certain statements herein that are not historical facts are
forward-looking statements, including, without limitation, those regarding: A)
the expected plans and benefits of our partnership with Microsoft to bring
together complementary assets and expertise to form a global mobile ecosystem
for smartphones; B) the timing and expected benefits of our strategies,
including expected operational and financial benefits and targets as well as
changes in leadership and operational structure; C) the timing of the
deliveries of our products and services; D) our ability to innovate, develop,
execute and commercialize new technologies, products and services; E)
expectations regarding market developments and structural changes; F)
expectations and targets regarding our industry volumes, market share, prices,
net sales and margins of our products and services; G) expectations and targets
regarding our operational priorities and results of operations; H) expectations
and targets regarding collaboration and partnering arrangements; I) the outcome
of pending and threatened litigation, regulatory proceedings or investigations
by authorities; J) expectations regarding the successful completion of
restructurings, investments, acquisitions and divestments on a timely basis and
our ability to achieve the financial and operational targets set in connection
with any such restructurings, investments, acquisitions and divestments; and K)
statements preceded by "believe,""expect,""anticipate,""foresee,""target,""estimate,""designed,""aim", "plans,""intends,""will" or similar
expressions. These statements are based on management's best assumptions and
beliefs in light of the information currently available to it. Because they
involve risks and uncertainties, actual results may differ materially from the
results that we currently expect. Factors, including risks and uncertainties
that could cause these differences include, but are not limited to: 1) our
ability to make the Windows Phone ecosystem a competitive and profitable global
ecosystem that achieves sufficient scale, value and attractiveness to relevant
market participants, making Nokia products with Windows Phone a competitive
choice for consumers; 2) our success in the smartphone market, including our
ability to introduce and bring to market quantities of attractive,
competitively priced Nokia products with Windows Phone that are positively
differentiated from our competitors' products, both outside and within the
Windows Phone ecosystem; 3) our ability to produce attractive and competitive
devices in our Mobile Phones business unit, including feature phones and
devices with features such as full touch that can be categorized as
smartphones, in a timely and cost efficient manner with differentiated
hardware, software, localized services and applications; 4) the success of our
HERE strategy, including our ability to establish a successful location-based
platform and extend our location-based services across devices and operating
systems; 5) our ability to provide support for our Devices & Services business
and maintain current and create new sources of revenue from our location-based
service and commerce assets; 6) our ability to protect numerous patented
standardized or proprietary technologies from third-party infringement or
actions to invalidate the intellectual property rights of these technologies;
7) our ability to maintain the existing sources of intellectual property
related revenue and establish new such sources; 8) the intensity of competition
in the various markets where we do business and our ability to maintain or
improve our market position or respond successfully to changes in the
competitive environment; 9) our ability to keep momentum and increase our speed
of innovation, product development and execution in order to bring new
innovative and competitive mobile products and location-based or other services
to the market in a timely manner; 10) the success of our partnership with
Microsoft in connection with the Windows Phone ecosystem; 11) our ability to
effectively and smoothly implement the planned changes in our operational
structure and achieve targeted efficiencies and reductions in operating
expenses; 12) our ability to retain, motivate, develop and recruit
appropriately skilled employees; 13) our dependence on the development of the
mobile and communications industry, including location-based and other services
industries, in numerous diverse markets, as well as on general economic
conditions globally and regionally; 14) our ability to maintain and leverage
our traditional strengths in the mobile products market, especially if we are
unable retain the loyalty of our mobile operator and distributor customers and
consumers as a result of the implementation of our strategies or other factors;
15) the performance of the parties we partner and collaborate with, including
Microsoft and our ability to achieve successful collaboration or partnering
arrangements; 16) our ability to deliver our mobile products profitably, in
line with quality requirements and on time, especially if the limited number of
suppliers we depend on, many of which are geographically concentrated with a
majority based in Asia, fail to deliver sufficient quantities of fully
functional products, components, sub-assemblies, software and services on
favorable terms and in compliance with our supplier requirements; 17) our
ability to manage efficiently our manufacturing and logistics, as well as to
ensure the quality, safety, security and timely delivery of our products and
services; 18) any actual or even alleged defects or other quality, safety and
security issues in our products; 19) any inefficiency, malfunction or
disruption of a system or network that our operations rely on; 20) the impact
of cybersecurity breach or other factors leading to an actual or alleged loss,
improper disclosure or leakage of any personal or consumer data collected by us
