2014-01-23 12:03:06 CET
2014-01-23 12:04:11 CET
REGULATED INFORMATION
Nokia - Financial Statement Release
Nokia Corporation Q4 and full year2013 Interim report
Nokia Corporation
Financial Statement Release
January 23, 2014 at 13.00 (CET+1)
This is a summary of the fourth quarter and full year 2013 report published
today. The complete fourth quarter and full year 2013 report with tables is
available at http://www.results.nokia.com/results/Nokia_results2013Q4e.pdf.
Investors should not rely on summaries of our interim reports only, but should
review the complete interim reports with tables.
Nokia Corporation Report for Q4 2013 and Full Year 2013
FINANCIAL AND OPERATING HIGHLIGHTS
Fourth quarter 2013 highlights for continuing operations*:
Nokia's non-IFRS EPS in Q4 2013 of EUR 0.08 (0.06 in Q3 2013); reported EPS of
EUR 0.05 (0.04 in Q3 2013)
Nokia's net sales in Q4 2013 were EUR 3.5 billion, up 18% compared to Q3 2013
- In Q4 2013, underlying operating profitability for Nokia's continuing
operations increased to EUR 408 million or 11.7% of net sales, compared to EUR
344 million or 11.7% of net sales in Q3 2013.
- NSN achieved solid underlying operating profitability, with Q4 2013 non-IFRS
operating margin of 11.2% compared to 8.4% in Q3 2013. This reflected strong
gross margin and continued progress relative to its strategy in a seasonally
strong quarter, partially offset by higher than normal non-IFRS other expenses.
- HERE's external net sales grew to EUR 225 million, an increase of 10%
year-on-year and 28% sequentially.
- Nokia announced that Samsung extended a patent license agreement between
Nokia and Samsung for 5 years. Samsung will pay compensation to Nokia for the
period commencing from January 1, 2014. The amount to be paid by Samsung will
be finally settled in a binding arbitration, which is expected to be concluded
during 2015.
Full year 2013 highlights for continuing operations*:
Nokia's full year 2013 non-IFRS EPS of EUR 0.21 (0.13 in 2012); reported EPS of
EUR 0.05 (-0.20 in 2012)
Nokia's full year net sales 2013 were EUR 12.7 billion, down 17% compared to
full year 2012
- Despite NSN's lower top line, underlying operating profitability improved to
EUR 1.1 billion or 9.7% of net sales, compared to EUR 0.8 billion or 5.7% of
net sales in 2012, reflecting strong gross margin and continued progress
relative to its strategy.
- NSN achieved its target to reduce non-IFRS annualized operating expenses and
production overheads by more than EUR 1.5 billion by the end of 2013, compared
to the end of 2011.
- NSN reported net profit improved to EUR 15 million, compared to a reported
net loss of EUR 1.4 billion in 2012, reflecting lower levels of restructuring
charges, strong operational performance in both Global Services and Mobile
Broadband, and lower purchase price accounting related expenses.
Balance sheet highlights:
- Nokia Group ended 2013 with a strong balance sheet and solid cash position
with gross cash of EUR 9.0 billion and net cash of EUR 2.3 billion compared to
EUR 9.1 billion and EUR 2.4 billion, respectively, at the end of Q3 2013. At
the end of 2013, NSN's contribution to Nokia Group gross and net cash was EUR
2.8 billion and EUR 1.7 billion, respectively, compared to EUR 2.7 billion and
EUR 1.5 billion at the end of Q3 2013.
Additional information*:
- Nokia received shareholder approval for the sale of substantially all of its
Devices & Services business at our Extraordinary General Meeting. As a result,
Nokia has commenced reporting substantially all of its Devices & Services
business as discontinued operations. In Q4 2013, discontinued operations net
sales were EUR 2.6 billion and non-IFRS operating margin was -7.3%. Full year
2013 discontinued operations net sales were EUR 10.7 billion and non-IFRS
operating margin was -4.8%. Within discontinued operations, we continue to
focus on innovation as well as working capital efficiency and the overall cash
flow performance.
- Nokia achieved its 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.
*See note 3 to our Summary Financial Information table below concerning our
current operational and reporting structure.
Risto Siilasmaa, Nokia Chairman and interim CEO commented on the company's
progress: "The fourth quarter of 2013 was a watershed moment in Nokia's history. Having
received overwhelmingly strong support from our shareholders at our
extraordinary general meeting in November for the sale of our phones business
to Microsoft, we are diligently working towards defining Nokia's future
direction. I am pleased with the progress we have made thus far in our strategy
evaluation and excited by the opportunities ahead for each of our three
continuing businesses: NSN, HERE and Advanced Technologies.
During the fourth quarter, Nokia's continuing businesses produced a healthy
underlying operating margin of 12%. While the first quarter of the year is
seasonally weak for our continuing operations, we continue to expect the
closing of the Microsoft transaction to significantly improve Nokia's earnings
profile.
The strength of NSN's underlying profitability highlights just how
fundamentally different the company is today, compared with two years ago when
it started its restructuring and transformation program. Today, we are more
focused, more innovative and more disciplined. With these fundamental elements
in place, we believe NSN is well-positioned to deliver solid business
performance for the year ahead.
For HERE, we see long-term transformational growth opportunities in the
automotive market, as well as in other industries. Thus, we are planning to
increase investment levels in 2014 to capture these exciting opportunities in
the coming years.
For Advanced Technologies, we are focused on continuing to invest in
innovation, implementing our successful business strategy of licensing our
industry leading intellectual property to companies interested in Nokia's
innovations, and are planning to add further value to our partners through
technology licensing."
SUMMARY FINANCIAL INFORMATION
-------------------------------------------------------------
Reported and Non-IFRS Reported and Non-IFRS
fourth quarter 2013 results1-4 full year 2013
results1-5
-------------------
EUR million Q4/13 Q4/12 YoY Q3/13 QoQ 2013 2012 YoY
Change Change Change
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nokia's continuing
operations
Net sales 3 476 4 413 -21% 2 939 18% 12 709 15 400 -17%
Operating profit 274 329 -17% 262 5% 519 -821
Operating profit 408 670 -39% 344 19% 1 436 1 142 26%
(non-IFRS)
EPS, EUR diluted 0.05 0.06 -17% 0.04 25% 0.05 -0.21
EPS, EUR diluted 0.08 0.10 -20% 0.06 33% 0.21 0.13 62%
(non-IFRS)
Net cash from 1 152 1 930 -40%
operating
activities
Net cash and other 2 309 4 360 -47% 2 413 -4% 2 309 4 360 -47%
liquid assets6
-------------------------------------------------------------
Nokia Solutions
and Networks
-------------------
Net sales 3 105 3 988 -22% 2 592 20% 11 282 13 779 -18%
Mobile Broadband 1 563 1 776 -12% 1 259 24% 5 347 6 043 -12%
net sales
Global Services 1 540 1 979 -22% 1 331 16% 5 753 6 929 -17%
net sales
Operating profit 243 252 -4% 166 46% 420 -795
Operating profit 349 576 -39% 218 60% 1 089 782 39%
(non-IFRS)
Operating margin % 7.8% 6.3% 6.4% 3.7% -5.8%
Operating margin % 11.2% 14.4% 8.4% 9.7% 5.7%
(non-IFRS)
--------------------------------------------------------------------------------
HERE
Net sales 254 278 -9% 211 20% 914 1 103 -17%
Operating profit 18 -56 14 29% -154 -301
Operating profit 25 40 -38% 20 25% 48 154 -69%
(non-IFRS)
Operating margin % 7.1% -20.1% 6.6% -16.8% -27.3%
Operating margin % 9.8% 14.4% 9.5% 5.2% 13.9%
(non-IFRS)
-------------------------------------------------------------
Advanced
Technologies
-------------------
Net sales 121 151 -20% 140 -14% 529 534 -1%
Operating profit 65 100 -35% 83 -22% 310 325 -5%
Operating profit 82 100 -18% 84 -2% 329 329
(non-IFRS)
Operating margin % 53.7% 66.2% 59.3% 58.6% 60.9%
Operating margin % 67.8% 66.2% 60.0% 62.2% 61.6%
(non-IFRS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Discontinued
operations
Net sales 2 633 3 701 -29% 2 758 -5% 10 735 15 152 -29%
Operating profit -198 97 -145 -590 -1 479
Operating profit -191 -47 -130 -520 -1 012
(non-IFRS)
Operating margin % -7.5% 2.6% -5.3% -5.5% -9.8%
Operating margin % -7.3% -1.3% -4.7% -4.8% -6.7%
(non-IFRS)
Net cash from -1 081 -2 284
operating
activities6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nokia Group
(continuing and
discontinued
operations)
EPS, EUR diluted -0.01 0.05 -0.02 -0.17 -0.84
EPS, EUR diluted 0.03 0.05 -40% 0.01 200% 0.02 -0.17
(non-IFRS)
Net cash from 53 563 -91% 9 489% 72 -354
operating
activities
Net cash and other 2 309 4 360 -47% 2 413 -4% 2 309 4 360 -47%
liquid assets6
--------------------------------------------------------------------------------
Note 1 relating to results information and non-IFRS (also referred to as
“underlying”) results: The results information in this report is unaudited. 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 all material 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 NSN 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 Q4 2013 and Q4 2012 non-IFRS results to our
reported results, can be found in our complete Q4 2013 and full year 2013
report with tables on pages 15 and 17-22. A reconciliation of our Q3 2013
non-IFRS results to our reported results can be found in our complete Q3
interim report with tables on pages 24 and 27-32 published on October 29, 2013.
Note 2 relating to non-IFRS exclusions for continuing operations:
Q4 2013 - EUR 135 million (net) consisting of:
- EUR 95 million restructuring charge and other associated items in Nokia
Solutions and Networks.
- EUR 4 million restructuring charge in HERE
- EUR 22 million of transaction and other related costs resulting from the
proposed sale of Devices & Services business to Microsoft
- EUR 11 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of Motorola Solutions'
networks assets
- EUR 3 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
Q3 2013 - EUR 82 million (net) consisting of:
- EUR 39 million restructuring charge and other associated items in Nokia
Solutions and Networks.
