q3 2009 earning report of nokia

1 © 2009 Nokia Third Quarter 2009 Financial Results

Olli-Pekka Kallasvuo President & CEO

Rick Simonson Executive Vice President & CFO

Kristian Pullola Vice President, Head of Treasury and Investor Relations

Nokia Conference CallThird Quarter 2009 Financial Results

October 15, 2009 15.00 Helsinki time 8.00 New York time


Disclaimer

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) our ability to develop and grow our consumer Internet services business; D) expectations regarding market developments and structural changes; E) expectations regarding our mobile device volumes, market share, prices and margins; F) expectations and targets for our results of operations; G) the outcome of pending and threatened litigation; H) 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 I) 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) the deteriorating global economic conditions and related financial crisis and their impact on us, our customers and end-users of our products, services and solutions, our suppliers and collaborative partners; 2) the development of the mobile and fixed communications industry, as well as 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; 3) the intensity of competition in the mobile and fixed communications industry and our ability to maintain or improve our market position or respond successfully to changes in the competitive landscape; 4) competitiveness of our product, services and solutions portfolio; 5) our ability to successfully manage costs; 6) exchange rate fluctuations, including, in particular, fluctuations between the euro, which is our reporting currency, and the US dollar, the Japanese yen, the Chinese yuan and the UK pound sterling, as well as certain other currencies; 7) the success, financial condition and performance of our suppliers, collaboration partners and customers; 8) our ability to source sufficient amounts of fully functional components, sub-assemblies, software and content without interruption and at acceptable prices; 9) the impact of changes in technology and our ability to develop or otherwise acquire and timely and successfully commercialize complex technologies as required by the market; 10) the occurrence of any actual or even alleged defects or other quality, safety or security issues in our products, services and solutions; 11) the impact of changes in government policies, trade policies, laws or regulations or political turmoil in countries where we do business; 12) our success in collaboration arrangements with others relating to development of technologies or new products, services and solutions; 13) 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; 14) inventory management risks resulting from shifts in market demand; 15) 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 solutions; 16) our ability to protect numerous Nokia, NAVTEQ and Nokia Siemens Networks patented, standardized or proprietary technologies from third-party infringement or actions to invalidate the intellectual property rights of these technologies; 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) the management of our customer financing exposure; 20) our ability to retain, motivate, develop and recruit appropriately skilled employees; 21) whether, as a result of investigations into alleged violations of law by some 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 violations that may have occurred after the transfer, of such assets and employees that could result in additional actions by government authorities; 22) 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; 23) unfavorable outcome of litigations; 24) allegations of possible health risks from electromagnetic fields generated by base stations and mobile devices and lawsuits related to them, regardless of merit; as well as the risk factors specified on pages 11-28 of Nokia’s annual report on Form 20-F for the year ended December 31, 2008 under Item 3D. “Risk Factors.” Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Nokia does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.


Good execution in an improving market environment

• The demand environment for mobile handsets improved faster than anticipated in many markets, but the uncertainty remains

• Q3 was a solid quarter for Nokia’s Devices & Services business despite the component constraints we encountered

• The formation of the Solutions unit is an important structural change that improve our ability to execute and innovate

• Nokia can further improve its position in the Products business by leveraging its low cost, unmatched scale, brand, and distribution


Estimated Global Device MarketIndustry mobile device volumes in 3Q 2009 estimated to be 288 million, up 7% QoQ and down 7% YoY.

3Q 2009 Industry Device Volumes by Technology (millions)

3Q 2009 Industry Device Volumes by Region (millions)


• Shipped 1.8 million N97 devices and 5.7 million touchscreen devices altogether

• Shipped 4.4 million Eseries devices

• Strong contribution from 6700 and 5130 XpressMusic

• Ovi partnership with Facebook

• Launch of Ovi APIs and our Ovi SDK Beta

• Acquisitions of Cellity, Plum and Dopplr

• Ovi Mail reached 2 million users

• Nokia Messaging with 35 operators

• Developers from 65 countries

• Nokia Music Store in 22 countries

• Comes With Music in 12 countries

• Navigation in more than 70 countries with 6 000 3D

Nokia N900 with Maemo

landmarks

Devices & Services in 3Q09: Highlights


Nokia Siemens Networks

• Net sales of EUR 2.8 billion (down 21% YoY and down 14% QoQ)

• Non-IFRS gross margin of 28.8% (up 80 bps QoQ)

• Non-IFRS operating loss of EUR 53 million (compared with profit of EUR 2 million in 2Q 2009)

• The challenging competitive factors and market conditions necessitated the impairment charges of EUR 1.3 billion at NSN

• We now expect the total infrastructure market in 2009 compared to 2008 will decline approximately 5% and NSN’smarket share to decline more than the moderate decline expected earlier


OPEX performance and overall taxes

• Devices & Services non-IFRS opex was 1.36 billion Euros, down 77 million Euros QoQ

• This was achieved through a combination of continuing to contain discretionary expenses and reducing structural costs

• Year-to-date, the headcount impact of the announced measures totals approximately 4 000 people in Devices & Services of which approximately 3 500 have already left the company

• In Q3, Nokia’s taxes benefited from favorable country profit mix as well as net credits related to prior years

• If Nokia’s estimated long-term tax rate of 26% had been applied, non-IFRS EPS would have been approximately 2 Euro cents lower

