DJ DGAP-UK-Regulatory: Nokia Q4 2011 net sales EUR 10.0 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.29) Nokia 2011 net sales EUR 38.7 billion, non-IFRS EPS EUR 0.29 (reported EPS EUR -0.31)
Nokia / Miscellaneous
26.01.2012 12:09
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The issuer is solely responsible for the content of this announcement.
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- Accelerating investment in Lumia range of smartphones, having sold well over
1 million Lumia devices to date
- Solid Q4 performance in mobile phones
- Strong balance sheet, with net cash and other liquid assets of EUR 5.6
billion at end of Q4 2011
- Nokia Board of Directors will propose a dividend of EUR 0.20 per share for
2011 (EUR 0.40 per share for 2010)
Nokia Corporation
Interim report
January 26, 2012 at 13.00 (CET+1)
This is a summary of the fourth quarter and annual results 2011 interim report
published today. The complete fourth quarter and annual results 2011 interim
report with tables is available at
http://www.results.nokia.com/results/Nokia_results2011Q4e.pdf. Investors should
not rely on summaries of our interim reports only, but should review the
complete interim reports with tables.
Reported and Non-IFRS Reported and Non-IFRS
fourth quarter 2011 results1 full year 2011 results1
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EUR million Q4/201 Q4/201 YoY Q3/201 QoQ 2011 2010 YoY
1 0 Change 1 Change Change
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Nokia
Net sales 10 005 12 651 -21% 8 980 11% 38 659 42 446 -9%
Operating -954 884 -71 -1 073 2 070
profit
Operating 478 1090 -56% 252 90% 1 825 3 204 -43%
profit
(non-IFRS)
EPS, EUR -0.29 0.20 -0.02 -0.31 0.50
diluted
EPS, EUR 0.06 0.22 -73% 0.03 100% 0.29 0.61 -52%
diluted
(non-IFRS)2
Net cash from 644 2436 -74% 852 -25% 1 137 4 774 -76%
operating
activities
Net cash and 5 581 6 996 -20% 5 067 10% 5 581 6 996 -20%
other liquid
assets3
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Devices &
Services4
Net sales 5 997 8 499 -29% 5 392 11% 23 943 29 134 -18%
Smart Devices 2 747 4 396 -38% 2 194 25% 10 820 14 874 -27%
net sales
Mobile Phones 3 040 3 948 -23% 2 915 4% 11 930 13 696 -13%
net sales
Mobile device 113.5 123.7 -8% 106.6 6% 417.1 452.9 -8%
volume
(mn units)
Smart Devices 19.6 28.6 -31% 16.8 17% 77.3 103.6 -25%
volume
(mn units)
Mobile Phones 93.9 95.0 -1% 89.8 5% 339.8 349.2 -3%
volume
(mn units)
Mobile device 53 69 -23% 51 4% 57 64 -11%
ASP5
Smart Devices 140 154 -9% 131 7% 140 144 -3%
ASP5
Mobile Phones 32 42 -24% 32 0% 35 39 -10%
ASP5
Operating 203 1 082 -81% 168 22% 884 3 540 -75%
profit
Operating 292 1 025 -72% 258 13% 1 683 3 403 -51%
profit
(non-IFRS)
Operating 3.4% 12.7% 3.1% 3.7% 12.2%
margin %
Operating 4.9% 12.1% 4.8% 7.0% 11.7%
margin %
(non-IFRS)
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Location &
Commerce6
Net sales 306 265 15% 282 9% 1 091 869 25%
Operating -1 205 -148 -85 -1 526 -663
profit
Operating 29 -29 28 4% 48 -173 -
profit
(non-IFRS)
Operating 393.8% -55.8% -30.1% -139.9% -76.3%
margin %
Operating 9.5% -10.9% 9.9% 4.4% -19.9%
margin %
(non-IFRS)
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Nokia Siemens
Networks7
Net sales 3 815 3 961 -4% 3 413 12% 14 041 12 661 11%
Operating 67 1 -114 -300 -686
profit
Operating 176 145 21% 6 225 95 137%
profit
(non-IFRS)
Operating 1.8% 0.0% -3.3% -2.1% -5.4%
margin %
Operating 4.6% 3.7% 0.2% 1.6% 0.8%
margin %
(non-IFRS)
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Note 1 relating to non-IFRS results: Non-IFRS results exclude special items for
all periods. In addition, non-IFRS results exclude intangible asset
amortization, other purchase price accounting related items and inventory value
adjustments arising from i) the formation of Nokia Siemens Networks and ii) all
business acquisitions completed after June 30, 2008. More specific information
about the exclusions from the non-IFRS results may be found in our complete
interim report with tables for Q4 2011 on pages 4-5, 20-22 and 24, and pages
41-43 and 45 for the full years 2011 and 2010.
Nokia believes that these non-IFRS financial measures provide meaningful
supplemental information to both management and investors regarding Nokia's
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. A reconciliation of the non-IFRS results to
our reported results for Q4 2011 and Q4 2010 can be found in the tables on
pages 18 and 20-24 of our complete interim report with tables. A reconciliation
of our Q3 2011 non-IFRS results to our reported results can be found on pages
17 and 20-24 of our complete Q3 2011 interim report with tables which was
published on October 20, 2011. A reconciliation of our 2011 and 2010 non-IFRS
results to our reported results can be found on pages 40-45.
Note 2 relating to non-IFRS Nokia EPS: Nokia taxes continued to be unfavorably
impacted by Nokia Siemens Networks taxes as no tax benefits are recognized for
certain Nokia Siemens Networks deferred tax items. In Q4 2011, the Finnish
statutory tax rate change also had a one-quarter negative impact. If Nokia's
estimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS would
have been approximately 1.2 Euro cents higher in Q4 2011.
Note 3 relating to Nokia net cash and other liquid assets: Calculated as total
cash and other liquid assets less interest-bearing liabilities.
Note 4 relating to Devices & Services reporting structure: As of April 1, 2011,
our Devices & Services business has two operating and reportable segments -
Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses
on mass market mobile devices - as well as Devices & Services Other. Prior
period results for each quarter and the full year 2010 and Q1 2011 have been
regrouped (on an unaudited basis) for comparability purposes according to the
new reporting format that became effective on April 1, 2011.
Devices & Services prior period results for each quarter and the full year 2010
and Q1, Q2 and Q3 2011 have also been recasted (on an unaudited basis) for
comparability purposes according to the new reporting format that became
effective on October 1, 2011. See Note 6 below relating to Location & Commerce.
Note 5 relating to average selling prices (ASP): Mobile device ASP represents
total Devices & Services net sales (Smart Devices net sales, Mobile Phones net
sales, and Devices & Services Other net sales) divided by total Devices &
Services volumes. Devices & Services Other net sales includes net sales of
Nokia's luxury phone business Vertu and spare parts, as well as intellectual
property royalty income. Smart Devices ASP represents Smart Devices net sales
divided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phones
net sales divided by Mobile Phones volumes.