- EUR 3 million restructuring charge in HERE
- EUR 1 million restructuring charge in Advanced Technologies
- EUR 5 million restructuring related impairments in Corporate Common
- EUR 18 million of transaction costs related to the proposed sale of Devices &
Services business to Microsoft
- EUR 13 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of Motorola Solutions'
networks assets
- EUR 3 million of intangible asset amortization and other purchase price
accounting related items arising from the acquisition of NAVTEQ
Q3 2013 taxes - EUR 11 million tax benefits related to previous year's earnings.
Q4 2012 - EUR 341 million (net) consisting of:
- EUR 255 million restructuring charge and other associated item in Nokia
Solutions and 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 79 million gain on sale of real estate in Corporate Common
- 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
Note 3 relating to operational and reporting structure: Nokia introduced a new
reporting structure starting with the reporting of the fourth quarter 2013 and
full year 2013 results report. Nokia has three continuing businesses: Nokia
Solutions and Networks (NSN), HERE and Advanced Technologies. Nokia reports
financial information for a total of four reportable segments - Mobile
Broadband and Global Services within NSN, HERE, and Advanced Technologies -
and, additionally, separate information for Discontinued Operations. NSN is one
of the leading global providers of telecommunications infrastructure hardware,
software and services, with the focus on the mobile broadband market. On August
7, 2013 Nokia completed the acquisition of Siemens' stake in Nokia Siemens
Networks, which was a joint venture between Nokia and Siemens. In accordance
with this transaction, the Siemens name has been phased out from Nokia Siemens
Networks' company name and branding. The new name and brand is Nokia Solutions
and Networks, also referred to as NSN, which is being used also for financial
reporting purposes. Until the end of the second quarter 2013, NSN has been
reported as a single reportable segment for Nokia financial reporting purposes.
Since then Nokia reports financial information for two operating and reportable
segments within NSN, Mobile Broadband and Global Services. Mobile Broadband
provides mobile operators with radio and core network software together with
the hardware needed to deliver mobile voice and data services. Global Services
provides mobile operators with a broad range of services, including
professional services, network implementation and customer care services. NSN
also contains NSN Other, which includes net sales and related cost of sales and
operating expenses of non-core businesses as well as Optical Networks through
May 6, 2013 when its divestment was completed. 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.
Advanced Technologies business builds on several of Nokia's current Chief
Technology Office (CTO) and Intellectual Property Rights activities through
advanced research, development and concept products in areas such as
connectivity, sensing and material technologies, as well as web and cloud
technologies. At the same time, Advanced Technologies plans to continue to
build Nokia's patent portfolio from this innovation and targets to expand its
industry-leading technology licensing program, spanning technologies that
enable mobility today and tomorrow. Nokia's IPR income is reported with
Advanced Technologies. Nokia has signed an agreement on September 2, 2013 to
enter into a transaction whereby Nokia will sell substantially all of its
Devices & Services business to Microsoft. After receiving shareholder
confirmation and approval at Nokia's Extraordinary General Meeting in November
2013 for the pending sale of substantially all of its Devices & Services
business, Nokia is currently reporting substantially all of its former Devices& Services business as discontinued operations. Historical results information
for past periods before the fourth quarter 2013 has been regrouped for
historical comparative purposes. As is customary, certain judgments have been
made when regrouping historical results information and allocating items in the
regrouped results.
Note 4 relating to changes to historical comparative financials due to revised
IFRS accounting standard, IAS19 Employee Benefits: The historical comparative
financials presented in this 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 published on April 18, 2013.
Note 5 relating to January-December 2013 results: Further information about the
results for the period from January 1 to December 31, 2013 can be found on
pages 27-32, 34-45 and 47 of the complete Q4 2013 and full year 2013 report
with tables.
Note 6 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 pages 53-54 of the complete Q4 2013 and full year 2013 report with tables.
NOKIA OUTLOOK
Continuing Operations
- Nokia expects NSN's non-IFRS operating margin for the full year 2014 to be
towards the higher end of NSN's targeted long term non-IFRS operating margin
range of 5% to 10%. This outlook is based on Nokia's expectations regarding a
number of factors, including:
- competitive industry dynamics;
- product and regional mix;
- the timing of major new network deployments;
- efforts to drive year-on-year net sales growth in the second half of 2014; and
- expected continued improvement under NSN's transformation programs.
- Nokia expects NSN's non-IFRS operating margin in the first quarter 2014 to be
approximately 5% plus or minus 4 percentage points. This outlook is based on
Nokia's expectation that the first quarter will be seasonally weak, in addition
to the factors mentioned above.
- During 2014 Nokia expects HERE to invest to capture longer term
transformational growth opportunities. This is expected to negatively affect
HERE's 2014 non-IFRS operating margin.
- Nokia expects Advanced Technologies annualized net sales run rate to increase
to approximately EUR 600 million during 2014, after Microsoft becomes a more
significant intellectual property licensee in conjunction with the sale of
substantially all of our Devices & Services business to Microsoft. This
compares to Advanced Technologies' current annualized net sales run rate of
approximately EUR 500 million.
- On a non-IFRS basis, until a pattern of tax profitability is reestablished in
Finland, Nokia expects to record approximately EUR 250 million of annualized
tax expense for the continuing operations. This corresponds to the total
anticipated cash tax obligations for NSN, HERE, and Advanced Technologies.
After a pattern of tax profitability is reestablished in Finland, Nokia expects
to record tax expenses at a long term effective tax rate of approximately 25%,
however Nokia's cash tax obligations are expected to remain at approximately
EUR 250 million annually until Nokia's Finnish tax losses carried forward of
approximately EUR 11 billion have been fully utilized.
- Nokia expects full year 2014 capital expenditures for continuing operations
to be approximately EUR 200 million, primarily attributable to NSN.
Discontinued Operations
- Nokia received shareholder approval for the sale of substantially all of its
Devices & Services business at our Extraordinary General Meeting. As a result,
Nokia has commenced reporting substantially all of its Devices & Services
business as discontinued operations. In the first quarter 2014, Nokia expects
the discontinued operations related to the Devices & Services business to
generate a negative operating margin on a non-IFRS basis.
NOKIA'S ANNUAL GENERAL MEETING 2014
Nokia's Annual General Meeting 2014 is scheduled to be held on June 17, 2014.
The Nokia Board of Directors will convene the meeting and publish the notice
and related proposals at a later date.
As announced earlier, Nokia's Board of Directors is conducting a strategy
evaluation for Nokia Group between signing and closing of the transaction
whereby Nokia will sell substantially all of its Devices & Services business
and license its patents to Microsoft. This evaluation is comprised of
evaluations of strategies for each of Nokia's three continuing businesses and
possible synergies between them, as well as an evaluation of the optimal
corporate and capital structure for Nokia after the closing of the transaction.
After this evaluation is complete, deemed excess capital is planned to be
distributed to shareholders. The Nokia Board of Directors will decide on its
proposal to the Annual General Meeting on distributions to shareholders only
after the anticipated closing of the transaction and the completion of the
strategy evaluation.
NOKIA TO SELL DEVICES & SERVICES TO MICROSOFT IN EUR 5.44 BILLION ALL-CASH
TRANSACTION
On September 3, 2013, Nokia announced that it had signed an agreement to enter
into a transaction whereby Nokia will sell substantially all of its Devices &
Services business and license its patents to Microsoft for EUR 5.44 billion in
cash, payable at closing.
At our Extraordinary General Meeting on November 19, 2013, Nokia received
shareholder approval for the sale, with more than 99% of the votes cast in
support of the proposal and recommendation of the Nokia Board of Directors. As
a result, Nokia has commenced reporting substantially all of its Devices &
Services business as discontinued operations.
The transaction is expected to close in the first quarter of 2014, subject to
regulatory approvals and other customary closing conditions. As of the end of
2013, Nokia has received the majority of regulatory approvals for the
transaction.
FOURTH QUARTER 2013 FINANCIAL AND OPERATING DISCUSSION
NOKIA'S CONTINUING OPERATIONS
See note 3 to our Summary Financial Information table above concerning our
current operational and reporting structure and note 4 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.
FOURTH QUARTER 2013 NET SALES,
REPORTED & CONSTANT CURRENCY1
----------------------------------------------------
YoY QoQ
Change Change
---------------------------------------------------
Continuing operations -21% 18%
net sales - reported
Continuing operations -17% 18%
net sales - constant currency1
NSN net sales - reported -22% 20%
NSN net sales - constant currency1 -19% 20%
HERE net sales - reported -9% 20%
HERE net sales - constant currency1 -8% 21%
---------------------------------------------------
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's continuing operations net sales would have
decreased 17% year-on-year and increased 18% sequentially.
The following table sets forth Nokia's continuing operations financial position
at the end of the periods indicated, as well as the year-on-year and sequential
growth rates.
NOKIA'S CONTINUING OPERATIONS CASH FLOW
AND FINANCIAL POSITION
----------------------------------------------------------------
EUR million Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
---------------------------------------------------------------
---------------------------------------------------------------
Total cash and 8 971 9 909 -9% 9 134 -2%
other liquid assets
NSN contribution 2 768 2 420 14% 2 656 4%
---------------------------------------------------------------
Net cash and 2 309 4 360 -47% 2 413 -4%
other liquid assets1
---------------------------------------------------------------
NSN contribution 1 678 1 270 32% 1 536 9%
---------------------------------------------------------------
Note 1: Total cash and other liquid assets minus interest-bearing liabilities.
In the fourth quarter 2013, Nokia's total cash and other liquid assets
decreased by EUR 163 million and Nokia's net cash and other liquid assets
decreased by EUR 104 million, compared to the third quarter 2013. The
sequential decline in Nokia's net cash and other liquid assets was primarily
due to cash outflows from discontinued operations, which more than offset cash
inflows from Nokia's continuing operations. The cash inflows from Nokia's
continuing operations were primarily driven by an increase in NSN's
profitability on a sequential basis. Excluding approximately EUR 150 million of
restructuring-related cash outflows, NSN had cash inflows from net working
capital in the fourth quarter 2013 of approximately EUR 80 million.
