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Profitability Strong for the Quarter - Operating Profit up 39% Year on Year, Excluding Special Items
Nokia Corporation NOK
The complete press release with tables is available at
NOKIA IN THE FIRST QUARTER 2008* EUR million Q1/2008** Q1/2007** Change Net sales 12 660 9 856 28% Devices & Services 9 263 8 163 13% Nokia Siemens Networks 3 401 1 697 Operating profit 1 531 1 272 20% Devices & Services 1 883 1 252 50% Nokia Siemens Networks*** -74 78 Group Common Functions -278 -58 Operating margin (%) 12.1 12.9 Devices & Services (%) 20.3 15.3 Nokia Siemens Networks (%)*** -2.2 4.6 Net profit 1 222 979 25% EPS, EUR Diluted*** 0.32 0.25 28%
- EUR 217 million loss due to transfer of Finnish pension liabilities (impacting Common Group Functions) - EUR 81 million facilities impairment and other charges related to closure of the Bochum site in Germany (impacting Devices & Services operating profit) - EUR 65 million gain due to transfer of Finnish pension liabilities (impacting Nokia Siemens Networks operating profit) - EUR 100 million restructuring charge (impacting Nokia Siemens Networks operating profit) - Excluding the net impact of these special items, diluted EPS was EUR 0.38 ** Q1 2007 special items: - EUR 32 million restructuring charges (impacting Devices & Services operating profit) - EUR 25 million charge related to restructuring of a subsidiary company (impacting Devices & Services operating profit) - EUR 12 million charge for Nokia Siemens Networks related incremental costs expensed during the first quarter (impacting Networks operating profit) - Excluding the impact of these special items, diluted EPS was EUR 0.26. *** Important note to Nokia Siemens Networks Q1 2008 operating profit and Nokia EPS, both including and excluding special items: In addition to the 'special items' listed above, Nokia Siemens Networks reported operating profit also included EUR 120 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks. FIRST QUARTER 2008 HIGHLIGHTS - Nokia net sales of EUR 12.7 billion, up 28% year on year (up 35% at constant currency). - Nokia diluted EPS of EUR 0.38, growing 46% from Q1 2007, excluding special items. - Nokia operating margin of 14.7%, up year on year from 13.6% in Q1 2007, down sequentially from 15.9% in Q4 2007, excluding special items. - Nokia Devices & Services operating margin of 21.2%, up year on year from 16.0%, down sequentially from 22.8% in Q4 2007, excluding special items. - Nokia operating cash flow of EUR 0.8 billion. - Nokia device volumes of 115.5 million units, up 27% year on year and down 13% sequentially. - Estimated industry device volumes of 295 million units, up 17% year on year and down 12% sequentially. - Nokia estimated device market share of 39%, up from 36% in Q1 2007 and down from 40% in Q4 2007. - Nokia device ASP of EUR 79, down from EUR 83 in Q4 2007. (Device ASP excludes net sales from Services & Software) - Nokia Siemens Networks operating margin was -1.1%, excluding special items, and was a positive 2.4%, excluding special items and purchase price accounting related items arising from the formation of Nokia Siemens Networks.
- Nokia expects industry mobile device volumes in the second quarter 2008 to be up slightly sequentially, similar to the market growth in the second quarter 2007, compared to the first quarter 2007. - We expect Nokia's mobile device market share in the second quarter 2008 to increase sequentially. - Nokia continues to expect industry mobile device volumes in 2008 to grow approximately 10% from the approximately 1.14 billion units Nokia estimates for 2007. - Nokia expects the mobile device market to decline in value in Euro terms in 2008, compared to 2007. The change from our previous estimate of value growth for this market primarily reflects the negative impact of the recently weakened US dollar, the general economic slowdown in the US, and possibly going forward some economic slowdown in Europe. - Nokia continues to expect some decline in industry ASPs in 2008, primarily reflecting the increasing impact of the emerging markets and competitive factors in general. - Nokia continues to target an increase in its market share in mobile devices in 2008. - Nokia expects the mobile and fixed infrastructure and related services market to be flat in Euro terms in 2008, compared to 2007. The change from the previous estimate of "very slight growth" for this market primarily reflects the negative impact of the recently weakened US dollar. - Nokia and Nokia Siemens Networks target for Nokia Siemens Networks market share to remain constant in 2008, compared to 2007. - Nokia and Nokia Siemens Networks cost synergy target for Nokia Siemens Networks is to achieve substantially all of the EUR 2.0 billion of targeted annual cost synergies by the end of 2008, as previously announced.
