Nokia Corporation Interim Report for Q2 2013 and January-June 2013

Nokia Corporation Interim Report for Q2 2013 and January-June 2013 
ESPOO, FINLAND -- (Marketwired) -- 07/18/13 -- 


 
Nokia Corporation
Interim report
July 18, 2013 at 13.00 (CET+1)

 
This is a summary of the second quarter 2013 and January - June 2013
interim report published today. The complete second quarter 2013 and
January - June 2013 interim report with tables is available at
http://www.results.nokia.com/results/Nokia_results2013Q2e.pdf.
Investors should not rely on summaries of our interim reports only,
but should review the complete interim reports with tables. 
FINANCIAL AND OPERATING HIGHLIGHTS 
Second quarter 2013 highlights: 
Nokia Group non-IFRS EPS in Q2 2013 was EUR 0.00; reported EPS was
EUR - 0.06. 
* Nokia Group achieved underlying operating profitability for the
fourth consecutive quarter, with a Q2 non-IFRS operating margin of
5.3%, driven by strong performance of Nokia Siemens Networks. 
* Nokia Group ended Q2 with a strong balance sheet and solid cash
position, with gross cash of EUR 9.5 billion and net cash of EUR 4.1
billion. Nokia Siemens Networks' contribution to Nokia Group gross
and net cash was EUR 2.5 billion and EUR 1.4 billion respectively. 
* Nokia Siemens Networks achieved underlying profitability for the
fifth consecutive quarter, with a Q2 non-IFRS operating margin of
11.8%, reflecting record non-IFRS gross margin and continued progress
relative to its strategy. This exceeded the earlier expectation for
Nokia Siemens Networks non-IFRS operating margin to be approximately
5%, plus or minus four percentage points. 
* Devices & Services achieved Q2 non-IFRS operating margin of
negative 1.2%, which was consistent with the earlier expectation for
approximately negative 2%, plus or minus four percentage points. 
* HERE achieved Q2 non-IFRS operating margin of 3.4%. This exceeded
the earlier expectation for a negative non-IFRS operating margin. 
Nokia Group net sales in Q2 2013 were EUR 5.7 billion, down 3%
quarter-on-quarter 
* Nokia Siemens Networks Q2 net sales decreased 1%
quarter-on-quarter to EUR 2.8 billion, reflecting Nokia Siemens
Networks' focused strategy. 
* Devices & Services Q2 net sales decreased 6% quarter-on-quarter
to EUR 2.7 billion. 
* Lumia Q2 volumes increased 32% quarter-on-quarter to 7.4
million units, reflecting strong demand from customers for a broadened
Lumia product range. 
* Mobile Phones Q2 volumes decreased 4% quarter-on-quarter to
53.7  million units, but demonstrated some signs of recovery in the
latter part of the quarter. 
* HERE Q2 net sales increased 8% quarter-on-quarter to EUR 0.2
billion. 
January-June 2013 highlights: 
Nokia Group net sales in January-June 2013 were EUR 11.5 billion 
* Nokia Group net sales for the first half 2013 decreased 22%
year-on-year. 
* Reported EPS for the first half 2013 was EUR -0.13, compared to
EUR -0.63 in the first half 2012. 
Commenting on the second quarter results, Stephen Elop, Nokia CEO,
said: "We're pleased to report an underlying operating profit for the
fourth consecutive quarter on a group level. We benefited from another
strong performance at Nokia Siemens Networks, which continued to
deliver well against its focused strategy. With our recent
announcement to purchase Siemens' 50% stake in Nokia Siemens
Networks, we believe we will create value for Nokia shareholders and
look forward to strengthening Nokia Siemens Networks as a more
independent entity. 
In Devices & Services, our Mobile Phones business unit started to
demonstrate some signs of recovery in the latter part of the second
quarter following a difficult start to the year. Also, towards the end
of the second quarter, we started to ship the Asha 501, which brings
a new design and user experience to the highly competitive sub-100
USD market. While we are very encouraged by the consumer response to
our innovations in this price category, our Mobile Phones business
unit is planning to take actions to focus its product offering and
improve product competitiveness. 
In our Smart Devices business unit, we continue to focus on
delivering meaningful differentiation to consumers around the world.
We are very proud of the recent creations by our Lumia team, from the
Lumia 520  - our most affordable Windows Phone 8 product which has
enjoyed a strong start in markets like China, France, India,
Thailand, the UK, the US and Vietnam - to the Lumia 1020, our star
imaging product which we unveiled to the world last week. Overall,
Lumia volumes grew to 7.4 million in the second quarter, the highest
for any quarter so far and showing increasing momentum for the
ecosystem. During the third quarter, we expect that our new Lumia
products will drive a significant part of our Smart Devices
revenue." 