or our partners or subcontractors, made available to us or stored in or through
our products; 21) our ability to successfully manage the pricing of our
products and costs related to our products and our operations; 22) the
potential complex tax issues and obligations we may face, including the
obligation to pay additional taxes in various jurisdictions and our actual or
anticipated performance, among other factors, could result in allowances
related to deferred tax assets; 23) exchange rate fluctuations, particularly
between the euro, which is our reporting currency, and the US dollar, the
Japanese yen and the Chinese yuan, as well as certain other currencies; 24) our
ability to protect the technologies, which we or others develop or which we
license, from claims that we have infringed third parties' intellectual
property rights, as well as our unrestricted use on commercially acceptable
terms of certain technologies in our product and services; 25) the impact of
economic, regulatory, political or other development on our sales,
manufacturing facilities and assets located in emerging market countries as
well as the impact of regulations against imports to those countries; 26) the
impact of changes in and enforcement of government policies, technical
standards, trade policies, laws or regulations in countries where our assets
are located and where we do business; 27) investigations or claims by
contracting parties in relation to exits from countries, areas or contractual
arrangements; 28) unfavorable outcome of litigation, regulatory proceedings or
investigations by authorities; 29) allegations of possible health risks from
electromagnetic fields generated by base stations and mobile devices, and the
lawsuits and publicity related to them, regardless of merit; 30) Nokia Siemens
Networks' success in the mobile broadband infrastructure and related services
market and its ability to effectively, profitably and timely adapt business and
operations to the diverse needs of its customers; 31) Nokia Siemens Networks'
ability to maintain and improve its market position and respond successfully to
changes and competition in the mobile broadband infrastructure and related
services market; 32) Nokia Siemens Networks' success in implementing its
restructuring plan and reducing its operating expenses and other costs; 33)
Nokia Siemens Networks' ability to invest in and timely introduce new
competitive products, services, upgrades and technologies; 34) Nokia Siemens
Networks' dependence on limited number of customers and large, multi-year
contracts; 35) Nokia Siemens Networks' liquidity and its ability to meet its
working capital requirements, including access to available credit under its
financing arrangements and other credit lines as well as cash at hand; 36) the
management of Nokia Siemens Networks' customer financing exposure; 37) whether
ongoing or any additional governmental investigations of alleged violations of
law by some former employees of Siemens may involve and affect the
carrier-related assets and employees transferred by Siemens to Nokia Siemens
Networks; 38) any impairment of Nokia Siemens Networks customer relationships
resulting from ongoing or any additional governmental investigations involving
the Siemens carrier-related operations transferred to Nokia Siemens Networks,
as well as the risk factors specified on pages 12-47 of Nokia's annual report
on Form 20-F for the year ended December 31, 2012 under Item 3D. "Risk
Factors." Other unknown or unpredictable factors or underlying assumptions
subsequently proving to be incorrect could cause actual results to differ
materially from those in the forward-looking statements. Nokia does not
undertake any obligation to publicly update or revise forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent legally required.
Nokia, Helsinki - April 18, 2013
Media and Investor Contacts:
Corporate Communications, tel. +358 7180 34900
email: press.services@nokia.com
Investor Relations Europe, tel. +358 7180 34927
Investor Relations US, tel. +1 914 368 0555
www.nokia.com
Planned publication dates for Nokia Corporation interim reports in 2013
- second quarter 2013 interim report: July 18, 2013
- third quarter 2013 interim report: October 17, 2013
Nokia Siemens Networks standalone financial reports
As announced in March 2013, Nokia Siemens Networks Finance B.V. issued EUR 800
million Senior Notes. As a result of this transaction and in line with terms
and conditions that commensurate with the nature of these debt securities,
Nokia Siemens Networks has agreed to make certain financial data publicly
available on its new standalone reporting format that was introduced in the
Nokia Siemens Networks annual report for 2012. For standalone financial
reporting purposes, Nokia Siemens Networks currently has two operating
segments: Mobile Broadband and Global Services. Nokia Siemens Networks provides
detailed disclosure of certain financial information for these operating
segments. For Nokia Group financial reporting purposes Nokia Siemens Networks
remains as one reportable segment. The classification of certain items
presented on Nokia Siemens Networks standalone financial statements differ from
the Nokia Group presentation. Certain additional disclosures are also required
to be presented on a standalone basis. The standalone report will be made
publicly available for the first, second and third quarter of the fiscal year
within 60 days following the end of respective quarter and for the full year
within 120 days after the end of the fiscal year. This obligation continues for
as long as the notes are outstanding.
In line with the above, the Nokia Siemens Networks standalone financial report
for the first quarter 2013 will be published before the end of May 2013. Nokia
Siemens Networks plans to announce a more precise publication date in due
course.
Nokia's Annual General Meeting
Nokia's Annual General Meeting 2013 will be held on May 7, 2013.
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