Note 6 relating to Location & Commerce: On June 22, 2011, we announced plans to
create a new Location & Commerce business which combines NAVTEQ and Nokia's
social location services operations from Devices & Services, which focuses on
location based services and local commerce. The Location & Commerce business is
an operating and reportable segment beginning October 1, 2011. From the third
quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate
reportable segment of Nokia. Prior period results for each quarter and the full
year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for
comparability purposes according to the new reporting format that became
effective on October 1, 2011. Recasted reported financial information can be
accessed at: http://www.nokia.com/investors.
Note 7 relating to Nokia Siemens Networks: Nokia Siemens Networks completed the
acquisition of Motorola Solutions' networks assets on April 30, 2011.
Accordingly, the fourth quarter and full year 2011 results of Nokia Siemens
Networks are not directly comparable to their prior-year comparatives.
STEPHEN ELOP, NOKIA CEO:
The fourth quarter of 2011 marked a significant step in Nokia's transformation.
Most notably, in Q4 we introduced new mobile phones and smartphones, which
resulted from the strategy shift in our Devices & Services business.
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Overall, we are pleased with the performance of our mobile phones business, which benefited in Q4 from sequential double-digit percentage growth in our dual SIM business, with particular strength in India, Middle East and Africa and South East Asia. In October, we introduced the Asha 200, 201, 300 and 303, which brought new mobile phones into 76 markets around the world. We are building on this foundation with R&D investments as we continue our journey to connect the next billion to the Internet. Also in October, just six months after signing an agreement with Microsoft, we introduced our first two devices based on the Windows Phones platform - the Nokia Lumia 800 and the Nokia Lumia 710. We brought the new devices to market ahead of schedule, demonstrating that we are changing the clock speed of Nokia. To date, we have introduced Lumia to consumers in Europe, Hong Kong, India, Russia, Singapore, South Korea and Taiwan. We have also started our important re-entry into the North American market. Earlier this month, T-Mobile started selling the Nokia Lumia 710 as a lead device. We also announced the new Nokia Lumia 900 with AT&T, and immediately received a number of industry awards. The Nokia Lumia 900 is our third Lumia device, our first LTE device designed specifically for the North American market, and AT&T is positioning the Lumia 900 as a lead LTE device. In the war of ecosystems, clearly there are some strong contenders already on the field. And with Lumia, we have demonstrated that we belong on the field. Our specific intent has been to establish a beachhead in this war of ecosystems, and country by country that is what we are now accomplishing. To date we have sold well over 1 million Lumia devices. From this beachhead of more than 1 million Lumia devices, you will see us push forward with the sales, marketing and successive product introductions necessary to be successful. We also plan to bring the Lumia series to additional markets including China and Latin America in the first half of 2012. And, while we progressed in the right direction in 2011, we still have a tremendous amount to accomplish in 2012, and thus, it is my assessment that we are in the heart of our transition. Specifically, changing market conditions are putting increased pressure on Symbian. In certain markets, there has been an acceleration of the anticipated trend towards lower-priced smartphones with specifications that are different from Symbian's traditional strengths. As a result of the changing market conditions, combined with our increased focus on Lumia, we now believe that we will sell fewer Symbian devices than we previously anticipated. During Q4, we also formed the Location & Commerce business to drive value from our leading mapping and location-based services platform. We conducted annual impairment testing in Q4 in the context of our new structure and plans for the future, and valued the Location & Commerce business at EUR 4.1 billion, resulting in an impairment of goodwill of EUR 1.1 billion. The Location & Commerce business is an important asset that is bringing differentiating location-based services to Nokia, the Windows Phone ecosystem, and other Microsoft products such as Bing. We believe this is the leading location-based services platform with an opportunity to become tremendously powerful as computing goes more mobile, and location increasingly becomes a critical organizing dimension for a person's experiences. In summary, with a strong balance sheet, our performance in mobile phones and the new excitement around Lumia, we are confident that we are on the right track to build long-term value. NOKIA OUTLOOK - Nokia expects its non-IFRS Devices & Services operating margin in the first quarter 2012 to be around breakeven, ranging either above or below by approximately 2 percentage points. This outlook is based on our expectations regarding a number of factors, including: - competitive industry dynamics, particularly impacting our Smart Devices business unit; - a greater-than-normal seasonal decline in Devices & Services net sales; - timing, ramp-up, and consumer demand related to our new products; - the macroeconomic environment. - Nokia continues to target to reduce Devices & Services non-IFRS operating expenses by more than EUR 1 billion for the full year 2013, compared to the recasted full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.35 billion. - Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS operating margin to be negative in the earlier part of 2012. In the first quarter of 2012, Nokia Siemens Networks expects substantial charges related to its previously announced global restructuring program aimed at maintaining long-term competitiveness and improving profitability. Due to the nature of the restructuring program as well as prevailing uncertain macroeconomic conditions, the timing of improvements in profitability is uncertain and therefore Nokia Siemens Networks' non-IFRS operating margin in 2012 is expected to be volatile. Thus, Nokia and Nokia Siemens Networks do not believe it is appropriate to give specific full year or quarterly guidance for Nokia Siemens Networks during 2012. - Nokia Siemens Networks continues to target to reduce its non-IFRS annualized operating expenses and production overheads by EUR 1 billion by the end of 2013, compared to the end of 2011. LONGER TERM OUTLOOK AND TARGETS Nokia believes it is currently not appropriate to provide annual targets for 2012 mainly for the following reasons: - 2012 is expected to continue to be a year of transition, during which our Devices & Services business will be subject to risks and uncertainties. Those risks and uncertainties include, among others, consumer demand for our Symbian devices; the timing, ramp-up, and consumer demand related to new products, including our Lumia devices; and further pressure on margins as competitors endeavor to capitalize on our platform and product transition; - Nokia Siemens Networks has announced a new strategy which focuses its business on mobile broadband and services, and has launched an extensive global restructuring program. - Additionally, the macroeconomic environment is making it increasingly difficult to estimate our outlook and provide reliable targets. Longer-term, Nokia targets: - Devices & Services net sales to grow faster than the market. - Devices & Services non-IFRS operating margin to be 10% or more. Longer-term, Nokia and Nokia Siemens Networks target: - Nokia Siemens Networks' non-IFRS operating margin to be between 5% and 10%. FOURTH QUARTER 2011 FINANCIAL HIGHLIGHTS The non-IFRS results exclude: Q4 2011 -- EUR 1 432 million (net) consisting of: - EUR 1 090 million partial impairment of goodwill in Location & Commerce - EUR 25 million restructuring charge in Location & Commerce - EUR 119 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ - EUR 100 million restructuring charge and EUR 36 million associated impairments in Devices & Services - EUR 2 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services - EUR 86 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions' networks assets - EUR 23 million restructuring charge and other associated items in Nokia Siemens Networks - EUR 49 million benefit from a cartel claim settlement Q4 2010 -- EUR 206 million (net) consisting of: - EUR 28 million restructuring charge and other associated items in Nokia Siemens Networks - EUR 85 million restructuring charges in Devices & Services - EUR 147 million gain on sale of wireless modem business in Devices & Services - EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks - EUR 119 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ - EUR 5 million of intangible assets amortization and other purchase price related items arising from the acquisition of OZ Communications, Novarra and Motally in Devices & Services Q4 2010 taxes -- EUR 52 million non-cash tax benefit from reassessment of recoverability deferred tax assets in Nokia Siemens Networks Q3 2011 -- EUR 323 million (net) consisting of: - EUR 26 million restructuring charge and other associated items in Nokia Siemens Networks - EUR 59 million restructuring charge and EUR 54 million associated impairments in Devices & Services - EUR 24 million positive Accenture deal closing adjustment in Devices & Services - EUR 94 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 113 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ - EUR 1 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i) the formation of Nokia Siemens Networks and ii) all business acquisitions completed after June 30, 2008. Nokia Group Nokia has three businesses that reflect its new operational structure implemented during 2011 - Devices & Services, Location & Commerce and Nokia Siemens Networks. As of April 1, 2011, Devices & Services has two operating
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and reportable segments - Smart Devices, which focuses on smartphones, and
Mobile Phones, which focuses on mass market mobile devices - as well as Devices
& Services Other. As of October 1, 2011, a new operating and reportable
segment, Location & Commerce, was formed by combining the NAVTEQ business with
Nokia's social location services operations, which focuses on location based
services and local commerce. From the third quarter of 2008 until the end of
the third quarter of 2011, NAVTEQ was a separate reportable segment of Nokia.
Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3
2011 have been recasted (on an unaudited basis) for comparability purposes
according to the new reporting format. Recasted reported financial information
can be accessed at: http://www.nokia.com/investors
The following chart sets out 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 2011 NET SALES,
REPORTED & CONSTANT CURRENCY1
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YoY Change QoQ Change
=-----------------------------------------------------------
=-----------------------------------------------------------
Group net sales - reported -21% 11%
Group net sales - constant currency1 -19% 11%
Devices & Services -29% 11%
net sales - reported
Devices & Services -26% 12%
net sales - constant currency1
Nokia Siemens Networks -4% 12%
net sales - reported
Nokia Siemens Networks -5% 10%
net sales - constant currency1
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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.
The following chart sets out Nokia Group's cash flow for the periods indicated
and financial position at the end of the periods indicated, as well as the
year-on-year and sequential growth rates.
NOKIA GROUP CASH FLOW
AND FINANCIAL POSITION
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EUR million Q4/2011 Q4/2010 YoY Change Q3/2011 QoQ Change
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Net cash from 634 2 436 -74% 852 -26%
operating activities
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Total cash and 10 902 12 275 -11% 10 809 1%
other liquid assets
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Net cash and 5 581 6 996 -20% 5 067 10%
other liquid assets1
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Note 1: Total cash and other liquid assets minus interest-bearing liabilities.
Year-on-year, net cash and other liquid assets decreased by EUR 1.4 billion
primarily due to payment of the dividend, cash outflows related to the
acquisition of Motorola Solutions' networks assets, and capital expenditures,
partially offset by positive overall net cash from operating activities and a
EUR 500 million equity investment in Nokia Siemens Networks by Siemens.
Sequentially, net cash and other liquid assets increased by EUR 514 million
primarily due to underlying profitability, net working capital improvements in
Nokia Siemens Networks, cash inflows related to IPR, positive foreign exchange
impact on our cash balances, and the receipt of a platform support payment from
Microsoft, partially offset by net cash outflows related to taxes, capital
expenditures, and hedging activities.
Our broad strategic agreement with Microsoft includes platform support payments
from Microsoft to us as well as software royalty payments from us to Microsoft.
In the fourth quarter 2011, we received the first quarterly platform support
payment of USD 250 million (EUR 180 million). We have a competitive software
royalty structure, which includes minimum software royalty commitments. Over
the life of the agreement, both the platform support payments and the minimum
software royalty commitments are expected to measure in the billions of US
Dollars.
Devices & Services
As of April 1, 2011, our Devices & Services business has two operating and
reportable segments - Smart Devices, which focuses on smartphones, and Mobile
Phones, which focuses on mass market mobile devices - as well as Devices &
Services Other. Additionally, in 2011 we announced plans to create a new
Location & Commerce business which combines NAVTEQ and Nokia's social location
services operations from Devices & Services. The Location & Commerce business
is an operating and reportable segment beginning October 1, 2011. Prior period
results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have
been recasted (on an unaudited basis) for comparability purposes according to
the new reporting format. Recasted reported financial information can be
accessed at: http://www.nokia.com/investors
The following chart sets out a summary of the results for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates.
DEVICES & SERVICES
RESULTS SUMMARY
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Q4/2011 Q4/2010 YoY Q3/2011 QoQ
Change Change
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Net sales (EUR million)1 5 997 8 499 -29% 5 392 11%
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Mobile device volume 113.5 123.7 -8% 106.6 6%
(million units)
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Mobile device ASP (EUR) 53 69 -23% 51 4%
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Non-IFRS gross margin (%) 25.8% 29.0% 25.7%
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Non-IFRS operating 1 262 1 431 -12% 1 126 12%
expenses (EUR million)
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Non-IFRS operating 4.9% 12.1% 4.8%
margin (%)
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Note 1: Includes IPR royalty income recognized in Devices & Services Other net
sales.
Net Sales
The year-on-year decline and sequential increase in our Devices & Services net
sales are discussed below in our operating analysis of our Smart Devices and
Mobile Phones business units. No non-recurring IPR royalty income was
recognized in the fourth quarter 2011, compared with approximately EUR 70
million recognized in the third quarter 2011 and approximately EUR 30 million
recognized in the fourth quarter 2010 in Devices & Services Other which
benefited our overall Devices & Services results in those quarters. At
constant currency, Devices & Services net sales would have decreased 26%
year-on-year and increased 12% sequentially.
The following chart sets out the net sales for our Devices & Services business
for the periods indicated, as well as the year-on-year and sequential growth
rates, by geographic area. The IPR royalty income described in the paragraph
above has been allocated to the geographic areas contained in this chart.