 
 
SUMMARY FINANCIAL INFORMATION
 
+----------+-----------------------------------+-+------------------------+
|          |                                   | | Reported and Non-IFRS  |
|          |Reported and Non-IFRS second       | | January-June 2013      |
|          |     quarter results (1,2,3)       | | (results 1,2,3,4)      |
|----------+------+------+------+------+-------+-+--------+--------+------+
|EUR       |Q2/13 |Q2/12 |YoY   |Q1/13 |  QoQ  | |Q1-Q2/13|Q1-Q2/12| YoY  |
|million   |      |      |Change|      |Change | |        |        |Change|
+----------+------+------+------+------+-------+-+--------+--------+------+
|Nokia     |      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
| Net sales| 5 695| 7 542|  -24%| 5 852|    -3%| |  11 547|  14 896|  -22%|
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |  -115|  -824|      |  -150|       | |    -265|  -2 162|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
| profit   |      |      |      |      |       | |        |        |      |
|(non-IFRS)|   303|  -325|      |   181|    67%| |     484|    -583|      |
|          |      |      |      |      |       | |        |        |      |
| EPS, EUR |      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
|EPS, EUR  |      |      |      |      |       | |        |        |      |
|diluted   |      |      |      |      |       | |        |        |      |
|(non-IFRS)|      |      |      |      |       | |        |        |      |
|(5)       |0.00  | -0.08|      | -0.02|       | |   -0.01|   -0.16|      |
|          |      |      |      |      |       | |        |        |      |
|Net cash  |-196  |   102|      |   206|       | |      10|    -488|      |
|from      |      |      |      |      |       | |        |        |      |
|operating |      |      |      |      |       | |        |        |      |
|activities|      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
|Net cash  |4 067 |4 197 |   -3%| 4 480|    -9%| |   4 067|   4 197|   -3%|
|and       |      |      |      |      |       | |        |        |      |
|other     |      |      |      |      |       | |        |        |      |
|liquid    |      |      |      |      |       | |        |        |      |
|assets(6) |      |      |      |      |       | |        |        |      |
+----------+------+------+------+------+-------+-+--------+--------+------+
|Devices   |      |      |      |      |       | |        |        |      |
|& Services|      |      |      |      |       | |        |        |      |
| (7)      |      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
|Net sales |2 724 |4 023 |  -32%| 2 888|    -6%| |   5 612|   8 269|  -32%|
|          |      |      |      |      |       | |        |        |      |
|Smart     |      |      |      |      |       | |        |        |      |
|Devices   |      |      |      |      |       | |        |        |      |
|net sales |1 164 |1 541 |  -24%| 1 164|     0%| |   2 328|   3 245|  -28%|
|          |      |      |      |      |       | |        |        |      |
|Mobile    |      |      |      |      |       | |        |        |      |
|Phones net|      |      |      |      |       | |        |        |      |
|sales     |1 405 |2 291 |  -39%| 1 590|   -12%| |   2 995|   4 602|  -35%|
|          |      |      |      |      |       | |        |        |      |
|Mobile    |      |      |      |      |       | |        |        |      |
|device    |      |      |      |      |       | |        |        |      |
|volume    |      |      |      |      |       | |        |        |      |
|(mn units)| 61.1 |  83.7|  -27%|  61.9|    -1%| |   123.0|   166.4|  -26%|
|          |      |      |      |      |       | |        |        |      |
|Smart     |      |      |      |      |       | |        |        |      |
|Devices   |      |      |      |      |       | |        |        |      |
|volume    |      |      |      |      |       | |        |        |      |
|(mn units)|  7.4 | 10.2 |  -27%|   6.1|    21%| |    13.5|    22.1|  -39%|
|          |      |      |      |      |       | |        |        |      |
|Mobile    |      |      |      |      |       | |        |        |      |
|Phones    |      |      |      |      |       | |        |        |      |
|volume    |      |      |      |      |       | |        |        |      |
|(mn units)| 53.7 | 73.5 |  -27%|  55.8|    -4%| |   109.5|   144.3|  -24%|
|          |      |      |      |      |       | |        |        |      |
|Mobile    |      |      |      |      |       | |        |        |      |
|device    |      |      |      |      |       | |        |        |      |
|ASP(8)    |   45 |   48 |   -6%|    47|    -4%| |      46|      50|   -8%|
|          |      |      |      |      |       | |        |        |      |
|Smart     |      |      |      |      |       | |        |        |      |
|Devices   |      |      |      |      |       | |        |        |      |
|ASP(8)    |  157 |  151 |    4%|   191|   -18%| |     172|     147|   17%|
|          |      |      |      |      |       | |        |        |      |
|Mobile    |      |      |      |      |       | |        |        |      |
|Phones    |      |      |      |      |       | |        |        |      |
|ASP(8)    |   26 |   31 |  -16%|    28|    -7%| |      27|      32|  -16%|
|          |      |      |      |      |       | |        |        |      |
|Operating |      |      |      |      |       | |        |        |      |
|profit    |  -33 |  -473|      |   -42|       | |     -75|    -691|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |      |      |      |      |       | |        |        |      |
|(non-IFRS)|   -32|  -364|      |     4|       | |     -28|    -490|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  | -1.2%|-11.8%|      | -1.5%|       | |   -1.3%|   -8.4%|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  |      |      |      |      |       | |        |        |      |
|(non-IFRS)| -1.2%| -9.0%|      |  0.1%|       | |   -0.5%|   -5.9%|      |
+----------+------+------+------+------+-------+-+--------+--------+------+
|HERE(7)   |      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
| Net sales|   233|   283|  -18%|   216|     8%| |     449|     560|  -20%|
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |   -89|   -95|      |   -97|       | |    -186|    -189|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |      |      |      |      |       | |        |        |      |
|(non-IFRS)|     8|    41|  -80%|    -5|       | |       3|      77|  -96%|
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  |-38.2%|-33.6%|      |-44.9%|       | |  -41.4%|  -33.8%|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  |      |      |      |      |       | |        |        |      |
|(non-IFRS)|  3.4%| 14.5%|      | -2.3%|       | |    0.7%|   13.7%|      |
+----------+------+------+------+------+-------+-+--------+--------+------+
|Nokia     |      |      |      |      |       | |        |        |      |
|Siemens   |      |      |      |      |       | |        |        |      |
|Networks  |      |      |      |      |       | |        |        |      |
|(7)       |      |      |      |      |       | |        |        |      |
|          |      |      |      |      |       | |        |        |      |
| Net sales| 2 781| 3 343|  -17%| 2 804|    -1%| |   5 585|   6 290|  -11%|
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |     8|  -226|      |     3|   167%| |      11|  -1 230|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|profit    |      |      |      |      |       | |        |        |      |
|(non-IFRS)|   328|    28|      |   196|    67%| |     524|    -118|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  |  0.3%| -6.8%|      |  0.1%|       | |    0.2%|  -19.6%|      |
|          |      |      |      |      |       | |        |        |      |
| Operating|      |      |      |      |       | |        |        |      |
|margin %  |      |      |      |      |       | |        |        |      |
|(non-IFRS)| 11.8%|  0.8%|      |  7.0%|       | |    9.4%|   -1.9%|      |
+----------+------+------+------+------+-------+-+--------+--------+------+