Europe 25.7 23.9 7.5 37.2 -30.9 Middle East & Africa 20.2 15.7 28.7 23.6 -14.4 China 21.0 15.7 33.8 20.2 4.0 Asia-Pacific 34.1 23.7 43.9 34.0 0.3 North America 2.6 4.8 -45.8 5.1 -49.0 Latin America 11.9 7.3 63.0 13.4 -11.2 Total 115.5 91.1 26.8 133.5 -13.5
Europe 1 212 2 045 -40.8 Middle East & Africa 448 540 -17.0 China 269 492 -45.3 Asia-Pacific 944 838 12.7 North America 192 243 -21.1 Latin America 336 424 -20.7 Total 3 401 4 582 -25.8
Q1 2008 OPERATING HIGHLIGHTS
- On January 28, 2008, Nokia and Trolltech ASA announced that they had entered into an agreement that Nokia will make a public voluntary tender offer to acquire Trolltech, a company headquartered in Oslo, Norway and publicly listed on the Oslo Stock Exchange. Trolltech is a recognized software provider with world-class software development platforms and frameworks. The tender offer has commenced and completion of the acquisition is subject to customary closing conditions, including regulatory approvals.
- We launched a technology concept called "Morph", jointly developed by Nokia Research Center and the University of Cambridge, UK. The concept shows how future mobile devices might benefit from nanotechnology research to be flexible and environmentally intuitive, sensing and reacting to the needs of users as well as objects around them.
- Nokia and UC Berkeley researchers tested technology for gathering traffic information from mobile devices in cars as an alternative to networks of sensors on the highways. One hundred cars equipped with the GPS-enabled Nokia N95 traveled a 10-mile stretch of highway near San Francisco to show how real-time information could be collected from the GPS feed to predict traffic flows and holdups, while preserving the privacy of the devices' owners.
- We opened a satellite design studio in Rio de Janeiro, reflecting the increasing impact Latin American style and culture are expected to have on the future design of mobile devices and services.
- We launched the 2008 Nokia Mobile Filmmaking Awards to support Pangea Day. Through 'Share on Ovi' consumers can upload, vote and share content for the Pangea Day broadcast on May 10, 2008.
- At the Mobile World Congress 2008, we unveiled a new line up of converged devices and Internet services. The Nokia N96, Nokia N78, Nokia 6210 Navigator and Nokia 6220 classic all feature different location based and multimedia experiences, from pedestrian navigation to geotagging and movie viewing to video and photo sharing.
- Nokia and Google announced a cooperation to integrate Google's popular search engine with the Nokia Search application. The integration will begin in select markets with the Nokia N96, Nokia N78, Nokia 6210 Navigator and Nokia 6220 classic.
Services & Software
- At the Mobile World Congress 2008, we announced the next step towards our Ovi Internet service environment by introducing 'Nokia Maps 2.0' and 'Share on Ovi', a personal media sharing community that makes it easy to upload, manage and share personal media.
- We continued to expand the Nokia Music Store's geographical reach, opening online stores in Germany and Finland.
- Orange and Nokia signed a memorandum of understanding in order to partner on value-added services such as location based services, maps, mobile advertising and gaming.
- We launched the N-Gage First Access Program, which allows consumers to try all N-Gage games for free from any one of the tens of millions of compatible Nokia devices in the market. They can then download and buy games with a mobile device or PC.