DEVICES & SERVICES NET SALES
BY GEOGRAPHIC AREA
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EUR million Q4/2011 Q4/2010 YoY Q3/2011 QoQ
Change Change
=--------------------------------------------------------------
=--------------------------------------------------------------
Europe 1 922 3 088 -38% 1 394 38%
Middle East & Africa 1 065 1 177 -10% 957 11%
Greater China 1 008 1 682 -40% 1 240 -19%
Asia-Pacific 1 297 1 603 -19% 1 197 8%
North America 53 233 -77% 73 -27%
Latin America 652 715 -9% 531 23%
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Total 5 997 8 499 -29% 5 392 11%
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Volume
The following chart sets out the mobile device volumes for our Devices &
Services business for the periods indicated, as well as the year-on-year and
sequential growth rates, by geographic area.
DEVICES & SERVICES MOBILE DEVICE
VOLUMES BY GEOGRAPHIC AREA
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million units Q4/2011 Q4/2010 YoY Change Q3/2011 QoQ Change
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Europe 25.3 33.5 -24% 20.7 22%
Middle East & Africa 25.9 22.2 17% 26.0 0%
Greater China 14.7 21.9 -33% 15.9 -8%
Asia-Pacific 34.7 31.3 11% 32.4 7%
North America 0.5 2.6 -81% 0.7 -29%
Latin America 12.4 12.2 2% 10.9 14%
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Total 113.5 123.7 -8% 106.6 6%
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On a year-on-year basis, the decline in our total Devices & Services volumes in
the fourth quarter 2011 was driven by significantly lower Smart Devices
volumes. Mobile Phones volumes were approximately flat year-on-year.
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The sequential increase in our total Devices & Services volumes in the fourth
quarter 2011 was driven by higher Mobile Phones and Smart Device volumes
supported by an increased seasonal demand for our devices.
During the fourth quarter 2011, our overall channel inventory increased on a
sequential basis. We ended the fourth quarter 2011 with our sales channel
inventories within our normal range of 4-6 weeks.
Average Selling Price
On a year-on-year basis, the overall decrease in our Devices & Services ASP in
the fourth quarter 2011 was driven primarily by the lower ASP in Mobile Phones
and, to a lesser extent, Smart Devices, a higher proportion of Mobile Phones
sales, the negative impact from foreign currency hedging and the appreciation
of the Euro against certain currencies, partially offset by a positive impact
from lower deferral of revenue related to services sold in combination with our
devices.
On a sequential basis, the overall increase in our Devices & Services ASP in
the fourth quarter 2011 was driven primarily by a product mix shift towards
Smart Devices, the depreciation of the Euro against certain currencies and a
lower deferral of revenue related to services sold in combination with our
devices, partially offset by a negative impact from foreign currency hedging,
pricing pressure and lower IPR royalty income as the third quarter 2011 ASP
benefited from the recognition of non-recurring IPR royalty income discussed
above.
Gross Margin
On a year-on-year basis, the decline in our Devices & Services non-IFRS gross
margin in the fourth quarter 2011 was driven by gross margin declines in both
Smart Devices and Mobile Phones, partially offset by higher IPR royalty income.
On a sequential basis, the slight increase in our Devices & Services non-IFRS
gross margin in the fourth quarter 2011 was driven primarily by gross margin
improvements in Mobile Phones, almost entirely offset by the gross margin
decline in Smart Devices and lower IPR royalty income.
Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 16%
year-on-year due to declines in Smart Devices and Devices & Services Other
research and development expenses, partially offset by a year-on-year increase
in Mobile Phones research and development expenses. The decreases in Smart
Devices and Devices & Services Other research and development expenses were due
primarily to a focus on priority projects and cost controls. The increase in
Mobile Phones research and development expenses was primarily due to
investments in product development to bring new innovations to the market in
support of our strategy to bring internet to the next billion, partially offset
by a focus on priority projects and cost controls.
On a sequential basis, Devices & Services non-IFRS research and development
expenses increased by 12% primarily due to an increase in Mobile Phones
research and development expenses as we invested to support our Internet for
the next billion strategy.
Devices & Services non-IFRS sales and marketing expenses decreased 5%
year-on-year, primarily due to lower sales, and increased 19% sequentially. The
sequential increase was primarily driven by higher marketing expenses,
particularly relating to our new smartphone launches in Smart Devices.
Devices & Services non-IFRS administrative and general expenses decreased 28%
year-on-year and 22% sequentially. In the fourth quarter 2011, Devices &
Services non-IFRS other income and expense had a slight positive year-on-year
and sequential impact on profitability. Reported other income and expense was
significantly adversely impacted in the fourth quarter 2011 primarily as a
result of restructuring-related expenses discussed below, which were recognized
in Devices & Services Other, partially offset by a benefit related to a cartel
claim settlement.
Cost Reduction Activities and Planned Operational Adjustments
We are continuing to target to reduce our Devices & Services non-IFRS operating
expenses by more than EUR 1 billion for the full year 2013, compared to the
recasted full year 2010 Devices & Services non-IFRS operating expenses of EUR
5.35 billion. This reduction is expected to come from a variety of different
sources and initiatives, including a planned reduction in the number of
employees and normal personnel attrition, a reduction in the use of outsourced
professionals, reductions in facility costs, and various improvements in
efficiencies.
During the fourth quarter 2011, Devices & Services recognized net charges of
EUR 136 million related to restructuring activities, which included
restructuring charges and associated impairments. As of the end of the fourth
quarter 2011, we had recognized cumulative charges of EUR 797 million related
to restructuring activities in 2011. While the total extent of the
restructuring activities is still to be determined, we currently anticipate
cumulative charges in Devices & Services of around EUR 900 million before the
end of 2012. We also believe total cash outflows related to our Devices &
Services restructuring activities will be below the level of the cumulative
charges related to these restructuring activities.
Smart Devices
The following chart sets out a summary of the results for our Smart Devices
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
SMART DEVICES
RESULTS SUMMARY
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Q4/2011 Q4/2010 YoY Change Q3/2011 QoQ Change
=---------------------------------------------------------------------------
Net sales (EUR millions)1 2 747 4 396 -38% 2 194 25%
=---------------------------------------------------------------------------
Smart Devices volume 19.6 28.6 -31% 16.8 17%
(million units)
=---------------------------------------------------------------------------
Smart Devices ASP (EUR) 140 154 -9% 131 7%
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Gross margin (%) 19.9% 28.7% 20.7%
=---------------------------------------------------------------------------
Operating expenses 732 899 -19% 656 12%
(EUR millions)
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Contribution margin (%) -7.0% 11.6% -8.7%
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Note 1: Does not include IPR royalty income. IPR royalty income is recognized
in Devices & Services Other net sales.
Net Sales
The year-on-year decline in our Smart Devices net sales in the fourth quarter
2011 was primarily due to significantly lower volumes. On a sequential basis,
the increase in our Smart Devices net sales in the fourth quarter 2011 was due
to the higher volumes and ASP.
Volume
The year-on-year decline in our Smart Devices volumes in the fourth quarter
2011 continued to be driven by the strong momentum of competing smartphone
platforms relative to our Symbian devices in all regions, particularly in
Europe.