 
Note 1 relating to non-IFRS (also referred to as "underlying")
results: In addition to information on our reported IFRS results, we
provide certain information on a non-IFRS, or underlying business
performance, basis. Non-IFRS results exclude all material special
items for all periods. In addition,
non-IFRS results exclude
intangible asset amortization, other purchase price accounting
related items and inventory value adjustments arising from (i) the
formation of Nokia Siemens Networks and (ii) all business
acquisitions completed after June 30, 2008.  Nokia believes that our
non-IFRS results provide meaningful supplemental information to both
management and investors regarding Nokia's underlying business
performance by excluding the above-described items that may not be
indicative of Nokia's business operating results. These non-IFRS
financial measures should not be viewed in isolation or as
substitutes to the equivalent IFRS measure(s), but should be used in
conjunction with the most directly comparable IFRS measure(s) in the
reported results. See note 2 below for information about the
exclusions from our non-IFRS results. More information, including a
reconciliation of our Q2 2013 and Q2 2012 non-IFRS results to our
reported results, can be found in our complete Q2 2013 and
January-June 2013 interim report with tables on pages 20 and 23-28. A
reconciliation of our Q1 2013 non-IFRS results to our reported
results can be found in our complete Q1 interim report with tables on
pages 19 and 21-25 published on April 18, 2013. 
Note 2 relating to non-IFRS exclusions: 
Q2 2013  - EUR 418 million (net) consisting of: 
* EUR 157 million restructuring charge and other associated items
in Nokia    Siemens Networks. 
* EUR 151 million losses related to divestments of businesses in
Nokia Siemens   Networks. 
* EUR 10 million restructuring charge in HERE 
* EUR 12 million of intangible asset amortization and other
purchase price    accounting related items arising from the
acquisition of Motorola Solutions' networks assets 
* EUR 87 million of intangible asset amortization and other
purchase price   accounting related items arising from the acquisition
of NAVTEQ 
* EUR 1 million of intangible assets amortization and other
purchase price  accounting related items arising from the acquisition
of Novarra, MetaCarta and Motally in Devices & Services 
Q1 2013  - EUR 331 million (net) consisting of: 
* EUR 129 million restructuring charge and other associated items
in Nokia Siemens Networks, including EUR 53 million of net charges
related to country  and contract exits based on the strategy that
focuses on key markets and product segments. 
* EUR 5 million restructuring charge in HERE 
* EUR 72 million restructuring charge in Devices & Services 
* EUR 27 million positive item from a cartel claim settlement in
Devices & Services 
* EUR 64 million of intangible asset amortization and other
purchase price accounting related items arising from the formation of
Nokia Siemens Networks and the acquisition of Motorola Solutions'
networks assets 
* EUR 87 million of intangible asset amortization and other
purchase price accounting related items arising from the acquisition
of NAVTEQ 
* EUR 1 million of intangible assets amortization and other
purchase price accounting related items arising from the acquisition
of Novarra, MetaCarta and Motally in Devices & Services 
Q2 2012  - EUR 499 million (net) consisting of: 
* EUR 190 million restructuring charge and other associated items
in Nokia Siemens Networks, including EUR 70 million of charges related
to country and contract exits based on new strategy that focuses on
key markets and product segments. 
* EUR 10 million restructuring charge in HERE 
* EUR 80 million restructuring charge and associated impairments of
EUR 28  million in Devices & Services 
* EUR 64 million of intangible asset amortization and other
purchase price  accounting related items arising from the formation of
Nokia Siemens Networks and the acquisition of Motorola Solutions'
networks assets 
* EUR 126 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  accounting related items arising from the acquisition
of Novarra, MetaCarta and Motally in Devices & Services 
Q2 2012 taxes  - EUR 800 million valuation allowance for deferred tax
assets impacting Nokia taxes 
Q1 2012  - EUR 1 080 million (net) consisting of: 
* EUR 772 million restructuring charge and other associated items
in Nokia Siemens Networks 
* EUR 10 million restructuring charge in HERE 
* EUR 91 million restructuring charge in Devices & Services 
* EUR 86 million of intangible asset amortization and other
purchase price accounting related items arising from the formation of
Nokia Siemens Networks and the acquisition of Motorola Solutions'
networks assets 
* EUR 120 million of intangible asset amortization and other
purchase price  accounting related items arising from the acquisition
of NAVTEQ 
* EUR 1 million of intangible assets amortization and other
purchase price  accounting related items arising from the acquisition
of Novarra, MetaCarta and Motally in Devices & Services 
Q1 2012 taxes  - EUR 135 million valuation allowance for Nokia
Siemens Networks deferred tax assets impacting Nokia taxes. 
Note 3 relating to changes to historical comparative financials due
to revised IFRS accounting standard, IAS19 Employee Benefits: The
historical comparative financials presented in the interim report
include certain changes to previously reported information. These
changes result from the retrospective application of a revised IFRS
accounting standard IAS19, Employee Benefits and mainly relate to
consolidated statements of comprehensive income and financial
position. For more information on the adjustments between the
previously reported information and the adjusted information, please
see the related disclosure starting on page 39 of the complete Q1
2013 interim report with tables published on April 18, 2013. 
Note  4 relating  to January-June  2013 results:  Further information
about the results  for the period  from January 1 to  June 30, 2013
can be  found on pages 18-19, 21, 29, 30, 32 and  34 of  the 
complete  Q2 2013  and January-June 2013 interim report with tables. 
Note 5 relating to non-IFRS Nokia EPS: Nokia taxes were unfavorably
impacted by Devices & Services taxes as no tax benefits are
recognized for certain Devices & Services deferred tax items. If
Nokia's earlier estimated long-term tax rate of 26% had been applied,
non-IFRS Nokia EPS would have been approximately 1.5 Euro cent higher
in Q2 2013. Going forward on a non-IFRS basis, until a pattern of tax
profitability is reestablished in Finland, Nokia expects to record
quarterly tax expense of approximately EUR 50 million related to its
Devices & Services business and approximately EUR 50 million related
to its Nokia Siemens Networks business. Nokia expects to continue to