Nokia Siemens Networks
- In February, Nokia Siemens Networks acquired Apertio, a leading provider of open real-time subscriber data platforms and applications. The Apertio platform was a key component of a major subscriber management deal signed with T-Mobile Germany in March.
- Nokia Siemens Networks services capabilities and global reach were influential in winning a number of deals, including a pan-India contract for single Interactive Voice Response for Bharti Airtel; a large turnkey network expansion, including managed services, with Hutchison Telecom Indonesia; and a major consulting and systems integration DVB-H deal with Global Mediacom in Indonesia.
- At the Mobile World Congress 2008, Nokia Siemens Networks launched its LTE solution for radio and core networks, including the new Flexi Multimode Base Station.
- Nokia Siemens Networks signed a first customer deal, with Vodacom Tanzania, for the Village Connection solution, which brings mobile connectivity to customers in rural and suburban communities in new growth markets.
- Nokia Siemens Networks continued to win strategic contracts in important markets, including a frame agreement to cover future network expansion with Megafon in Russia; key reference deals for its all-IP Internet High Speed Packet Access architecture solution, with T2 Slovenia and Stelera Wireless in the US; and an agreement with BSNL in India to expand broadband access to 25 000 villages.
For more information on the operating highlights mentioned above, please refer to related press announcements, which can be accessed at the following link: http://www.nokia.com/press and http://www.nokiasiemensnetworks.com/press.
NOKIA IN THE FIRST QUARTER 2008
(International Financial Reporting Standards (IFRS) comparisons given to the first quarter 2007 results, unless otherwise indicated.)
As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated basis. Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of the former Nokia Networks and Siemens' carrier-related operations for fixed and mobile networks. Accordingly, the results of Nokia Group and Nokia Siemens Networks for the first quarter 2008 are not directly comparable to results for the first quarter 2007. Nokia's first quarter 2007 included the former Nokia Networks business group only.
As of January 1, 2008, our three mobile device business groups, Mobile Phones, Multimedia and Enterprise Solutions, and the supporting horizontal groups were replaced by an integrated business segment, Devices & Services. Prior period results for Nokia and its reportable segments have been regrouped for comparability purposes according to the new reportable segments (on an unaudited basis). Devices & Services has three business units, Devices, Services & Software and Markets, supported by a Corporate Development Office. Link to regrouped 2007 financials: http://www.nokia.com/investors.
Nokia's net sales increased 28% to EUR 12.7 billion (EUR 9.9 billion). Net sales of Devices & Services increased 13% to EUR 9.3 billion (EUR 8.2 billion). Net sales of Nokia Siemens Networks were EUR 3.4 billion.
Operating profit increased 20% to EUR 1.5 billion (EUR 1.3 billion), representing an operating margin of 12.1% (12.9%). Operating profit in Devices & Services increased 50% to EUR 1.9 billion (EUR 1.3 billion), representing an operating margin of 20.3% (15.3%). The operating loss in Nokia Siemens Networks was EUR 74 million, representing an operating margin of -2.2%. Group Common Functions expenses totaled EUR 278 million (EUR 58 million).
Financial income was EUR 68 million (EUR 48 million). Profit before tax and minority interests was EUR 1 607 million (EUR 1 325 million). Net profit totaled EUR 1 222 million (EUR 979 million). Earnings per share increased to EUR 0.32 (basic) and to EUR 0.32 (diluted), compared to EUR 0.25 (basic) and EUR 0.25 (diluted) in the first quarter 2007. Earnings per share, excluding special items, increased to EUR 0.38 (diluted), compared to EUR 0.26 (diluted) in the first quarter 2007.
The average number of employees during January-March 2008 was 114 735. At March 31, 2008, we employed a total of 116 378 people (112 262 people at December 31, 2007).
The total number of Nokia shares on March 31, 2008 was 3 797 402 044. On March 31, 2008, Nokia and its subsidiary companies owned 10 661 635 Nokia shares, representing approximately 0.3% of the total number of Nokia shares and the total voting rights.