On a sequential basis, the increase in our Smart Devices volumes in the fourth
quarter 2011 was primarily driven by the broader availability throughout the
quarter of the Nokia N9 and the shipments during the quarter of the Nokia Lumia
800 and 710 in selected markets, as well as increased seasonal demand for our
devices.
Average Selling Price
The year-on-year decline in our Smart Devices ASP in the fourth quarter 2011
was driven primarily by a higher proportion of sales of lower priced Symbian
devices and price erosion due to the competitive environment, as well as the
negative impact from foreign currency hedging. Our ASP in the fourth quarter
2011 benefited from the sales of the higher priced Nokia N9 and Nokia Lumia
devices and a lower deferral of revenue related to services sold in combination
with our devices.
Sequentially, the increase in our Smart Devices ASP in the fourth quarter 2011
was driven primarily by a positive mix shift towards our newer higher priced
smartphones, the depreciation of the Euro against certain currencies and the
lower deferral of revenue related to services sold in combination with our
devices, partially offset by price erosion and the negative impact from foreign
currency hedging.
Gross Margin
The year-on-year decline in our Smart Devices gross margin in the fourth
quarter 2011 was driven primarily by greater price erosion than cost erosion
due to the competitive environment and the Symbian related allowances discussed
below, partially offset by the lower deferral of revenue related to services
sold in combination with our devices and the positive impact from foreign
currency hedging.
On a sequential basis, the decline in our Smart Devices gross margin in the
fourth quarter 2011 was driven primarily by the Symbian related allowances
discussed below, greater price erosion than cost erosion, and the negative
impact from foreign currency hedging, which partially offset the positive
impact from the lower deferral of revenue related to services sold in
combination with our devices and lower fixed manufacturing costs.
Following the announcement of our strategic partnership with Microsoft in
February 2011, our strategy included the expectation to sell approximately 150
million more Symbian devices in the years to come. However, changing market
conditions are putting increased pressure on Symbian. In certain markets, there
has been an acceleration of the anticipated trend towards lower-priced
smartphones with specifications that are different from Symbian's traditional
strengths, which has contributed to a faster decline of our Symbian volumes
than we anticipated. We expect this trend to continue in 2012. To maximize the
value of the Symbian asset going forward, we expect to continue shipping
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Symbian devices in specific regions and distribution channels, as well as to
continue to provide software support to our Symbian customers through 2016. As
a result of the changing market conditions, combined with our increased focus
on Lumia, we now believe we will sell fewer Symbian devices than previously
anticipated. Thus, in the fourth quarter 2011, we recognized allowances for
excess component inventory and future purchase commitments related to Symbian.
Mobile Phones
The following chart sets out a summary of the results for our Mobile Phones
business unit for the periods indicated, as well as the year-on-year and
sequential growth rates.
MOBILE PHONES
RESULTS SUMMARY
=-------------------------------------------------------------------------------
-
Q4/2011 Q4/2010 YoY Q3/2011 QoQ Change
Change
=-------------------------------------------------------------------------------
Net sales (EUR millions)1 3 040 3 948 -23% 2 915 4%
=-------------------------------------------------------------------------------
Mobile Phones volume (million 93.9 95.0 -1% 89.8 5%
units)
=-------------------------------------------------------------------------------
Mobile Phones ASP (EUR) 32 42 -24% 32 0%
=-------------------------------------------------------------------------------
Gross margin (%) 27.7% 28.5% 23.6%
=-------------------------------------------------------------------------------
Operating expenses (EUR 429 410 5% 404 6%
million)
=-------------------------------------------------------------------------------
Contribution margin (%) 13.5% 18.1% 10.1%
=-------------------------------------------------------------------------------
Note 1: Does not include IPR royalty income. IPR royalty income is recognized
in Devices & Services Other net sales.
Net Sales
On a year-on-year basis, our Mobile Phones net sales in the fourth quarter 2011
decreased due to the lower ASP. On a sequential basis, the increase in our
Mobile Phones net sales in the fourth quarter 2011 was due to higher volumes.
Volume
Mobile Phones volumes in the fourth quarter 2011 were approximately flat
year-on-year. This was primarily driven by our reduced portfolio of higher
priced mobile phones compared to the fourth quarter 2010, almost entirely
offset by a portfolio renewal, such as the broad availability of dual SIM
devices, and higher volumes at lower price points in the fourth quarter 2011.
On a sequential basis, the increase in our Mobile Phones volumes in the fourth
quarter 2011 was primarily driven by the broader availability of our dual SIM
devices as well as the ongoing product renewal across the mobile phones
portfolio, and to a lesser extent from higher seasonal demand for our mobile
products.
Average Selling Price
The year-on-year decline in our Mobile Phones ASP in the fourth quarter 2011
was primarily driven by an increased proportion of sales of lower priced
devices, the negative impact from foreign currency hedging and the appreciation
of the Euro against certain currencies.
On a sequential basis, our Mobile Phones ASP was unchanged with relatively
stable prices across the portfolio. The negative impact from foreign currency
hedging in the fourth quarter 2011 was offset by the deprecation of the Euro
compared to certain currencies and the lower deferral of revenue related to
services sold in combination with our devices.
Gross Margin
The year-on-year decline in our Mobile Phones gross margin in the fourth
quarter 2011 was primarily due to greater price erosion than cost erosion and
the appreciation of the Euro against certain currencies partially offset by a
positive mix shift towards higher margin mobile phones, the positive impact
from foreign currency hedging, and the lower deferral of revenue related to
services sold in combination with our devices.
The sequential increase in our Mobile Phones gross margin in the fourth quarter
2011 primarily reflected the positive impact from foreign currency hedging,
greater cost erosion than price erosion, the lower deferral of revenue related
to services sold in combination with our devices, lower warranty costs and more
efficient utilization of manufacturing capacity, partially offset by the
depreciation of the Euro against certain currencies.
Location & Commerce
On June 22, 2011, we announced plans to create a new Location & Commerce
business which combines NAVTEQ and Nokia's social location services operations
from Devices & Services. The Location & Commerce business is an operating and
reportable segment beginning October 1, 2011. In addition to a broad portfolio
of products and services for the wider internet ecosystem, the Location &
Commerce business is creating integrated social location offerings in support
of Nokia's strategic goal in smartphones, including the Nokia experience with
Windows Phone, as well as support for bringing the internet to the next
billion. From the third quarter 2008 until the end of the third quarter 2011,
NAVTEQ was a separate reportable segment of Nokia. Prior period results for
each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted
(on an unaudited basis) for comparability purposes according to the new
reporting format that became effective on October 1, 2011. Recasted reported
financial information can be accessed at: http://www.nokia.com/investors.
The following chart sets out a summary of the results for Location & Commerce
for the periods indicated, as well as the year-on-year and sequential growth
rates.