record taxes related to its HERE business at a 26% rate. 
Note 6 relating to Nokia net cash and other liquid assets: Calculated
as total cash and other liquid assets less interest-bearing
liabilities. For selected information on Nokia Group interest-bearing
liabilities, please see the table on page 40 of the complete Q2 2013
and January-June 2013 interim report with tables. 
Note 7 relating to operational and reporting structure: We have three
businesses: Devices & Services, HERE and Nokia Siemens Networks and
four operating and reportable segments: Smart Devices and Mobile
Phones within Devices & Services, HERE and Nokia Siemens Networks.
Smart Devices focuses on smartphones and Mobile Phones focuses on
mass market mobile devices, including Asha full-touch smartphones.
Devices & Services also contains Devices & Services Other, which
includes net sales of our luxury phone business Vertu through October
12, 2012, spare parts and related cost of sales and operating
expenses, as well as intellectual property (IPR) income and common
research and development expenses. In October 2012, we completed the
divestment of Vertu to EQT VI, a European private equity firm.  HERE
focuses on the development of location-based services and local
commerce. We introduced HERE as the new brand for our location and
mapping service in November 2012. As of January 1, 2013, our Location
& Commerce business and reportable segment was renamed HERE. Nokia
Siemens Networks is one of the leading global providers of
telecommunications infrastructure hardware, software and services,
with the focus on the mobile broadband market. Nokia Siemens Networks
operational organization is based on two business units: Mobile
Broadband and Global Services. The Mobile Broadband business unit
provides mobile operators with radio and core network software
together with the hardware needed to deliver mobile voice and data
services. The Global Services business unit provides mobile operators
with a broad range of services, including professional services,
network implementation and customer care services. 
Note 8 relating to average selling prices (ASP): Mobile device ASP
represents total Devices & Services net sales (Smart Devices net
sales, Mobile Phones net sales, and Devices & Services Other net
sales) divided by total Devices & Services volumes. Devices &
Services Other net sales includes net sales of Nokia's luxury phone
business Vertu through October 12, 2012, spare parts, as well as
intellectual property income. Smart Devices ASP represents Smart
Devices net sales divided by Smart Devices volumes. Mobile Phones ASP
represents Mobile Phones net sales divided by Mobile Phones volumes.
As IPR income is included in Devices & Services Other net sales, we
provide our total mobile device ASP both including and excluding IPR
income. The mobile device ASP excluding IPR income in the second
quarter 2013 was EUR 42, down 11% from EUR 47 in the second quarter
2012 and down 7% from EUR 45 in the first quarter 2013. 
NOKIA OUTLOOK 
* Nokia expects its Devices & Services non-IFRS operating margin in
the third quarter 2013 to be approximately negative 2 percent, plus
or minus four percentage points. This outlook is based on Nokia's
expectations regarding a number of factors, including: 
* competitive industry dynamics continuing to negatively affect
Devices & Services; 
* consumer demand for our products; 
* ramp-up for our high-end Lumia smartphones and new Mobile
Phones         devices; 
* expected increases in Devices & Services' operating expenses;
and 
* the macroeconomic environment. 
* In the third quarter 2013, supported by the wider availability of
recently announced Lumia products as well as recently announced
Mobile Phones products, Nokia expects higher Devices & Services net
sales, compared to the second quarter 2013. 
* Nokia continues to target to reduce its Devices & Services
non-IFRS operating expenses to an annualized run rate of
approximately EUR 3.0 billion by the end of 2013. 
* Nokia and Nokia Siemens Networks expect Nokia Siemens Networks
non-IFRS operating margin in the third quarter 2013 to be
approximately positive 7  percent, plus or minus four percentage
points. This outlook is based on Nokia Siemens Networks' expectations
regarding a number of factors, including: 
* competitive industry dynamics; 
* product and regional mix; 
* expected continued improvement under Nokia Siemens Networks
restructuring program; and 
* the macroeconomic environment. 
* Nokia and Nokia Siemens Networks now target to reduce Nokia
Siemens     Networks' non-IFRS annualized operating expenses and
production overheads by more than EUR 1.5 billion by the end of 2013,
compared to the end of 2011. Nokia and Nokia Siemens Networks
previous target was to reduce Nokia Siemens Networks' non-IFRS
annualized operating expenses and production overheads by more than
EUR 1 billion by the end of 2013, compared to the end of 2011. 
NOKIA TO FULLY ACQUIRE SIEMENS' STAKE IN NOKIA SIEMENS NETWORKS 
On July 1, 2013, Nokia Corporation and Siemens AG announced that they
have entered into a definitive agreement pursuant to which Nokia
acquires Siemens' entire 50% stake in their joint venture, Nokia
Siemens Networks. The acquisition has been approved by the Board of
Directors of Nokia as well as the Managing and Supervisory Boards of
Siemens, and is subject to the customary regulatory approval process. 
The purchase price for Siemens' stake is EUR 1.7 billion and the
transaction is expected to close during the third calendar quarter of
2013. Upon closing of the planned acquisition, Nokia Siemens Networks
will become a wholly owned subsidiary of Nokia. Of the purchase
price, EUR 1.2 billion will be paid in cash at the closing of the
transaction. The balance of EUR 0.5 billion will be paid in the form
of a secured loan from Siemens due one year from closing. Nokia has
obtained committed bank financing for the EUR 1.2 billion cash
portion. 
Nokia will continue to consolidate Nokia Siemens Networks for
financial reporting purposes as well as continue to strengthen the
company as a more independent entity. 
SECOND QUARTER 2013 FINANCIAL AND OPERATING DISCUSSION 
NOKIA GROUP 
See note 7 to our Summary Financial Information table above
concerning our current operational and reporting structure and note 3
concerning certain changes to historical comparative financials due
to a revised IFRS accounting standard, IAS19 Employee Benefits. The
following discussion includes information on a non-IFRS, or
underlying business performance, basis. See notes 1 and 2 to our
Summary Financial Information table above for information about our
underlying non-IFRS results and the non-IFRS exclusions for the
periods discussed below. 
The following table sets forth the year-on-year and sequential growth
rates in our net sales on a reported basis and at constant currency
for the periods indicated. 