At the end of the fourth quarter 2013, NSN's contribution to Nokia's total cash
and other liquid assets was approximately EUR 2.8 billion and its contribution
to Nokia's net cash and other liquid assets was approximately EUR 1.7 billion,
a sequential increase of approximately EUR 110 million and EUR 140 million,
respectively.
In the fourth quarter 2013, Nokia's continuing operations financial income and
expenses was a net expense of EUR 50 million, compared to a net expense of 52
million in the fourth quarter 2012 and a net expense of EUR 63 million in the
third quarter 2013. On a year-on-year basis, the decrease was primarily due to
lower net foreign exchange-related losses, partially offset by higher interest
expenses. On a sequential basis, the decrease was primarily due to the
recognition of income related to one of our investments and lower interest
expenses, partially offset by higher net foreign exchange-related losses.
At the end of the fourth quarter 2013, Nokia's continuing operations in Finland
had approximately EUR 2.2 billion (calculated at the Finnish corporate tax rate
of 20%) of net deferred tax assets that have not been recognized in the
financial statements as the net deferred tax assets were subject to a valuation
allowance. The majority of Nokia's Finnish deferred tax assets are indefinite
in nature and available against future Finnish tax income. Given the likely
impact of the expected transaction and related licensing agreements with
Microsoft on the continuing Nokia businesses as well as the recent financial
performance of NSN, the company will continue closely monitoring the need for
the valuation allowance.
NOKIA SOLUTIONS AND NETWORKS
The following table sets forth a summary of the results for NSN and its
reportable segments, Mobile Broadband and Global Services, for the periods
indicated, as well as the year-on-year and sequential growth rates.
NSN RESULTS SUMMARY
-------------------------------------------------------------------------
Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
------------------------------------------------------------------------
Net sales (EUR million) 3 105 3 988 -22% 2 592 20%
------------------------------------------------------------------------
Mobile Broadband 1 563 1 776 -12% 1 259 24%
net sales (EUR million)
------------------------------------------------------------------------
Global Services 1 540 1 979 -22% 1 331 16%
net sales (EUR million)
------------------------------------------------------------------------
Non-IFRS gross margin (%) 37.6% 36.0% 36.6%
------------------------------------------------------------------------
Non-IFRS operating expenses 771 843 -9% 732 5%
(EUR million)
------------------------------------------------------------------------
Non-IFRS operating margin (%) 11.2% 14.4% 8.4%
------------------------------------------------------------------------
Mobile Broadband 7.5% 16.8% 4.9%
contribution margin (%)
------------------------------------------------------------------------
Global Services 15.2% 11.7% 12.3%
contribution margin (%)
------------------------------------------------------------------------
Operating margin (%) 7.8% 6.3% 6.4%
------------------------------------------------------------------------
Net Sales
The following table sets forth NSN net sales for the periods indicated, as well
as the year-on-year and sequential growth rates, by geographic area.
NSN NET SALES
BY GEOGRAPHIC AREA
----------------------------------------------------------------
EUR million Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
---------------------------------------------------------------
---------------------------------------------------------------
Europe 834 1 058 -21% 701 19%
Middle East & Africa 337 388 -13% 247 36%
Greater China 424 416 2% 278 53%
Asia-Pacific 907 1 176 -23% 791 15%
North America 263 426 -38% 299 -12%
Latin America 340 524 -35% 276 23%
---------------------------------------------------------------
Total 3 105 3 988 -22% 2 592 20%
---------------------------------------------------------------
The year-on-year decrease of 22% in NSN net sales in the fourth quarter 2013
was partially due to divestments of businesses not consistent with its
strategic focus, as well as the exiting of certain customer contracts and
countries. Excluding these two factors, NSN net sales in the fourth quarter
2013 declined by approximately 15% primarily due to reduced wireless
infrastructure deployment activity, which affected both Global Services and
Mobile Broadband. Additionally, NSN net sales were negatively affected by
foreign currency fluctuations. The year-on-year decrease in Mobile Broadband
was primarily due to lower sales in GSM and core networks, which were partially
offset by an increase in LTE sales primarily in Greater China, Europe and
Asia-Pacific excluding Japan. The year-on-year decrease in Global Services was
primarily due to a reduction in network implementation activity, consistent
with lower levels of large scale Mobile Broadband deployments, and the exiting
of certain contracts in line with NSN's strategic focus. On a regional basis,
NSN continued to have lower net sales in Japan following high levels of
spending in the fourth quarter 2012. In Europe, the year-on-year sales decline
was primarily related to network modernization and divestments in line with
NSN's strategy. The year-on-year sales decline in Latin America was primarily
driven by constrained operator spending and certain contract exits. Finally,
the year-on-year decline in Middle East and Africa was primarily due to country
exits.
The sequential increase of 20% in NSN net sales in the fourth quarter 2013
reflects a seasonal increase in sales in both Mobile Broadband and Global
Services. The increase in Mobile Broadband net sales was driven by growth
across our radio access portfolio. The increase in Global Services was driven
by growth in all business lines. On a regional basis, NSN's net sales increased
sequentially primarily due to Greater China, Middle East & Africa and Asia
Pacific, partially offset by lower sales in North America.
In the fourth quarter 2013, Global Services represented 50% of NSN net sales,
compared to 50% in the fourth quarter 2012 and 51% in the third quarter 2013.
In the fourth quarter 2013, Mobile Broadband represented 50% of NSN net sales,
compared to 45% in the fourth quarter 2012 and 49% in the third quarter 2013.
At constant currency, NSN net sales would have decreased 19% year-on-year and
increased 20% sequentially.
Non-IFRS Gross Margin
On a year-on-year basis, the increase in NSN non-IFRS gross margin in the
fourth quarter 2013 was due to a higher gross margin in Global Services related
to significant efficiency improvements as a result of NSN's restructuring
program, as well as a higher proportion of Mobile Broadband in the overall
sales mix. This was partially offset by a slightly lower gross margin in Mobile
Broadband driven by lower net sales in Japan and North America and costs
incurred in anticipation of a technology shift to TD-LTE related to major
projects in China, as well as the absence of non-recurring IPR income which
benefitted the fourth quarter 2012 by approximately EUR 30 million.
On a sequential basis, the increase in NSN non-IFRS gross margin in the fourth
quarter 2013 was primarily due to a higher gross margin in Global Services
offset by a lower gross margin in Mobile Broadband. The higher gross margin in
Global Services was primarily driven by seasonally higher network
implementation activities. The gross margin decline in Mobile Broadband was
primarily due to lower net sales in North America.
Non-IFRS Operating Expenses
NSN non-IFRS research and development expenses decreased 10% year-on-year in
the fourth quarter 2013. On a year-on-year basis, non-IFRS research and
development expenses were lower primarily due to business divestments and
reduced investments in business activities that are not consistent with NSN's
focused strategy, as well as increased research and development efficiency,
partially offset by higher investments in areas that are consistent with NSN's
focused strategy, most notably LTE. On a sequential basis, non-IFRS research
and development expenses increased 3% primarily due to higher accrued incentive
expenses consistent with NSN's business performance in the fourth quarter 2013.
On a year-on-year basis, NSN non-IFRS sales and marketing expenses decreased
16% primarily due to structural cost savings from NSN's transformation and
restructuring program. On a sequential basis NSN's non-IFRS sales and marketing
expenses increased 9% consistent with seasonally higher net sales and due to
higher accrued incentive expenses consistent with NSN's business performance in
the fourth quarter 2013.
NSN non-IFRS general and administrative expenses increased 15% year-on-year and
9% sequentially in the fourth quarter 2013. On a year-on-year basis, non-IFRS
general and administrative expenses were higher, primarily due to consultancy
fees related to information technology and other projects. On a sequential
basis non-IFRS general and administrative expenses were higher due to higher
accrued incentive expenses consistent with NSN's business performance in the
fourth quarter 2013.
Non-IFRS Operating Margin
The year-on-year decrease in NSN non-IFRS operating margin in the fourth
quarter 2013 was primarily due to a lower contribution margin in Mobile
Broadband, partially offset by a higher contribution margin in Global Services.
On a year-on-year basis, the 9.3 percentage point decline in Mobile Broadband
contribution margin was primarily due to higher operating expenses as a
percentage of net sales and, to a lesser extent, by slightly lower gross
margin. The year-on-year 3.5 percentage point increase in Global Services
contribution margin was primarily due to higher gross margin, partially offset
by higher operating expenses as a percentage of net sales.
On a sequential basis, NSN non-IFRS operating margin increased due to higher
contribution margin for both Global Services and Mobile Broadband, which
increased by 2.9 and 2.6 percentage points, respectively. The sequential
increase in Global Services contribution margin was primarily due to higher
gross margin partially offset by higher operating expenses as a percentage of
net sales. The sequential increase in Mobile Broadband contribution margin was
primarily due to lower operating expenses as a percentage of net sales
partially offset by a lower gross margin.
NSN non-IFRS other income and expenses for the fourth quarter 2013 was an
expense of EUR 50 million, compared to an expense of EUR 16 million in the
fourth quarter 2012, and income of EUR 1 million in the third quarter 2013. On
a year-on-year basis, the change in non-IFRS other income and expenses was
primarily due to a non-recurring litigation provision and a write down of a VAT
receivable. In addition to these items the sequential increase was also
negatively affected by an increase in doubtful account allowances and asset
retirement charges that are recurring in nature, but were at an elevated level
in the fourth quarter 2013.
Operating Margin
The year-on-year increase in NSN operating margin in the fourth quarter 2013
was primarily due to a higher gross margin. NSN's operating expenses also
declined as a result of the absence of purchase price accounting-related items
arising from the formation of Nokia Siemens Networks, which had been fully
amortized as of the end of the first quarter 2013. NSN's other income and
expenses was an expense of EUR 145 million in the fourth quarter 2013, compared
to an expense of EUR 274 million in the fourth quarter 2012. The decline in
NSN's other income and expenses was primarily due to lower restructuring
charges.