LOCATION & COMMERCE
RESULTS SUMMARY
=----------------------------------------------------------------------------
Q4/2011 Q4/2010 YoY Change Q3/2011 QoQ Change
=---------------------------------------------------------------------------
Net sales (EUR millions) 306 265 15% 282 9%
=---------------------------------------------------------------------------
Non-IFRS gross margin (%) 77.8% 82.6% 81.6%
=---------------------------------------------------------------------------
Non-IFRS operating 206 246 -16% 201 2%
expenses (EUR millions)
=---------------------------------------------------------------------------
Non-IFRS operating 9.5% -10.9% 9.9%
margin (%)
=---------------------------------------------------------------------------
Net Sales
The year-on-year increase in Location & Commerce net sales in the fourth
quarter 2011 was primarily driven by higher recognition of deferred revenue
related to sales of map platform licenses to Smart Devices and, to a lesser
extent, by higher sales of map content licenses to vehicle customers due to
higher consumer uptake of vehicle navigation systems, partially offset by lower
sales to portable navigation devices (PND) customers.
Sequentially, the increase in Location & Commerce net sales in the fourth
quarter 2011 was primarily due to seasonally strong sales of map content
licenses in the vehicle segment due to higher consumer uptake of vehicle
navigation systems and increased sales of updates.
Gross Margin
On a sequential basis, the decline in Location & Commerce non-IFRS gross margin
in the fourth quarter 2011 was primarily due to an increased proportion of
lower gross margin sales and a shift of research and development operating
expenses to cost of sales as a result of the divestiture of the media
advertising business.
On a year-on-year basis, the decline in Location & Commerce non-IFRS gross
margin in the fourth quarter 2011 was primarily due to a shift of research and
development operating expenses to cost of sales as a result of the divestiture
of the media advertising business.
Operating Expenses
Location & Commerce non-IFRS research and development expenses decreased 16%
year-on-year reflecting a shift in expenses from research and development to
costs of sales related to the divestiture of the media advertising business.
Location & Commerce non-IFRS research and development expenses increased 1%
sequentially primarily driven by the timing of projects related to product
development.
Location & Commerce non-IFRS sales and marketing expenses decreased 22%
year-on-year primarily driven by lower spending on product marketing. Location
& Commerce non-IFRS sales and marketing expenses increased 6% sequentially,
primarily driven by seasonal increases in marketing expenses related to map
update marketing campaigns.
Location & Commerce non-IFRS administrative and general expenses decreased 5%
year-on-year primarily driven by a focus on cost controls. Location & Commerce
non-IFRS administrative and general expenses increased 13 % sequentially
primarily driven by increased depreciation related to the closure of offices.
In the fourth quarter 2011, we conducted our annual impairment testing to
assess if events or changes in circumstances indicated that the carrying amount
of our goodwill may not be recoverable. As a result, we recorded a charge to
operating profit of EUR 1 090 million for the impairment of goodwill in our
Location & Commerce business. The impairment charge is based on our estimate
that the recoverable amount of Location & Commerce is EUR 4.1 billion. After
the impairment charge, the carrying amount of goodwill for Location & Commerce
is
EUR 3.3 billion. The impairment negatively impacted our reported EPS by EUR
0.29.
The impairment charge is the result of an evaluation of the projected financial
performance of our Location & Commerce business. This takes into consideration
the market dynamics in digital map data and related location-based content
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markets, including our estimate of the market moving long-term from fee-based
towards advertising-based models especially in some more mature markets. It
also reflects recently announced results and related competitive factors in the
local search and advertising market resulting in lower estimated growth
prospects from our location-based assets integrated with different advertising
platforms. After consideration of all relevant factors, we reduced the net
sales projections for Location & Commerce which, in turn, reduced projected
profitability and cash flows.
The Location & Commerce business is an important asset that is bringing
differentiating location-based services to Nokia, the Windows Phone ecosystem,
and other Microsoft products such as Bing. We believe this is the leading
location-based services platform with an opportunity to become tremendously
powerful as computing goes more mobile.
Nokia Siemens Networks
Nokia Siemens Networks completed the acquisition of Motorola Solutions'
networks assets on April 30, 2011. Accordingly, the results of Nokia Siemens
Networks for the fourth quarter 2011 are not directly comparable to its results
for the fourth quarter 2010.
The following chart sets out a summary of the results for Nokia Siemens
Networks for the periods indicated, as well as the year-on-year and sequential
growth rates.
NOKIA SIEMENS NETWORKS
RESULTS SUMMARY
=--------------------------------------------------------------------
Q4/2011 Q4/2010 YoY Q3/2011 QoQ
Change Change
=-------------------------------------------------------------------
Net sales (EUR million) 3 815 3 961 -4% 3 413 12%
=-------------------------------------------------------------------
Non-IFRS gross margin (%) 29.2% 26.4% 26.8%
=-------------------------------------------------------------------
Non-IFRS operating 943 881 7% 936 1%
expenses (EUR million)
=-------------------------------------------------------------------
Non-IFRS operating 4.6% 3.7% 0.2%
margin (%)
=-------------------------------------------------------------------
Net Sales
The following chart sets out Nokia Siemens Networks net sales for the periods
indicated, as well as the year-on-year and sequential growth rates, by
geographic area.
NOKIA SIEMENS NETWORKS
NET SALES BY GEOGRAPHIC AREA
=---------------------------------------------------------------
EUR millions Q4/2011 Q4/2010 YoY Q3/2011 QoQ
Change Change
=--------------------------------------------------------------
=--------------------------------------------------------------
Europe 1 272 1 357 -6% 1 074 18%
Middle East & Africa 394 423 -7% 301 31%
Greater China 438 508 -14% 302 45%
Asia-Pacific 909 978 -7% 978 -7%
North America 293 226 30% 304 -4%
Latin America 509 469 9% 454 12%
=--------------------------------------------------------------
Total 3 815 3 961 -4% 3 413 12%
=--------------------------------------------------------------
The year-on-year decrease in Nokia Siemens Networks' net sales in the fourth
quarter 2011 was driven primarily by a decline in sales of infrastructure
equipment, which more than offset the contribution from the acquired Motorola
Solutions networks assets and a slight increase in sales of services. Excluding
the acquired Motorola Solutions networks assets, net sales would have decreased
by 11% year-on-year. The sequential increase in Nokia Siemens Networks' net
sales in the fourth quarter 2011 was driven primarily by industry seasonality.
Services represented slightly over 50% of Nokia Siemens Networks' net sales in
the fourth quarter 2011.
At constant currency, Nokia Siemens Networks' net sales would have decreased 5%
year-on-year and increased 10% sequentially.
Gross Margin
The higher year-on-year and sequential Nokia Siemens Networks' non-IFRS gross
margin in the fourth quarter 2011 was primarily due to higher software sales,
improved performance in services and the contribution from the acquired
Motorola assets.