 
+----------------------------------------------------------------
---------+
| SECOND QUARTER 2013 NET SALES, REPORTED & CONSTANT CURRENCY(1)          |
+--------------------------------------------------------+-------+--------+
|                                                        | YoY   |  QoQ   |
|                                                        |Change | Change |
+--------------------------------------------------------+-------+--------+
| Group net sales - reported                             | -24%  |  -3%   |
|                                                        |       |        |
| Group net sales - constant currency(1)                 | -25%  |  -3%   |
|                                                        |       |        |
| Devices & Services net sales - reported                | -32%  |  -6%   |
|                                                        |       |        |
| Devices & Services net sales - constant currency(1)    | -33%  |  -6%   |
|                                                        |       |        |
| Nokia Siemens Networks net sales - reported            | -17%  |  -1%   |
|                                                        |       |        |
| Nokia Siemens Networks net sales - constant currency(1)| -17%  |  -1%   |
+--------------------------------------------------------+-------+--------+

 
Note 1: Change in net sales at constant currency excludes the impact
of changes in exchange rates in comparison to the Euro, our reporting
currency. 
At constant currency Nokia Group's net sales would have decreased 25%
year-on-year and 3% sequentially. 
The following table sets forth Nokia Group's reported cash flow for
the periods indicated and financial position at the end of the periods
indicated, as well as the year-on-year and sequential growth rates. 