On a sequential basis NSN operating margin increased primarily due to higher
gross margin, and to a lesser extent from lower operating expenses as a
percentage of net sales. NSN's other income and expense was an expense of EUR
145 million in the fourth quarter 2013, compared to an expense of EUR 38
million in the third quarter 2013. The increase in NSN's other income and
expenses was primarily due to higher restructuring charges and due to a
non-recurring litigation provision and a write down of a VAT receivable. In
addition to these items the sequential increase was also negatively affected by
an increase in doubtful account allowances and asset retirement charges that
are recurring in nature, but were at an elevated level in the fourth quarter
2013.
Global Restructuring Program
The following table sets forth a summary of NSN cost reduction activities and
planned operational adjustments under the global restructuring program
announced in November 2011.
NSN RESTRUCTURING SUMMARY
(Program announced in November 2011)
--------------------------------------------------------------------------------
-
EUR (million) Q4/2013 Cumulativ 2013 2014 Total
(approxima e up (approxima (approxim (approxi-
te) to te) ate mate
Q4/2013 estimate) estimate)
(approxim
ate)
--------------------------------------------------------------------------------
Restructuring-related 94 1 850 550 100 1 950
charges
--------------------------------------------------------------------------------
Restructuring-related 150 1 250 600 450 1 700
cash outflows
--------------------------------------------------------------------------------
NSN achieved a reduction in its non-IFRS annualized operating expenses and
production overheads by more than EUR 1.5 billion at the end of 2013, compared
to the end of 2011. In conjunction with this restructuring program, NSN
estimates total restructuring related charges of approximately EUR 1.95
billion, as well as total restructuring related cash outflows of approximately
EUR 1.7 billion. This is an update to the earlier estimate of approximately EUR
1.8 billion for restructuring related charges and approximately EUR 1.6 billion
for restructuring related cash outflows.
Non-cash charges and timing differences account for the differences between the
above charges and the corresponding cash out-flows. Changes in estimates of
timing or amounts of costs to be incurred and associated cash flows may become
necessary as the transformation and restructuring program is being completed.
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
---------------------------------------------------------------------
Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
--------------------------------------------------------------------
Net sales 254 278 -9 % 211 20 %
(EUR million)
--------------------------------------------------------------------
External net sales 225 204 10 % 176 28 %
(EUR million)
--------------------------------------------------------------------
Internal net sales 29 74 -61 % 35 -17 %
(EUR million)
--------------------------------------------------------------------
Non-IFRS gross margin (%) 75.6 % 82.0 % 82.5 %
--------------------------------------------------------------------
Non-IFRS operating 167 189 -12 % 153 9 %
expenses (EUR million)
--------------------------------------------------------------------
Non-IFRS operating 9.8 % 14.4 % 9.5 %
margin (%)
--------------------------------------------------------------------
Operating margin (%) 7.1 % -20.1 % 6.6 %
--------------------------------------------------------------------
Net Sales
In the fourth quarter 2013, the year-on-year increase in external HERE net
sales was primarily due to higher sales to vehicle customers, partially offset
by lower sales to personal navigation device (PND) customers consistent with
declines in the PND industry.
In the fourth quarter 2013, the sequential increase in external HERE net sales
was primarily due to higher seasonal sales to vehicle and PND customers.
In the fourth quarter 2013, HERE had sales of new vehicle licenses of 3.2
million units, compared to 2.4 million units in the fourth quarter 2012 and 2.6
million units in the third quarter 2013. On a year-on-year basis, unit sales to
vehicle customers increased primarily due to higher vehicle sales and higher
consumer uptake of in-vehicle navigation. On a sequential basis unit sales to
vehicle customers increased primarily due to higher consumer uptake of
in-vehicle navigation. Sales to vehicle customers represented well over 50% of
external HERE net sales in the fourth quarter 2013, as well as in the fourth
quarter 2012 and the third quarter 2013.
In the fourth quarter 2013, the year-on-year and sequential declines in
internal HERE net sales were primarily due to lower recognition of deferred
revenue related to our smartphone sales.
At constant currency HERE's overall net sales would have decreased 8%
year-on-year and increased 21% sequentially.
Non-IFRS Gross Margin
On a year-on-year basis, the decrease in HERE non-IFRS gross margin in the
fourth quarter 2013 was primarily due to a non-recurring licensing expense, as
well as higher sales of update units to vehicle customers, which generally
carry a lower gross margin, partially offset by lower costs related to service
delivery.
On a sequential basis, the decrease in HERE non-IFRS gross margin in the fourth
quarter 2013 was primarily due to a non-recurring licensing expense, as well as
higher sales of update units to vehicle customers, which generally carry a
lower gross margin and higher costs related to service delivery.
Non-IFRS Operating Expenses
HERE non-IFRS research and development expenses decreased 12% year-on-year due
to cost reduction actions. On a sequential basis, research and development
expenses increased 4% in the fourth quarter 2013 primarily due to higher
investments with the aim of capturing longer term transformational growth
opportunities.
HERE non-IFRS sales and marketing expenses decreased 9% year-on-year due to
cost reduction actions. On a sequential basis, sales and marketing expenses
increased 25% in the fourth quarter 2013, primarily due to higher seasonal
marketing expenses.
HERE non-IFRS general and administrative expenses decreased 11% year-on-year
primarily due to cost reduction actions. On a sequential basis, general and
administrative expenses increased 21% in the fourth quarter 2013 primarily due
to higher personnel costs.
Non-IFRS Operating Margin
The year-on-year decrease in HERE non-IFRS operating margin in the fourth
quarter 2013 was primarily due to lower internal net sales.
On a sequential basis, HERE's non-IFRS operating margin in the fourth quarter
2013 benefitted from lower operating expenses as a percentage of net sales,
which was offset by a lower gross margin.
HERE non-IFRS other income and expenses for the fourth quarter 2013 was
approximately zero, an expense of EUR 1 million in the third quarter and an
income of EUR 1 million in the fourth quarter 2012.
Operating Margin
In the fourth quarter 2013, HERE operating margin improved to 7.1%, compared to
negative 20.1% in the fourth quarter 2012, and 6.6% in the third quarter 2013.
The year-on-year improvement in HERE operating margin in the fourth quarter
2013 was primarily due to the absence of significant purchase price
accounting-related items arising from the purchase of NAVTEQ, the vast majority
of which had been fully amortized as of the end of the second quarter 2013. On
a sequential basis the improvement in HERE operating margin was primarily due
to lower operating expenses as a percentage of net sales, partially offset by a
lower gross margin.
HERE other income and expenses for the fourth quarter 2013 was an expense of
EUR 4 million, an expense of EUR 4 million in the third quarter of 2013 and an
expense of EUR 8 million in the fourth quarter 2012.
ADVANCED TECHNOLOGIES
The following table sets forth a summary of the results for Advanced
Technologies, for the periods indicated, as well as the year-on-year and
sequential growth rates.
ADVANCED TECHNOLOGIES
RESULTS SUMMARY
----------------------------------------------------------------------------
Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
---------------------------------------------------------------------------
Net sales 121 151 -20% 140 -14%
(EUR million)
---------------------------------------------------------------------------
Non-IFRS 98.4% 98.8% 98.6%
gross margin (%)
---------------------------------------------------------------------------
Non-IFRS 37 49 -24% 54 -31%
operating expenses (EUR million)
---------------------------------------------------------------------------
Non-IFRS 67.8% 66.2% 60.0%
operating margin (%)
---------------------------------------------------------------------------
Operating margin (%) 53.7% 66.2% 59.3%
---------------------------------------------------------------------------
Net Sales
The year-on-year and sequential decline in Advanced Technologies net sales in
the fourth quarter 2013 was primarily due to lower intellectual property
licensing income from certain licensees that experienced lower levels of
business activity. Sequentially, net sales was also negatively affected by
fluctuations in quarterly revenue recognition from certain licensees.
Non-IFRS Gross Margin
On both a year-on-year and sequential basis, Advanced Technologies non-IFRS
gross margin was stable.
Non-IFRS Operating Expenses
Advanced Technologies non-IFRS research and development expenses decreased by
31% year-on-year and decreased by 23% sequentially due to timing of certain
research and development projects.
Advanced Technologies non-IFRS sales and marketing expenses were flat
year-on-year and decreased by 62% sequentially due to fluctuations in
litigation-related expenses.
Advanced Technologies non-IFRS general and administrative expenses were
approximately flat year-on-year and sequentially.
Non-IFRS Operating Margin
Both year-on-year and sequentially, the increase in Advanced Technologies
non-IFRS operating margin was primarily due to lower operating expenses as a
percentage of net sales.
Operating Margin
Both year-on-year and sequentially, the decline in Advanced Technologies
operating margin was primarily due to higher operating expenses as percentage
of net sales.
DISCONTINUED OPERATIONS
The following table sets forth a summary of the results for discontinued
operations, for the periods indicated, as well as the year-on-year and
sequential growth rates.
DISCONTINUED OPERATIONS
RESULTS SUMMARY
--------------------------------------------------------------------------------
-
Q4/2013 Q4/2012 YoY Q3/2013 QoQ
Change Change
--------------------------------------------------------------------------------
Net sales (EUR million) 2 633 3 701 -29% 2 758 -5%
--------------------------------------------------------------------------------
Non-IFRS gross margin (%) 20.3% 20.9% 19.4%
--------------------------------------------------------------------------------
Non-IFRS operating expenses (EUR 717 817 -12% 659 9%
million)
--------------------------------------------------------------------------------
Non-IFRS operating margin (%) -7.3% -1.3% -4.7%
--------------------------------------------------------------------------------
Operating margin (%) -7.5% 2.6% -5.3%
--------------------------------------------------------------------------------
Net Sales
The year-on-year decline in discontinued operations net sales in the fourth
quarter 2013 was primarily due to lower Mobile Phones net sales and, to a
lesser extent, lower Smart Devices net sales. Our Mobile Phones net sales were
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. Our Smart Devices net sales were affected by
competitive industry dynamics including the strong momentum of competing
smartphone platforms, as well as our portfolio transition from Symbian products
to Lumia products.