Higher and faster than

expected OPEX reductions

Lower than expected

overall taxes


Nokia Income Statement in 3Q2009: Highlights

• Nokia non-IFRS gross margin was 31.4% (down 150 bps QoQ)

• Devices & Services net sales of EUR 6.9 billion (up 5% QoQ)

• Devices & Services gross margin of 30.9% (down 310 bps QoQ) and gross margin without the impact of hedging was 33.1% (up 180 bps QoQ)

• Devices & Services non-IFRS operating margin of 11.4% (down 80 bps QoQ)

• Services net sales were EUR 148 million (not comparable QoQ)

• Nokia device ASP was EUR 62 (unchanged from 2Q09)

• NAVTEQ net sales of EUR 166 million (up 12% QoQ)

• NAVTEQ non-IFRS operating margin of 25.9% (up from 12.8% in 2Q09)

• Nokia Siemens Networks net sales of EUR 2.8 billion (down 14% QoQ)

• Nokia Siemens Networks non-IFRS gross margin of 28.8% (up 80 bps QoQ)

• Nokia Siemens Networks non-IFRS operating margin of -1.9% (0.1% in 2Q09)

• Financial Income & Expenses in 3Q2009 was an expense of EUR 48 million (expense of EUR 61 million in 2Q2009)


Financial Position & Cash Flow MetricsE U R ( m illio n ) 3 Q 2 0 0 9 3 Q 2 0 0 8 Y o Y 2 Q 2 0 0 9 Q o Q

In v e n to rie s 2 0 3 4 3 2 4 6 - 3 7 % 1 9 7 3 3 %

A c c o u n ts R e c e iv a b le 8 2 6 3 1 0 7 7 2 - 2 3 % 8 7 2 5 - 5 %

A c c o u n ts P a y a b le 5 0 6 6 6 3 6 9 - 2 0 % 5 2 7 6 - 4 %

O p e ra tin g C a s h F lo w 7 2 0 1 0 8 5 - 3 4 % 7 1 6 1 %

C a p ita l E xp e n d itu re 1 0 3 2 6 2 - 6 1 % 1 3 7 - 2 5 %D e p re c ia tio n 4 2 8 4 9 0 - 1 3 % 4 4 3 - 3 %

C a s h a n d O th e r liq u id a s s e ts 7 4 3 2 7 2 3 2 3 % 6 9 9 4 6 %

G e a rin g ( N e t-D e b t ra tio ) - 1 5 % - 1 5 % - 1 0 %

D is trib u tio n s 0 2 5 0 - 1 0 0 % 1 5 1 9 D iv id en d s 0 0 1 5 1 9 B u y b a cks 0 2 5 0 - 1 0 0 % 0


Moving Forward


Nokia Capital Markets Day

• Nokia Capital Markets Day 09 will be held at Dipoli Congress Centre and Nokia Head Offices in Espoo, Finland on December 2, 2009

• For further information, please visit cmd.nokia.com


NokiaX6

Select Key Products

NokiaE71

Nokia5800 XpressMusicNokia

3110 classic

NokiaE63

NokiaE72

NokiaE66

NokiaN97

NokiaN97 mini

Nokia6303 classic

Nokia6700 classic

Nokia5530 XpressMusicNokia

5130 XpressMusic

Nokia5230


Nokia Income Statement

EUR (million)Devices & Services NAVTEQ

Nokia Siemens

Networks

Reported Nokia 3Q09

Devices & Services NAVTEQ

Nokia Siemens

Networks

Non-IFRS

Nokia

Net sales 6 915 166 2 760 9 810 6 915 166 2 760 9 810YoY growth -20% 6% -21% -20% -20% 6% -21% -20%

Gross profit 2 137 146 778 3 061 2 137 146 794 3 077Gross margin, % 30.9% 88.0% 28.2% 31.2% 30,9% 88.0% 28.8% 31.4%

R&D -703 -152 -531 -1 386 -701 -69 -487 -1 257% of net sales 10.2% 91.6% 19.2% 14.1% 10.1% 41.6% 17.6% 12.8%

S&M -552 -49 -318 -920 -552 -21 -248 -822% of net sales 8.0% 29.5% 11.5% 9.4% 8.0% 12.7% 9.0% 8.4%

AG&O -97 -13 -1036 -1 181 -97 -13 -112 -257% of net sales 1.4% 7.8% 37.5% 12.0% 1.4% 7.8% 4.1% 2.6%

Operating profit 785 -68 -1 107 -426 787 43 -53 741Operating margin, % 11.4% -41.0% -40.1% -4.3% 11.4% 25.9% -1.9% 7.6%

Financial income and expenses -48 -48

Profit before tax -469 698

Profit attributable to equity holders of the pare -559 634

EPS, Basic (EUR) -0.15 0.17EPS, Diluted (EUR) -0.15 0.17


Currency• 3Q09 EUR/USD average rate for P&L: 1.408

• 4Q09 EUR/USD Plan rate: 1.459

NOKIA THIRD QUARTER 2009 NET SALES

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

Reported & Constant Currency1

Q3/2009 vs. Q3/2008 Change

Q3/2009 vs.Q2/2009 Change

Group net sales – reported -20% -1%

Group net sales - constant currency1 -19% 0%

Devices & Services net sales – reported -20% 5%

Devices & Services net sales - constant currency1 -20% 6%

Nokia Siemens Networks net sales – reported -21% -14%

Nokia Siemens Networks net sales - constant currency1 -20% -14%