 
 
+----------------------------------------------------------------------
---+
|NOKIA GROUP CASH FLOW AND FINANCIAL POSITION                             |
+------------------------------+-------+-------+----------+-------+-------+
|EUR million                   |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ    |
|                              |       |       |          |       |Change |
+------------------------------+-------+-------+----------+-------+-------+
|Net cash from operating       |   -196|    102|          |    206|       |
|activities                    |       |       |          |       |       |
+------------------------------+-------+-------+----------+-------+-------+
|NSN contribution (approximate)|     90|    160|      -44%|    270|   -67%|
+------------------------------+-------+-------+----------+-------+-------+
|Total cash and other liquid   |  9 453|  9 418|        0%| 10 102|    -6%|
|assets                        |       |       |          |       |       |
+------------------------------+-------+-------+----------+-------+-------+
|NSN contribution              |  2 519|  1 846|       36%|  2 753|    -8%|
+------------------------------+-------+-------+----------+-------+-------+
|Net cash and other liquid     |  4 067|  4 197|       -3%|  4 480|    -9%|
|assets(1)                     |       |       |          |               |
+------------------------------+-------+-------+----------+-------+-------+
|NSN contribution              |  1 446|    383|      278%|  1 484|    -3%|
+------------------------------+-------+-------+----------+-------+-------+