The sequential decline in discontinued operations net sales in the fourth
quarter 2013 was primarily due to lower Smart Devices net sales. Our Smart
Devices net sales were affected by competitive industry dynamics including the
strong momentum of competing smartphone platforms. On a sequential basis,
Mobile Phones net sales were approximately flat.
On a year-on-year basis, discontinued operations unit volumes declined in the
fourth quarter 2013 due to lower Mobile Phones unit volumes, partially offset
by higher Smart Devices unit volumes. On a sequential basis, discontinued
operations unit volumes increased in the fourth quarter 2013 due to higher
Mobile Phones unit volumes, partially offset by lower Smart Devices unit
volumes.
Discontinued operations ASP declined on both a year-on-year and sequential
basis in the fourth quarter 2013. The year-on-year and sequential declines in
discontinued operations ASP were due to both Smart Devices and Mobile Phones.
We ended the fourth quarter 2013 within our normal 4 to 6 week channel
inventory range.
Non-IFRS Gross Margin
The slight year-on-year decline in discontinued operations non-IFRS gross
margin in the fourth quarter 2013 was primarily due to lower Smart Devices
gross margin, partially offset by higher Mobile Phones gross margin. On a
sequential basis, the increase in discontinued operations non-IFRS gross margin
in the fourth quarter 2013 was primarily due to higher Mobile Phones gross
margin, partially offset by lower Smart Devices gross margin.
Smart Devices non-IFRS gross margin in the fourth quarter 2013 was negatively
affected by approximately EUR 50 million of net allowances related to excess
component inventory, future purchase commitments and an inventory revaluation.
Non-IFRS Operating Expenses
The year-on-year decline in discontinued operations non-IFRS operating expenses
in the fourth quarter 2013 was primarily due to lower Mobile Phones and Smart
Devices operating expenses. On a sequential basis, the increase in discontinued
operations non-IFRS operating expenses in the fourth quarter 2013 was primarily
due to higher Smart Devices and Mobile Phones operating expenses.
Non-IFRS Operating Margin
The year-on-year decline in discontinued operations non-IFRS operating margin
in the fourth quarter 2013 was primarily due to lower Mobile Phones and Smart
Devices contribution margin. On a sequential basis, the decline in discontinued
operations non-IFRS operating margin in the fourth quarter 2013 was primarily
due to lower Smart Devices contribution margin, partially offset by higher
Mobile Phones contribution margin.
Operating Margin
The year-on-year decline in discontinued operations operating margin in the
fourth quarter 2013 was primarily due to lower Mobile Phones and Smart Devices
contribution margin. On a sequential basis, the decline in discontinued
operations operating margin in the fourth quarter 2013 was primarily due to
lower Smart Devices contribution margin, partially offset by higher Mobile
Phones contribution margin.
Additional Information
For comparative purposes, if Devices & Services had been presented as in the
prior three quarters of 2013, Devices & Services net sales would have been EUR
2 753 million and non-IFRS operating margin would have been negative 4.8% in
the fourth quarter 2013. Note that these results were negatively affected by
approximately EUR 50 million of net allowances related to excess component
inventory, future purchase commitments and an inventory revaluation.
FOURTH QUARTER 2013 OPERATING HIGHLIGHTS
Operating highlights for previous quarters are available in the respective
interim reports and for the full year 2013 later in this report.
NOKIA
- Nokia's Extraordinary General Meeting held on November 19, 2013 confirmed and
approved the sale of substantially all of Nokia's Devices & Services business
to Microsoft in line with the proposal and recommendation of the Nokia Board of
Directors. More than 99 % of the votes cast at the Extraordinary General
Meeting were in favor of this proposal.
- Following the announcement of shareholder approval for the sale of
substantially all of the Devices & Services business to Microsoft, Nokia
announced on November 20, 2013 that it would relocate its headquarters to the
Karaportti office campus in Espoo, Finland, where its wholly-owned subsidiary
NSN is also headquartered. The office building in Keilaniemi, where Nokia was
previously headquartered, is to become a Microsoft site after the expected
closing of the deal.
- Nokia received a ruling from the Delhi High Court in December for the release
of its Indian assets, including the Chennai factory, which had been frozen by
the Indian tax authorities related to a tax dispute that started in early 2013.
While the tax dispute is still ongoing, the ruling allows Nokia to proceed with
the planned transfer of its Indian assets to Microsoft as part of the global
transaction.
NSN
- NSN's strong mobile broadband deal momentum continued. During the quarter NSN
was granted a contract with Sprint in the United States for the deployment of
its TD- LTE network; was awarded the largest market share of non-Chinese
network suppliers of China Mobile's nationwide TD-LTE network; won an LTE
contract with China Telecommunications Corporation as major partner for its
nationwide LTE rollout; won Taiwan's first LTE tender for Chunghwa Telecom, the
largest operator in Taiwan with over 10 million mobile subscribers; and was
selected by Oi Brasil to supply its LTE network and to upgrade its GSM and 3G
networks. NSN was also selected as the key supplier for Ooredoo's nationwide 3G
services launch in Myanmar, the supplier of location-based services for NTT
DoCoMo; the supplier of Single RAN for Vodacom Tanzania; and of a network
security solution for E-Plus in Germany.
- NSN continues to lead in 4G technology, introducing new (FlexiZone) microcell
and picocell base stations that are the industry's only small cell solution
with the same features and capacity as macro base stations and that have the
unique ability to become a FlexiZone which overcomes the limitations on how
many small cells can be added within a macro cell coverage; launching a
powerful TD-LTE Base Station radio module and enhancing its Radio Base Station
Smart Scheduler to deliver even higher uplink data rates and cell capacity; and
enhancing its Telephony Application Server solution with full VoLTE
functionality. In December, the Singapore-based operator StarHub successfully
completed Southeast Asia's first 3GPP standard Voice over LTE call in a live
network on NSN's equipment.
- NSN made proof of concept projects and trials with Tier 1 operators on core
network virtualization and successfully demonstrated its telco cloud
capabilities in a joint proof-of-concept for Evolved Packet Core (EPC)
virtualization with SK Telecom, the leading operator in Korea.
- In December, NSN demonstrated its advanced mobile broadband solutions at the
Zain Technology Conference (ZTC): Liquid Applications, Active Antenna Systems,
Voice over LTE (VoLTE), Congestion Aware Packet Core, CEM, NetAct, Service
Quality Manager (SQM), Operations on Demand, and intelligent Self-Organizing
Networks (iSON).
- NSN continues to invest in innovation to stay at the forefront of mobile
broadband and announced research co-operation with China Mobile Research
Institute, the research and development branch of China Mobile: the two parties
will further their cooperation on research and standardization of advanced
mobile broadband technologies in LTE, as well as in 5G. NSN also made a
multi-year commitment to actively participate in 5G research activities
together with the NYU WIRELESS research center and in December announced its
participation as a founding member in the 5G public-private partnership between
the European Union and 5G PPP Association. The PPP will further develop 5G
technology to prepare for the future standardization of the system and
components that are expected to be deployed in the next decade.
HERE
HERE continued to further extend its reach across multiple platforms,
demonstrated through a number of new partnerships and agreements. HERE has
become the preferred partner across industries for maps and location-related
technology.
- HERE introduced HERE Maps for Windows RT 8.1 by bringing its renowned
comprehensive mapping application with true offline maps to the newly
introduced Nokia Lumia 2520 tablet.
- HERE announced that it will provide maps and maps-related functionality to be
embedded into the Tizen SDK. Thus, third party developers can create
location-enabled applications for the Tizen ecosystem that ultimately all
future users of Tizen-based devices can benefit from. HERE also joined the
newly launched partner program of the Tizen Association, aimed at accelerating
the development and commercialization of the Tizen OS.
- HERE announced that it will license positioning services and map technology
to Jolla for use in Sailfish operating system. This will provide Jolla users
with up-to-date map data and rich location information, such as restaurants and
hotels, from over 190 countries around the world.
- Honda introduced its first signature suite of connected apps, HondaLink™ Next
Generation, for 2014 Civic drivers in the US last quarter. Two of the apps
leverage the HERE Platform's comprehensive cloud-based services with 3D maps
and dynamic content including weather, navigation, traffic and local search. At
launch, iPhone 5, 5S and 5C will benefit from all the features in HondaLink.
- HERE updated its suite of integrated location experiences on Windows Phone by
introducing its augmented reality technology LiveSight across HERE Maps, HERE
Drive and HERE Transit, bringing real-time traffic information to HERE Drive,
introducing Collections in HERE Maps enabling people to organize favorites into
collections and sync them across other HERE apps and on here.com, and enhancing
the personalization options for routing and timing of HERE Transit.
- HERE simplified the way people can benefit from new offline maps by
introducing incremental map updates for Windows Phone 8 devices. When an update
is available, people no longer have to download all their maps anew, but only
those roads and other map features that have been updated will be downloaded.
On average, this means 85-90 percent less data and therefore a much faster
update process.
- HERE announced the launch of a community mapping pilot program in India, the
first major country where HERE will combine its industrial data collection
methods with a crowd mapping initiative. By balancing both its highly advanced
industrial capture methods and contributions from residents of local
communities, HERE takes a best-of-both-worlds approach to ensuring that its
maps consistently provide the freshest, most precise and locally relevant
information.
- Nissan in North America switched to HERE for upgraded map features including
extended POI listings, extended lane guidance data and 3D city models in the
in-dash navigation system for Nissan's 08IT equipped vehicles.
- Digicore, a global fleet management company, has powered their advanced
machine-to-machine tracking with the HERE Platform for UK and Europe initially,
with expansion to Australia, New Zealand and other APAC countries, in order to
achieve operational efficiencies and cost-reductions for more than 750,000
systems sold.
- Deutsche Telekom announced its collaboration with HERE to launch its Arrival
Control app which is the first app developed from the HERE native SDKs
leveraging map content and traffic for iOS and Android available in 19 European
countries with plans to expand worldwide.