Operating Expenses
Nokia Siemens Networks' non-IFRS research and development expenses increased
10% year-on-year primarily due to the addition of research and development
operations relating to the acquired Motorola Solutions networks assets as well
as investments in strategic initiatives. On a sequential basis, Nokia Siemens
Networks' non-IFRS research and development expenses increased 2% driven by
higher seasonal revenues, largely offset by cost control initiatives and focus
on strategic investments.
Nokia Siemens Networks' non-IFRS sales and marketing expenses increased 1%
year-on-year primarily due to the addition of sales and marketing operations
relating to the acquired Motorola Solutions networks assets, partially offset
by cost control initiatives. On a sequential basis, Nokia Siemens Networks
non-IFRS sales and marketing expenses decreased 1% reflecting cost control
initiatives.
Nokia Siemens Networks' non-IFRS administrative and general expenses increased
8% year-on-year, reflecting the higher net sales and the addition of Motorola
Solutions' network assets. Sequentially, Nokia Siemens Networks non-IFRS
administrative and general expenses decreased 1%.
The year-on-year improvement in Nokia Siemens Networks' non-IFRS other income
for the fourth quarter 2011 primarily reflected lower indirect tax provisions
as well as lower allowances for doubtful accounts. Sequentially, Nokia Siemens
Networks' non-IFRS other income decreased primarily due to higher indirect tax
provisions and some write-offs.
Operating Margin
The higher year-on-year Nokia Siemens Networks non-IFRS operating margin in the
fourth quarter 2011 primarily reflected the higher gross margin, partially
offset by increased operating expenses.
The sequential increase in Nokia Siemens Networks' non-IFRS operating margin in
the fourth quarter 2011 primarily reflected the high net sales and gross
margin, as well strong operating expense control.
Strategy Update and Global Restructuring Program
On November 23, 2011, Nokia Siemens Networks announced its strategy to focus on
mobile broadband and services and the launch of an extensive global
restructuring program.
Nokia Siemens Networks plans to realign its business to focus on mobile
broadband (including optical), customer experience management and services.
Nokia Siemens Networks' services organization will further strengthen its
global delivery system. Business areas not consistent with the new strategy are
planned to be divested or managed for value. Quality and innovation will
continue to be priorities for the company, with ongoing investment in both
areas.
Nokia Siemens Networks targets to reduce its non-IFRS annualized operating
expenses and production overheads by EUR 1 billion by the end of 2013, compared
to the end of 2011. While these savings are expected to come largely from
organizational streamlining, the company will also target areas such as real
estate, information technology, product and service procurement costs, overall
general and administrative expenses, and a significant reduction of suppliers
in order to further lower costs and improve quality.
Nokia Siemens Networks plans to reduce its global workforce by approximately 17
000 by the end of 2013. These planned reductions are expected to be driven by
aligning the company's workforce with its new strategy as well as through a
range of productivity and efficiency measures. These planned measures are
expected to include elimination of the company's matrix organizational
structure, site consolidation, transfer of activities to global delivery
centers, consolidation of certain central functions, cost synergies from the
integration of Motorola's wireless assets, efficiencies in service operations,
and company-wide process simplification.
Nokia Siemens Networks will begin the process of engaging with employee
representatives in accordance with country-specific legal requirements to find
socially responsible means to address these reduction needs. More information
will be shared in impacted countries as the process proceeds. In order to
reduce the impact of the planned reductions, Nokia Siemens Networks intends to
launch locally led programs at the most affected sites to provide re-training
and re-employment support.
In the first quarter of 2012, Nokia Siemens Network expects substantial charges
related to this restructuring program.
FOURTH QUARTER 2011 OPERATING HIGHLIGHTS
Devices & Services
- Nokia announced the Nokia Lumia 800 and Nokia Lumia 710, the first two Nokia
smartphones based on Windows Phone. The Lumia range is designed to bring
consumers attractive industrial design, a fast social and Internet experience,
leading imaging capabilities as well as signature Nokia experiences optimized
for Windows Phone, such as Nokia Drive and Mix Radio. By the end of the
quarter, the Nokia Lumia 800, which features a 3.7 inch AMOLED ClearBlack
curved display, was on sale in France, Germany, Hong Kong, India, Italy, the
Netherlands, Russia, Singapore, Spain, Taiwan and the United Kingdom. Since the
end of the year, the Lumia 800 has also gone on sale in Denmark, South Korea,
Sweden and Switzerland. By the end of the fourth quarter, the Lumia 710 was on
sale in Hong Kong, India, Italy, Russia, Singapore and Taiwan. Since the end of
the year, the Lumia 710 has also gone on sale in Germany, Spain and the United
States, where it is being offered exclusively through T-Mobile.
- Since the end of the quarter, Nokia has announced the Nokia Lumia 900, the
first of Nokia's Windows Phone-based range to feature high-speed LTE
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connectivity, and which will go on sale in early 2012 in the United States exclusively through AT&T. - Nokia announced four new Series 40-based mobile phones: the Nokia Asha 300, Asha 303, Asha 200 and Asha 201. Each phone supports Nokia's aim to connect the next billion consumers with devices which offer high-quality, stylish designs, with the best access to social networks and the Internet. The Nokia Asha 300, Asha 303 and Asha 200 - also Nokia's latest dual SIM device - started shipping during the fourth quarter of 2011, while the Nokia Asha 201 is expected to begin shipping in the first quarter of 2012. - Nokia announced and started shipments of the Nokia 603, an affordable no-compromise smartphone featuring simple pairing, sharing and tag reading with NFC and running on the latest Symbian Belle platform. Nokia also launched the Nokia Luna Bluetooth Headset designed as an in-ear device with NFC pairing capabilities. - Nokia announced and began shipments of two high performance audio headsets, the Nokia Purity HD Stereo Headset by Monster and the in-ear Nokia Purity Stereo Headset by Monster. Location & Commerce - Location & Commerce made available Nokia Maps and Nokia Drive for Nokia's new Lumia smartphones. Nokia Maps is a mobile application that gives people new ways to discover and explore the world around them, as well as enabling them to search for addresses and places of interest. Nokia Drive is a dedicated in-car navigation application, equivalent to a fully-fledged PND, including voice-guided navigation in multiple languages for more than 100 countries, 2D and 3D map views and day and night modes. - Location & Commerce launched Nokia Pulse, an application that enables people to instantly share their location or other information with family, friends or any other pre-defined group. - Location & Commerce commercially released Nokia Maps 3.08 for Symbian, providing better and faster ways to find places and the best way to get there. - Location & Commerce launched Nokia Maps 3D at maps.nokia.com/3D with search, routing and sharing functionality. - Location & Commerce began powering Yahoo! Maps. - NAVTEQ was selected by Ford Motor Company