 
Note 1: Total cash and other liquid assets minus interest-bearing
liabilities. 
In the second quarter 2013, Nokia Group total cash and other liquid
assets decreased sequentially by EUR 649 million and Nokia Group net
cash and other liquid assets decreased by EUR 413 million. 
The items below are the primary drivers of the decrease in Nokia
Group net cash and other liquid assets in the second quarter 2013 of
EUR 413 million: 
* Nokia Group level net profit adjusted for non-cash items of
positive EUR  382 million; 
* Nokia Group level net working capital-related cash outflows of
approximately  EUR 500 million, which included approximately EUR 230
million of restructuring related cash outflows; 
* Nokia Group excluding Nokia Siemens Networks level net
working capital-related outflows of approximately EUR 270 million,
which included approximately EUR 40 million of restructuring-related
outflows. The net working capital change in Nokia Group excluding
Nokia Siemens Networks is primarily due to a reduction of interest
free short-term liabilities, partially offset by a reduction of
receivables; 
* Nokia Siemens Networks level net working capital-related
outflows of approximately EUR 230 million, which included
approximately EUR 190 million of restructuring-related outflows. The
net working capital change in Nokia Siemens Networks is primarily due
to a reduction of interest free short-term liabilities, partially
offset by a reduction of receivables; 
* Nokia Group level net financial income and expense-related cash
outflow of approximately EUR 10 million, 
* Nokia Group level cash tax net outflows of approximately EUR 70
million; 
* Nokia Group level capital expenditure of approximately EUR 140
million; 
* Nokia Group level proceeds from the sale of fixed assets of
approximately EUR 60 million; 
* Nokia Group level outflow related to business divestments of
approximately EUR 60 million; and 
* Nokia Group level negative foreign exchange impact from
translation of net cash of approximately EUR 70 million. 
In the second quarter 2013, we received a quarterly platform support
payment of USD 250 million (approximately EUR 192 million) from
Microsoft. Our agreement with Microsoft includes platform support
payments from Microsoft to us as well as software royalty payments
from us to Microsoft. Under the terms of the agreement governing the
platform support payments, the amount of each quarterly platform
support payment is USD 250 million. We have a competitive software
royalty structure, which includes annual minimum software royalty
commitments that vary over the life of the agreement. Software
royalty payments, with minimum commitments are paid quarterly. Over
the life of the agreement, both the platform support payments and the
minimum software royalty commitments are expected to measure in the
billions of US dollars. Over the life of the agreement the total
amount of the platform support payments is expected to slightly
exceed the total amount of the minimum software royalty commitment
payments. In accordance with the terms of the agreement, the platform
support payments and annual minimum software royalty commitment
payments continue for a corresponding period of time. 
DEVICES AND SERVICES 
The following table sets forth a summary of the results for our
Devices & Services business for the periods indicated, as well as the
year-on-year and sequential growth rates. 


 
 
+----------------------------------------------------------------------
---+
|DEVICES & SERVICES RESULTS SUMMARY                                       |
+-----------------------------+-------+-------+----------+-------+--------+
|                             |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ     |
|                             |       |       |          |       |Change  |
+-----------------------------+-------+-------+----------+-------+--------+
|Net sales (EUR million)(1)   |  2 724|  4 023|      -32%|  2 888|     -6%|
+-----------------------------+-------+-------+----------+-------+--------+
|Mobile device volume (million|   61.1|   83.7|      -27%|   61.9|     -1%|
|units)                       |       |       |          |       |        |
+-----------------------------+-------+-------+----------+-------+--------+
|Mobile device ASP (EUR)      |     45|     48|       -6%|     47|     -4%|
+-----------------------------+-------+-------+----------+-------+--------+
|Non-IFRS gross margin (%)    |  24.4%|  18.1%|          |  25.1%|        |
+-----------------------------+-------+-------+----------+-------+--------+
|Non-IFRS operating expenses  |       |       |          |       |        |
|(EUR million)                |    696|  1 089|      -36%|    711|     -2%|
|                             |       |       |          |       |        |
+-----------------------------+-------+-------+----------+-------+--------+
|Non-IFRS operating margin (%)|  -1.2%|  -9.0%|          |   0.1%|        |
+-----------------------------+-------+-------+----------+-------+--------+
|Operating margin (%)         |  -1.2%| -11.8%|          |  -1.5%|        |
+-----------------------------+-------+-------+----------+-------+--------+

 
Note 1: Includes IPR income recognized in Devices & Services Other net
sales. 
The
year-on-year and sequential changes in our Devices & Services net
sales, volumes, average selling prices and gross margin are discussed
below under our Smart Devices and Mobile Phones business units. 
Smartphone Volumes 
In the second quarter 2013, Devices & Services total smartphone
volumes increased sequentially to 11.7 million units, compared to 11.1
million units in the first quarter 2013, composed of: 
* 7.4 million Lumia smartphones in Smart Devices 
* 4.3 million Asha full-touch smartphones in Mobile Phones 
Devices & Services Other 
Year-on-year Devices & Services Other net sales of EUR 155 million
were lower in the second quarter 2013, compared to EUR 191 million in
the second quarter 2012, due to the divestment of Vertu. The
sequential Devices & Services Other net sales were higher in the
second quarter 2013, compared to EUR 134 million in the first quarter
2013, due to higher IPR income. 
Within Devices & Services Other, we estimate that our current annual
IPR income run-rate is approximately EUR 0.5 billion. 
Channel Inventory 
We ended the second quarter 2013 within our normal 4 to 6 week
channel inventory range. On an absolute unit basis, channel
inventories decreased sequentially. 
Net Sales and Volumes by Geographic Area 
The following table sets forth the net sales for our Devices &
Services business for the periods indicated, as well as the
year-on-year and sequential growth rates, by geographic area. IPR
income is allocated to the geographic areas contained in this chart. 