ADVANCED TECHNOLOGIES
- Nokia announced that Samsung has extended a patent license agreement between
Nokia and Samsung for five years. The agreement would have expired at the end
of 2013. According to the agreement, Samsung will pay additional compensation
to Nokia for the period commencing from January 1, 2014 onwards, and the amount
of such compensation will be finally settled in a binding arbitration, which is
expected to be concluded during 2015.
- Nokia's CTO unit continued advanced research and development of sensing and
materials technologies, including Nokia Research Center's efforts as a founder
partner and board member of the European Union's Graphene Flagship, the EU's
biggest research initiative ever. During the fourth quarter of 2013, NRC's
Cambridge lab in the UK demonstrated one potential for graphene, creating an
ultra-thin, transparent, flexible humidity sensor capable of unprecedented
response times. The sensor's fast performance and physical properties make
possible a wide range of exciting future applications.
DISCONTINUED OPERATIONS
- Nokia launched its first Windows tablet, the Nokia Lumia 2520, and its first
large screen Lumia smartphones, the Lumia 1520 and Lumia 1320.
- Lumia smartphones continued to benefit from a growing Windows Phone
application store, with key applications including Instagram, Waze and Vine
announced in the quarter.
- Nokia introduced new additions to its Asha platform family of devices: the
Nokia Asha 500, Asha 502 and Asha 503.
NOKIA'S CONTINUING OPERATIONS FULL YEAR 2013
The following discussion is of Nokia's continuing operations reported results
for full year 2013. Comparisons are given to full year 2012 results, unless
otherwise indicated. See note 3 to our Summary Financial Information table
above concerning our current operational and reporting structure and note 4
concerning certain changes to historical comparative financials due to a
revised IFRS accounting standard, IAS19 Employee Benefits.
The following table sets forth a summary of the reported results for the
periods indicated, as well as the year-on-year growth rates.
NOKIA'S CONTINUING OPERATIONS
RESULTS SUMMARY
-----------------------------------------------------
2013 2012 YoY
Change
----------------------------------------------------
Net sales 12 709 15 400 -17%
(EUR million)
----------------------------------------------------
Gross margin (%) 42.1% 36.1%
----------------------------------------------------
Operating expenses 4 290 5 143 -17%
(EUR million)
----------------------------------------------------
Operating margin (%) 4.1% -5.3%
----------------------------------------------------
Financial income -280 -357
and expense, net
----------------------------------------------------
Tax -202 -304
----------------------------------------------------
Profit/Loss 41 -1 483
----------------------------------------------------
Profit/Loss attributable to -615 -3 105
equity holders of the parent
----------------------------------------------------
EPS, basic 0.05 -0.21
----------------------------------------------------
EPS, diluted 0.05 -0.21
----------------------------------------------------
Net cash from 1 152 1 930 -40%
operating activities
----------------------------------------------------
NSN contribution 771 1 630 -53%
(approximate)
----------------------------------------------------
Total cash and 8 971 9 909 -9%
other liquid assets
----------------------------------------------------
NSN contribution 2 768 2 420 14%
----------------------------------------------------
Net cash and 2 309 4 360 -47%
other liquid assets1
----------------------------------------------------
NSN contribution 1 678 1 270 32%
----------------------------------------------------
The decline in Nokia's continuing operations net sales in 2013 was primarily
due to lower NSN and HERE net sales. The decline in NSN net sales was partially
due to divestments of businesses not consistent with its strategic focus, as
well as the exiting of certain customer contracts and countries. Excluding
these two factors, NSN net sales in 2013 declined by approximately 13%
primarily due to reduced wireless infrastructure deployment activity, which
affected both Global Services and Mobile Broadband. The decline in HERE net
sales was primarily due to a decline in internal HERE net sales due to lower
recognition of deferred revenue related to our smartphone sales, partially
offset by an increase in external HERE net sales due to higher sales to vehicle
customers. Additionally, NSN and HERE net sales were negatively affected by
foreign currency fluctuations.
The increase in Nokia's continuing operations gross margin in 2013 was
primarily due to a higher NSN gross margin. NSN gross margin increased due to
higher gross margin in both Global Services and Mobile Broadband related to
significant efficiency improvements as a result of NSN's restructuring program,
as well as a higher proportion of Mobile Broadband within the total sales mix.
The decrease in Nokia's continuing operations operating expenses in 2013 was
primarily due to lower NSN and HERE operating expenses. The decline in NSN's
operating expenses was primarily due the absence of purchase price
accounting-related items arising from the formation of Nokia Siemens Networks,
which had been fully amortized as of the end of the first quarter 2013. In
addition, NSN benefitted from business divestments and reduced operating
expenses in business activities that are not consistent with NSN's focused
strategy, as well as increased research and development efficiency, partially
offset by higher investments in areas that are consistent with NSN's focused
strategy, most notably LTE. Other income and expenses in 2013 was a
significantly lower expense than in 2012 due to lower restructuring and
associated charges.
Nokia's continuing operations net financial income and expense in 2013 was a
lower expense than in 2012. The lower net expense was primarily due to lower
net foreign exchange-related losses, partially offset by higher interest
expenses.
Nokia's continuing operations tax expense in 2013 was lower than in 2012. The
lower tax expense was primarily due to the absence of a non-cash valuation
allowance of EUR 135 million related to NSN's deferred tax assets in the first
quarter 2012.
Nokia's continuing operations produced a net profit in 2013 compared to a loss
in 2012. The net profit improvement was primarily due to lower operating
expenses and lower other expenses.
In 2013, Nokia's continuing operations total cash and other liquid assets
decreased by EUR 938 million and Nokia's continuing operations net cash and
other liquid assets decreased by EUR 2.05 billion.
The items below are the primary drivers of the decrease in Nokia's continuing
operations net cash and other liquid assets in 2013 of EUR 2.05 billion:
- Nokia's continuing operations net profit adjusted for non-cash items of
positive EUR 1.3 billion;
- Nokia's continuing operations outflow related to the acquisition of Siemens'
stake in Nokia Siemens Networks of EUR 1.7 billion;
- Nokia's continuing operations net working capital-related cash outflows of
approximately EUR 70 million, which included approximately EUR 600 million of
restructuring related cash outflows;
- NSN net working capital-related outflows of approximately EUR 260 million,
which included approximately EUR 600 million of restructuring-related cash
outflows. Excluding the restructuring-related cash outflows, NSN net working
capital-related inflows of approximately EUR 340 million is primarily due to a
decrease in receivables and inventories, partially offset by an decrease in
interest free short term liabilities.
- HERE net working capital-related inflows of approximately EUR 120 million;
- Advanced Technologies net working capital-related inflows of approximately
EUR 70 million.
- Nokia's continuing operations net financial income and expense-related cash
inflow of approximately EUR 220 million,
- Nokia's continuing operations cash tax net outflows of approximately EUR 250
million;
- Nokia's continuing operations net proceeds related to unlisted funds of
approximately EUR 80 million;
- Nokia's continuing operations capital expenditure of approximately EUR 210
million;
- Nokia's continuing operations net outflows of approximately 60 million EURO
related to business divestments;
- Nokia's continuing operations inflow related to the proceeds from the sale of
fixed assets of approximately EUR 80 million;
- Nokia's continuing operations proceeds related to the equity component of the
Microsoft convertible bond of approximately EUR 150 million;
- Nokia's continuing operations negative foreign exchange impact from
translation of opening net cash of approximately EUR 230 million; and
- Discontinued operations cash outflow of approximately EUR 1.2 billion.
DISCONTINUED OPERATIONS FULL YEAR 2013
The following discussion is of discontinued operations reported results for
full year 2013. Comparisons are given to full year 2012 results, unless
otherwise indicated. See note 3 to our Summary Financial Information table
above concerning our current operational and reporting structure and note 4
concerning certain changes to historical comparative financials due to a
revised IFRS accounting standard, IAS19 Employee Benefits.
DISCONTINUED OPERATIONS
RESULTS SUMMARY
-------------------------------------------------
2013 2012 YoY Change
------------------------------------------------
Net sales 10 735 15 152 -29%
(EUR million)
------------------------------------------------
Gross margin (%) 20.6% 18.7%
------------------------------------------------
Operating expenses 2 685 3 796 -29%
(EUR million)
------------------------------------------------
Operating margin (%) -5.5% -9.8%
------------------------------------------------
Net cash from -1 081 -2 284
operating activities
------------------------------------------------
The decline in discontinued operations net sales in 2013 was primarily due to
lower Mobile Phones net sales and, to a lesser extent, lower Smart Devices net
sales. The decline in Mobile Phones net sales was due to lower volumes and
ASPs, 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. The decline in Smart Devices net sales was
due to lower volumes, affected by competitive industry dynamics including the
strong momentum of competing smartphone platforms, as well as our portfolio
transition from Symbian products to Lumia products.
The increase in discontinued operations gross margin in 2013 was primarily due
to a higher Smart Devices gross margin, partially offset by slightly lower
Mobile Phones gross margin. The increase in Smart Devices gross margin was
primarily due to lower inventory related allowances, which negatively affected
Smart Devices gross margin in 2012.
The decrease in discontinued operations operating expenses in 2013 was due to
lower Mobile Phones and Smart Devices operating expenses, primarily due to
structural cost savings, as well as overall cost controls.
The discontinued operations net financial income and expense in 2013 was a
lower income than in 2012. The lower net income was primarily due to lower net
foreign exchange-related gains.
The discontinued operations tax expense in 2013 was significantly lower than in
2012. The lower tax expense was primarily due to the absence of a non-cash
valuation allowance of EUR 800 million related to Finnish deferred tax assets
in the second quarter 2012.
The discontinued operations loss in 2013 was a smaller loss primarily due to
lower tax expense and lower operating losses.
In 2013, discontinued operations had cash outflows of approximately EUR 1.2
billion. This was primarily driven approximately EUR 1.1 billion of net cash
outflows from operating activities and EUR 130 million of net cash outflows
from investing activities.