The complete press release with tables is available at http://www.nokia.com/results/results2008Q1e.pdf.
It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding: A) the timing of product, services and solution deliveries; B) our ability to develop, implement and commercialize new products, services, solutions and technologies; C) expectations regarding market growth, developments and structural changes; D) expectations regarding our mobile device volume growth, market share, prices and margins; E) expectations and targets for our results of operations; F) the outcome of pending and threatened litigation; G) expectations regarding the successful completion of contemplated acquisitions on a timely basis and our ability to achieve the set targets upon the completion of such acquisitions; and H) statements preceded by "believe," "expect," "anticipate," "foresee," "target," "estimate," "designed," "plans," "will" or similar expressions are forward-looking statements. 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 that could cause these differences include, but are not limited to: 1) competitiveness of our product, service and solutions portfolio; 2) the extent of the growth of the mobile communications industry and general economic conditions globally; 3) the growth and profitability of the new market segments that we target and our ability to successfully develop or acquire and market products, services and solutions in those segments; 4) our ability to successfully manage costs; 5) the intensity of competition in the mobile communications industry and our ability to maintain or improve our market position or respond successfully to changes in the competitive landscape; 6) the impact of changes in technology and our ability to develop or otherwise acquire complex technologies as required by the market, with full rights needed to use; 7) timely and successful commercialization of complex technologies as new advanced products, services and solutions; 8) our ability to protect the complex technologies, which we or others develop or that 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 products, services and solution offerings; 9) our ability to protect numerous Nokia and Nokia Siemens Networks patented, standardized or proprietary technologies from third-party infringement or actions to invalidate the intellectual property rights of these technologies; 10) Nokia Siemens Networks' ability to achieve the expected benefits and synergies from its formation to the extent and within the time period anticipated and to successfully integrate its operations, personnel and supporting activities; 11) whether, as a result of investigations into alleged violations of law by some current or former employees of Siemens AG ("Siemens"), government authorities or others take further actions against Siemens and/or its employees that may involve and affect the carrier-related assets and employees transferred by Siemens to Nokia Siemens Networks, or there may be undetected additional violations that may have occurred prior to the transfer, or ongoing violations that may have occurred after the transfer, of such assets and employees that could result in additional actions by government authorities; 12) any impairment of Nokia Siemens Networks customer relationships resulting from the ongoing government investigations involving the Siemens carrier-related operations transferred to Nokia Siemens Networks; 13) occurrence of any actual or even alleged defects or other quality issues in our products, services and solutions; 14) our ability to manage efficiently our manufacturing and logistics, as well as to ensure the quality, safety, security and timely delivery of our products, services and solutions; 15) inventory management risks resulting from shifts in market demand; 16) our ability to source sufficient amounts of fully functional components and sub-assemblies without interruption and at acceptable prices; 17) any disruption to information technology systems and networks that our operations rely on; 18) developments under large, multi-year contracts or in relation to major customers; 19) economic or political turmoil in emerging market countries where we do business; 20) our success in collaboration arrangements relating to development of technologies or new products, services and solutions; 21) the success, financial condition and performance of our collaboration partners, suppliers and customers; 22) exchange rate fluctuations, including, in particular, fluctuations between the euro, which is our reporting currency, and the US dollar, the Chinese yuan, the UK pound sterling and the Japanese yen, as well as certain other currencies; 23) the management of our customer financing exposure; 24) allegations of possible health risks from electromagnetic fields generated by base stations and mobile devices and lawsuits related to them, regardless of merit; 25) unfavorable outcome of litigations; 26) our ability to recruit, retain and develop appropriately skilled employees; 27) the impact of changes in government policies, laws or regulations; and 28) our ability to effectively and smoothly implement our new organizational structure; as well as the risk factors specified on pages 10-25 of Nokia's annual report on Form 20-F for the year ended December 31, 2007 under "Item 3.D Risk Factors." Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Nokia does not undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
- Nokia plans to report its Q2 results on July 17, 2008
- The Annual General Meeting will be held on May 8, 2008
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