to be its exclusive map supplier for the SYNC MyFord Touch navigation system. The agreement positions NAVTEQ as the map data provider for the system in North America, Latin America, the Middle East, Russia and Europe. - NAVTEQ divested its media advertising business to Matchbin, a provider of content management, advertising and local marketplace solutions for media companies. Nokia Siemens Networks - On November 22, 2011, Nokia Siemens Networks announced a new strategy, including changes to its organizational structure and a significant restructuring program aimed at making the company a leader in mobile broadband and services and improving the company's competitiveness and profitability. - As part of its new strategy, Nokia Siemens Networks is focusing on mobile broadband and services, and as such has announced a number of planned divestments, with the sale of its Microwave Transport business to DragonWave, its fixed line Broadband Access business to ADTRAN and its WiMAX unit to NewNet Communications Technologies. - Nokia Siemens Networks announced a number of mobile broadband deals, including: working with SKY in Brazil to launch 4G TD-LTE wireless networks for the first time in Latin America; developing the GSM network and expanding 3G/HSPA+ for Polkomtel in Poland; and upgrading the GSM network in the Moscow region for Russian operator Megafon, paving the way for transition to LTE. - Nokia Siemens Networks continued to conduct a number of LTE trials, including collaborating with 02 in the UK to provide LTE services on a trial basis to select users in London, working with Saudi Telecom Company to ensure network availability for the upsurge in traffic during the holy Hajj pilgrimage, and successfully completing Indonesia's first 1800 MHz LTE trial for Indosat. In Japan, Nokia Siemens Networks implemented its Circuit Switched Fallback (CSFB) technology to enable CDMA and LTE technologies to work together in KDDI's network. - In optical, Nokia Siemens Networks worked with Italy's Fastweb using Liquid Transport architecture to deploy the country's first 100G optical fiber network between Milan and Rome. The company also announced a deal to deliver the world's longest 40G link, without intermediate amplifiers, in the 354 kilometre under-sea link upgrade for PT Telkom in Indonesia. - In services, Nokia Siemens Networks opened a new Service Delivery Center in Mexico, the company's fifth worldwide, to provide network planning and optimization services for operators in Latin America, with the intention of extending these capabilities to other regions in due course. - Nokia Siemens Networks was selected by Bharti Airtel to implement a pan-Indian Customer Experience Management platform to enrich data services experience; and to deliver a superior mobile broadband experience to Bharti customers in 16 African countries. In Egypt, Nokia Siemens Networks is upgrading Vodafone's subscriber data management system, enabling the operator to offer a range of customized services. For more information, please refer to related press announcements at the following links: www.nokia.com/press and www.nokiasiemensnetworks.com/press NOKIA IN JANUARY - DECEMBER 2011 (The following discussion is of Nokia's reported results. Comparisons are given to 2010 results, unless otherwise indicated.) Effective from October 1, 2011, Nokia had three businesses that reflect its new operational structure - Devices & Services, Location & Commerce and Nokia Siemens Networks. Devices & Services includes two operating and reportable segments - Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices - as well as Devices & Services Other. As of October 1, 2011 a new operating and reportable segment, Location & Commerce, was formed by integrating the NAVTEQ business with Nokia's social location services operations, which focuses on location based services and local commerce. From the third quarter 2008 until the fourth quarter 2011, NAVTEQ was a separate reportable segment of Nokia. Prior period results for each quarter and the full year 2010 and Q1, Q2 and Q3 2011 have been recasted (on an unaudited basis) for comparability purposes according to the new reporting format. Recasted reported financial information can be accessed at: http://www.nokia.com/investors In 2011, our net sales decreased 9% to EUR 38.7 billion (EUR 42.4 billion in 2010). Net sales of Devices & Services decreased 18% to EUR 23.9 billion (EUR 29.1 billion). Net sales of Smart Devices decreased 27% to EUR 10 820 million (EUR 14 874 million). Net sales of Mobile Phones decreased 13% to EUR 11 930 million (EUR 13 696 million). Net sales of Location & Commerce increased 25% to EUR 1 091 million (EUR 869 million). Net sales of Nokia Siemens Networks increased 11% to EUR 14.0 billion (EUR 12.7 billion). In 2011, Europe accounted for 31% (34%) of our net sales, Asia-Pacific 23% (21%), Greater China 17% (18%), Middle East & Africa 14% (13%), Latin America 11% (9%) and North America 4% (5%). The 10 markets in which we generated the greatest net sales in 2011 were, in descending order of magnitude, China, India, Brazil, Russia, Germany, Japan, the United States, the United Kingdom, Italy and Spain, together representing approximately 52% of total net sales in 2011. In comparison, the 10 markets in which we generated the greatest net sales in 2010 were China, India, Germany, Russia, the United States, Brazil, the United Kingdom, Spain, Italy and Indonesia, together representing approximately 52% of total net sales in 2010. Our gross margin in 2011 was 29.3%, compared to 30.2% in 2010. Gross profit in Devices & Services decreased to EUR 6 640 million (gross profit of EUR 8 722 million), representing a gross margin of 27.7% (29.9%). Gross profit of Smart Devices decreased to EUR 2 561 million (EUR 4 587 million), representing 23.7% of Smart Devices net sales (30.8%). Gross profit of Mobile Phones decreased to EUR 3 117 million (EUR 3 830 million), representing 26.1% of Mobile Phones net sales (28.0%). Gross profit in Location & Commerce increased to EUR 877 million (gross profit of EUR 700 million), representing a gross margin of 80.4% (80.5%). Gross profit in Nokia Siemens Networks increased to EUR 3 802 million (gross profit EUR 3 395 million), representing a gross margin of 27.1% (26.8%). Our 2011 operating loss was EUR 1.1 billion, compared with an operating profit of EUR 2.1 billion in 2010. Our 2011 operating margin was -2.8% (4.9%). Our operating profit in 2011 included purchase price accounting items and other special items of net negative EUR 2.9 billion (net negative EUR 1.1 billion). Operating profit in Devices & Services decreased to EUR 884 million (operating profit of EUR 3 540 million), representing an operating margin of 3.7% (12.2%). Devices & Services operating profit in 2011 included purchase price accounting items and other special items of net negative EUR 799 million (net positive EUR 137 million).Contribution of Smart Devices decreased to EUR -411 million (EUR 1 376 million), representing -3.8% of Smart Devices net sales (9.3%). Contribution of Mobile Phones decreased to EUR 1 481 million (EUR 2 327 million), representing 12.4% of Mobile Phones net sales (17.0%). Operating loss in Location & Commerce was EUR 1 526 million (operating loss of EUR 663 million), representing an operating margin of -139.9% (-76.3%). Location & Commerce operating loss included purchase price accounting items and other special items of negative EUR 1.6 billion (net negative EUR 490 million). Operating loss in Nokia Siemens Networks was EUR 300 million (operating loss EUR 686 million), representing an operating margin of -2.1% (-5.4%). Nokia Siemens Networks operating loss in 2011 included purchase price accounting
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