FULL YEAR 2013 OPERATING HIGHLIGHTS
NOKIA
- Nokia completed the acquisition of Siemens' stake in Nokia Siemens Networks
in August, making it wholly owned subsidiary. The acquisition was initially
announced in July. In accordance with this transaction, the Siemens name was
phased out from Nokia Siemens Networks' company name and branding. The new name
and brand was announced to be Nokia Solutions and Networks, also referred to as
NSN, which is also used for financial reporting purposes.
- On September 3, 2013, Nokia announced that it had signed an agreement to
enter into a transaction whereby Nokia will sell substantially all of its
Devices & Services business and license its patents to Microsoft for EUR 5.44
billion in cash, payable at closing.
- Nokia also announced changes to its leadership as a result of the proposed
transaction in September. To avoid the perception of any potential conflict of
interest between now and the pending closure of the transaction, Stephen Elop
stepped aside as President and CEO of Nokia Corporation, resigned from the
Board of Directors, and became Executive Vice President, Devices & Services.
Risto Siilasmaa assumed an interim CEO role for Nokia while continuing to serve
in his role as Chairman of the Nokia Board of Directors. Timo Ihamuotila became
President of Nokia for the interim period while also continuing to serve as
CFO. Mr. Ihamuotila assumed the responsibility of chairing the Nokia Leadership
Team.
- In the third quarter 2013, Nokia issued EUR 1.5 billion of financing in the
form of three EUR 500 million tranches of convertible bonds issued to Microsoft
maturing in 5, 6 and 7 years, respectively. On September 6, 2013, Nokia
announced that it had decided to draw down all of this financing to prepay
financing raised for the acquisition of the shares in NSN, which was completed
in August 2013, and for general corporate purposes. Microsoft has agreed not to
sell any of the bonds or convert any of the bonds to Nokia shares prior to the
closing of the sale of the Devices & Services business. If the sale of the
Devices & Services business is completed, the bonds will be redeemed and the
principal amount and accrued interest netted against the proceeds from the
transaction.
- As a result of the planned sale of substantially all of its Devices &
Services business, Nokia announced that it plans to focus on its three
established businesses: NSN, a leader in network infrastructure and services;
HERE, a leader in mapping and location services; and Advanced Technologies,
which will build on several of Nokia's current CTO and intellectual property
rights activities. Additionally, Nokia announced that its Board of Directors is
conducting a strategy evaluation for Nokia Group between signing and closing of
the transaction.
- Nokia's Extraordinary General Meeting held on November 19, 2013 confirmed and
approved the sale of substantially all of Nokia's Devices & Services business
to Microsoft in line with the proposal and recommendation of the Nokia Board of
Directors.
- Nokia ranked second within the Communications Equipment industry in the Dow
Jones Sustainability Indexes (World) released in September 2013. Nokia is also
among companies that have achieved the largest proportional improvement in
their sustainability performance within their sector.
- The Carbon Disclosure Project (CDP) listed Nokia in the CDP Nordic 260
Climate Change Report 2013 (comprising 260 largest Nordic companies). Nokia was
mentioned for the fifth year in a row in the Climate Disclosure Leadership
Index, being the only Nordic company to have been featured in the index for two
consecutive quarters.
NSN
- NSN added significant commercial LTE deals during 2013, including: contracts
for China Mobile's and China Telecom's nationwide TD-LTE networks; a contract
with Sprint in the USA for the deployment of their TD-LTE network; a contract
with TIM Brasil and with Oi Brasil to build their 4G LTE networks ahead of the
2014 football World Cup; LTE networks for MTS in the Moscow and Central Russia
regions.
- NSN also added a large number of other mobile broadband contracts including:
Taiwan's first LTE with Chunghwa Telecom; New Zealand's first 4G service with
Vodafone; 4G mobile broadband services for Ooredoo in Qatar and Ooredoo's
nationwide 3G services in Myanmar; modernizing the 3G network for M1 in
Singapore; 4G network infrastructure for Celcom in Malaysia; modernizing and
expanding Mobily's 2G, 3G and 4G networks in Saudi Arabia; implementing US
Cellular's second wave of LTE services; expanding Movistar Chile's 3G network
and implementing their LTE network as well as Claro's LTE network in Chile;
SFR's commercial LTE services in Paris; Tele2 Netherlands' 4G services
nationwide; 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; MTS's network upgrade in Ukraine.
- NSN continued to stay at the forefront of mobile broadband, further enhancing
its Radio Base Station Smart Scheduler, which notably offers significantly
improved cell edge coverage and better sustained performance under load and
launching a powerful TD-LTE Base Station radio module; and introducing new
(FlexiZone) microcell and picocell base stations with the unique ability to
become a FlexiZone which overcomes the limitations on how many small cells can
be added within a macro cell coverage.
- In other LTE technology developments, NSN and China Mobile enabled the
world's first live TV broadcast via TD-LTE; NSN and the Singapore-based
operator StarHub successfully completed Southeast Asia's first 3GPP standard
Voice over LTE call in a live network.
- NSN and Panasonic Mobile Communications were selected by NTT DOCOMO in Japan
to develop for LTE-Advanced next-generation mobile broadband network
architecture; NSN also helped all three major Korean operators - SK Telecom, LG
U+ and Korea Telecom - to become the world's first to launch LTE-Advanced
services commercially; NSN demonstrated the world's first 4G TD-LTE network
trial showing that Authorized Shared Access (ASA) is paving the way for future
5G networks.
- NSN announced Liquid Applications, turning base stations into an intelligent
part of a mobile operator's network to serve and deliver local content. In
September, SK Telecom of South Korea and NSN completed world's first
proof-of-concept of Liquid Applications over LTE.
- NSN completed comprehensive testing of mobile voice core services running in
the telco cloud and successfully demonstrated its telco cloud capabilities in a
joint proof-of-concept for Evolved Packet Core (EPC) virtualization with SK
Telecom.
- The Lebanese telecommunications operator, touch, chose NSN to simplify its
operations and improve its customer experience with the company's unique
operations support systems (OSS) portfolio and its related integration
services. NSN also opened a Global Delivery Center hub in China. The new
facility provides tools, processes and skilled resources to remotely manage
mobile broadband networks for operators in China and around the world.
- Zain Kuwait deployed NSN's Customer Experience Management (CEM), and NSN's
CEM contract with Beijing Mobile was extended, to implement an extensive
Quality of Experience solution.
- With over 15 years of experience in Managed Services, NSN during 2013 further
enhanced its Managed Services business approach and increased its overall
operational efficiency while also renewing nearly 90% of its existing Managed
Services contracts.
- NSN announced research co-operation with China Mobile Research Institute;
made a multi-year commitment to 5G research activities together with the NYU
WIRELESS research center; and announced its participation as a founding member
in the 5G public-private partnership between the European Union and 5G PPP
Association.
- NSN is putting its Technology Vision 2020 into practice, with its big data
telco platform prototype analyzing 1 million live messages a second, bridging
the best of IT and telco technologies
- During the year, NSN was recognized for its global advances and deployments
by Global TD-LTE Initiative (GTI), winning the TD-LTE Market Development Award
2013; for its progress in innovation with two Emerging Technologies Awards at
CTIA 2013 (its Fuel Cell solution and Liquid Applications); also a three-time
winner with its operator customers at the prestigious Global Telecoms Business
Innovation Awards in the ‘Wireless network infrastructure innovation' category.
The awards recognized joint projects with SK Telecom (Liquid Applications),
touch Telecom (centralized Network and Operations Center) and Zain Kuwait
(Customer Experience Index).
- In June 2013, ABI Research ranked NSN number 1 in its macro base station
vendor competitive assessment; and industry analyst firm Gartner positioned NSN
in the ‘Leaders' quadrant of the Magic Quadrant for LTE Network Infrastructure,
for the second consecutive year.
- In 2013, NSN completed its plan to streamline the portfolio and focus on
mobile broadband, including divestment of non-core businesses.
HERE
In 2013 HERE made significant progress towards its goal of becoming the leading
location cloud business with the introduction of new, innovative products as
well as updates to its signature experiences, a number of new partnerships that
demonstrate that HERE is the preferred partner across industries for maps and
location-based technology, and through further extending its reach across a
number of operating systems.
- HERE announced a complete Connected Driving offer, including HERE Auto, HERE
Auto Cloud and HERE Auto Companion. It is the only end-to-end driving solution
on the market today, which will help car makers and in-vehicle technology
suppliers connect the car to the cloud.
- HERE radically improved its traffic product, HERE Traffic, by building a new
system and engine that processes data even faster and more accurately than
before.
- HERE continued to strengthen its popular and critically acclaimed suite of
integrated location experiences on Windows Phone with a number of updates
throughout the year that brought new features and further refined the user
experience.
- Continental Corporation implemented 3D content from HERE in its new
entertainment platform. Automotive manufacturers can expand their
location-based applications to include rich 3D landmarks, satellite imagery
with split screen and current traffic information. This also will advance the
multi-modal transportation concept another step by providing drivers the
ability to synch their route profiles across in-dash systems in their vehicles
and their smartphone, tablet or PC.
- Garmin continued to put their trust in HERE across the globe by adopting
Natural Guidance in North America and Europe, changing the way people provide
directions to each other. This includes leveraging local knowledge and market
research to incorporate local nuances for choosing and describing reference
cues such as the color of a building or the name of a restaurant.
- Magneti Marelli and HERE announced their cooperation to develop an end-to-end
connected driving solution ready to use for car makers based on Magneti
Marelli's open platform and the HERE Connected Driving offering.
- HERE teamed up with Mercedes-Benz to jointly develop smart maps for connected
cars and ultimately, self-driving cars leveraging cloud technology.
- HERE announced that it delivers its indoor Venue Maps to Qualcomm Atheros,
Inc., a subsidiary of Qualcomm Incorporated, helping Qualcomm IZat(TM) location
technologies deliver more precise positioning to mobile devices inside
buildings.
- Rand McNally, one of the largest commercial truck routing software companies
in North America, chose HERE as its preferred map provider. HERE contributes
information specific to truck transportation, such as the height of a bridge
overpass, road weight restrictions for trucks and posted speed limits.
- SAP selected HERE to serve as the location technology for its TwoGo
car-sharing service.
- As a significant advancement in the longstanding partnership with Toyota,
Toyota Motor Europe 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.
- TripAdvisor, the world's largest travel site, selected the HERE Platform for
geocoding services to offer global coverage for consumers to plan trips. HERE
offers precise location information in more than 196 countries, helping
TripAdvisor website visitors to find hotels, restaurants, and attractions
across the world.
- The U.S. Federal Highway Administration has leveraged HERE Traffic covering
all major highways and border crossings in the U.S. to develop performance
measures.
- The embedded navigation systems of more than 10 million new cars sold in 2013
are powered by maps from HERE. This milestone underlines the leadership of HERE
in providing navigation and mapping solutions for the automotive industry.
- HERE further strengthened the Windows Phone 8 ecosystem by making its suite
of location-based experiences available for all Windows Phone 8 devices.
- HERE brought HERE Maps to the new Asha platform, thus helping to connect the
next billion.
- HERE introduced HTML5-based HERE Maps for the new Firefox OS as a first
collaborative step with Mozilla.
ADVANCED TECHNOLOGIES
- Nokia was one of the founding industrial partners and board members for the
EU's Graphene Flagship, the EU's biggest research initiative ever, tasked with
taking graphene, a nano-technology material with unique properties, from the
realm of academic research into commercial use in the space of ten years. Our
participation is led from the Nokia Research Center in Cambridge, UK.
DISCONTINUED OPERATIONS
- Nokia's new manufacturing facility in Hanoi, Vietnam, became fully
operational in the third quarter.
- Nokia was ranked ninth in Interbrand's Best Global Green Brands survey, ahead
of all its peers in the mobile industry.
- Nokia launched its first Windows tablet, the Nokia Lumia 2520, and its first
large screen Lumia smartphones, the Lumia 1520 and Lumia 1320.
- Nokia launched the Lumia 1020, which set a new benchmark for smartphone
imaging, and the Lumia 925, which introduced metal for the first time to the
Nokia Lumia range.
- Nokia launched the Lumia 620, a compact smartphone with a colorful design and
the Nokia Lumia 520, its most affordable Windows Phone 8 smartphone.
- Nokia introduced several new imaging innovations in 2013. These innovations
included, for instance, Smart Camera that allows people to shoot a sequence of
photos, making it easier to capture great moments.
- Lumia smartphones continued to benefit from a growing Windows Phone
application store, with key applications including Instagram, Waze and Vine
announced during the year. Nokia itself launched new applications such as Nokia
Storyteller, Beamer and Video Director.
- Nokia introduced Asha 501, the first of a new generation of smartphones to
run on the new Asha platform, before following up with new additions to the
Asha platform family in the form of the Nokia Asha 500, Asha 502 and Asha 503.
- Nokia started shipments of the Nokia 105, the most affordable phone in its
portfolio, retailing at a recommended price of EUR 15.
- Nokia introduced a new ultra-affordable camera phone, the Nokia 108.
- Nokia unveiled and started shipments of the Nokia 515, a premium mobile phone
with a 5 megapixel camera.
SHARES
The total number of Nokia shares on December 31, 2013, was 3 744 994 342. On
December 31, 2013, Nokia and its subsidiary companies owned 32 567 617 Nokia
shares, representing approximately 0.9% of the total number of Nokia shares and
the total voting rights.
DIVIDEND
The Nokia Board of Directors will decide on its proposal to the Annual General
Meeting on distributions to shareholders only after the anticipated closing of
the transaction whereby Nokia will sell substantially all of its Devices &
Services business and license its patents to Microsoft and the completion of
the strategy evaluation. The distributable funds on the balance sheet of the
parent company at December 31, 2013 amounted to EUR 4 676 million.
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 planned sale by Nokia of substantially all of Nokia's Devices & Services
business, including Smart Devices and Mobile Phones (referred to below as "Sale
of the D&S Business") pursuant to the Stock and Asset Purchase Agreement, dated
as of September 2, 2013, between Nokia and Microsoft International Holdings
B.V.(referred to below as the "Agreement"); B) the closing of the Sale of the
D&S Business; C) receiving timely, or at all, necessary regulatory approvals
for the Sale of the D&S Business; D) expectations, plans or benefits related to
or caused by the Sale of the D&S Business; E) expectations, plans or benefits
related to Nokia's strategies, including plans for Nokia with respect to its
continuing businesses that will not be divested in connection with the Sale of
the D&S Business; F) expectations, plans or benefits related to changes in
leadership and operational structure; G) expectations and targets regarding our
operational priorities, financial performance or position, results of
operations and use of proceeds from the Sale of the D&S Business; H) the timing
of the deliveries of our products and services; I) our ability to innovate,
develop, execute and commercialize new technologies, products and services; J)
expectations regarding market developments and structural changes; K)
expectations and targets regarding performance, including those related to
market share, prices, net sales and margins of products and services; L)
expectations and targets regarding collaboration and partnering arrangements;
M) the outcome of pending and threatened litigation, regulatory proceedings or
investigations by authorities; N) 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, divestments and
acquisitions, as well as any expected plans and benefits related to or caused
by such transactions; and O) statements preceded by "believe,""expect,""anticipate,""foresee,""sees,""target,""estimate,""designed,""aim","plans,""intends,""focus,""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) the inability to close
the Sale of the D&S Business in a timely manner, or at all, for instance due to
the inability or delays in obtaining necessary regulatory approvals for the
Sale of the D&S Business, or the occurrence of any event, change or other
circumstance that could give rise to the termination of the Agreement; 2) the
potential adverse effect on the sales of our mobile devices, business
relationships, operating results and business generally resulting from the
announcement of the Sale of the D&S Business or from the terms that we have
agreed for the Sale of the D&S Business; 3) any negative effect from the
implementation of the Sale of the D&S Business, as we may forego other
competitive alternatives for strategies or partnerships that would benefit our
Devices & Services business and if the Sale of the D&S Business is not closed,
we may have limited options to continue the Devices & Services business or
enter into another transaction on terms favorable to us, or at all; 4) our
ability to effectively and smoothly implement planned changes to our leadership
and operational structure or maintain an efficient interim governance structure
and preserve or hire key personnel; 5) any negative effect from the
implementation of the Sale of the D&S Business, including our internal
reorganization in connection therewith, which will require significant time,
attention and resources of our senior management and others within the company
potentially diverting their attention from other aspects of our business; 6)
disruption and dissatisfaction among employees caused by the plans and
implementation of the Sale of the D&S Business, reducing focus and productivity
in areas of our business; 7) the amount of the costs, fees, expenses and
charges related to or triggered by the Sale of the D&S Business; 8) any
impairments or charges to carrying values of assets or liabilities related to
or triggered by the Sale of the D&S Business; 9) potential adverse effects on
our business, properties or operations caused by us implementing the Sale of
the D&S Business; 10) the initiation or outcome of any legal proceedings,
regulatory proceedings or enforcement matters that may be instituted against us
relating to the Sale of the D&S Business; 11) Nokia Solutions and Networks'
(renamed from Nokia Siemens Networks) also referred to as NSN 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; 12) NSN's ability to maintain and improve its market
position and respond successfully to changes and competition in the mobile
broadband infrastructure and related services market; 13) NSN's success in
implementing its restructuring plan and reducing its operating expenses and
other costs; 14) NSN's ability to invest in and timely introduce new
competitive products, services, upgrades and technologies; 15) NSN's dependence
on limited number of customers and large, multi-year contracts; 16) NSN's
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; 17) the management of NSN's customer financing
exposure; 18) 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; 19) 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; 20) our ability to maintain the existing sources of intellectual
property related revenue and establish new such sources; 21) 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; 22) our ability to keep momentum and increase our
speed of innovation, product development and execution in order to bring new
innovative and competitive products and location-based or other services to the
market in a timely manner; 23) our ability to effectively and smoothly
implement the planned changes in our operational structure and achieve targeted
efficiencies and reductions in operating expenses and our ability to complete
the planned divestments and acquisition, including obtaining any needed
regulatory approvals; 24) our ability to retain, motivate, develop and recruit
appropriately skilled employees; 25) 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; 26) our ability to maintain and leverage
our position and strengths, 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; 27) the performance of the
parties we partner and collaborate with and our ability to achieve successful
collaboration or partnering arrangements; 28) our ability to deliver our
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; 29) 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; 30) any actual or even alleged defects
or other quality, safety and security issues in our products; 31) any
inefficiency, malfunction or disruption of a system or network that our
operations rely on; 32) 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; 33) our ability to
successfully manage the pricing of our products and services and costs related
to our products and services and our operations; 34) 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; 35)
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; 36) 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; 37) 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; 38) 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; 39) investigations or
claims by contracting parties in relation to exits from countries, areas or
contractual arrangements; 40) unfavorable outcome of litigation, regulatory
proceedings or investigations by authorities; 41) 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;
42) 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 (renamed Nokia Solutions and Networks); 43) any impairment of
NSN's customer relationships resulting from ongoing or any additional
governmental investigations involving the Siemens carrier-related operations
transferred to Nokia Siemens Networks (renamed Nokia Solutions and 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 proven 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 - January 23, 2014
Media and Investor Contacts:
Nokia
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
Planned publication dates for interim reports in 2014
- report for Q1 2014: April 29, 2014
- report for Q2 2014 and January-June 2014: July 24, 2014
- report for Q3 2014 and January-September 2014: October 23, 2014
Publication of "Nokia in 2013"
Nokia plans to publish its "Nokia in 2013" annual report, which includes the
review by the Board of Directors and the audited annual accounts, on March 31,
2014. The annual report will be available at www.nokia.com/financials, where
you may also access our past quarterly and annual financial reports.
Nokia's Annual General Meeting 2014
Nokia's Annual General Meeting 2014 is scheduled to be held on June 17, 2014.
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