 
+----------------------------------------------------------------
---------+
| DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA                         |
+---------------------+--------+--------+-----------+--------+------------+
| EUR million         |Q2/2013 |Q2/2012 |YoY Change |Q1/2013 | QoQ Change |
+---------------------+--------+--------+-----------+--------+------------+
| Europe              |    818 |  1 096 |      -25% |    895 |        -9% |
|                     |        |        |           |        |            |
| Middle East & Africa|    420 |    663 |      -37% |    501 |       -16% |
|                     |        |        |           |        |            |
| Greater China       |    232 |    542 |      -57% |    256 |        -9% |
|                     |        |        |           |        |            |
| Asia-Pacific        |    683 |    948 |      -28% |    724 |        -6% |
|                     |        |        |           |        |            |
| North America       |    123 |    128 |       -4% |    101 |        22% |
|                     |        |        |           |        |            |
| Latin America       |    448 |    646 |      -31% |    411 |         9% |
+---------------------+--------+--------+-----------+--------+------------+
| Total               |  2 724 |  4 023 |      -32% |  2 888 |        -6% |
+---------------------+--------+--------+-----------+--------+------------+

 
The following table sets forth the mobile device volumes for our
Devices & Services business for the periods indicated, as well as the
year-on-year and sequential growth rates, by geographic area. 


 
+----------------------------------------------------------------
---------+
| DEVICES & SERVICES MOBILE DEVICE VOLUMES BY GEOGRAPHIC AREA             |
+----------------------+---------+---------+------------+---------+-------+
| million units        | Q2/2013 | Q2/2012 | YoY Change | Q1/2013 | QoQ   |
|                      |         |         |            |         |Change |
+----------------------+---------+---------+------------+---------+-------+
| Europe               |    11.3 |    15.3 |       -26% |    11.8 |   -4% |
|                      |         |         |            |         |       |
| Middle East & Africa |    16.6 |    19.4 |       -14% |    15.5 |    7% |
|                      |         |         |            |         |       |
| Greater China        |     4.1 |     7.9 |       -48% |     3.4 |   21% |
|                      |         |         |            |         |       |
| Asia-Pacific         |    20.2 |    28.6 |       -29% |    23.1 |  -13% |
|                      |         |         |            |         |       |
| North America        |     0.5 |     0.6 |       -17% |     0.4 |   25% |
|                      |         |         |            |         |       |
| Latin America        |     8.4 |    11.9 |       -29% |     7.7 |    9% |
+----------------------+---------+---------+------------+---------+-------+
| Total                |    61.1 |    83.7 |       -27% |    61.9 |    1% |
+----------------------+---------+---------+------------+---------+-------+

 
On a year-on-year basis, net sales decreased in all regions primarily
due to lower sales in our Mobile Phones business unit. The largest
year-on-year decline in net sales was in Greater China followed by
Asia Pacific, Middle East & Africa and Latin America. In Greater
China and Europe the net sales declines were primarily due to lower
sales in our Smart Devices business unit whereas in Asia Pacific,
Middle East & Africa and Latin America the net sales declines were
primarily due to lower sales in our Mobile Phones business unit. 
On a sequential basis, net sales decreased in all regions except
North America and Latin America. The net sales increases in North
America and Latin America were primarily due to higher sales in our
Smart Devices business unit. The largest relative sequential decline
in net sales was in Middle East & Africa which was primarily due to
lower sales in our Smart Devices business unit. 
At constant currency Devices & Services' net sales would have
decreased 33% year-on-year and 6% sequentially. 
Non-IFRS Operating Expenses 
Devices & Services non-IFRS operating expenses decreased 36%
year-on-year and 2% sequentially in the second quarter 2013. On a
year-on-year basis, operating expenses related to Mobile Phones and
Smart Devices decreased 41% and 25%, respectively, in the second
quarter 2013. On a sequential basis, operating expenses related to
Mobile Phones was approximately flat, while Smart Devices operating
expenses decreased 3% in the second quarter 2013. In addition to the
factors described below, the year-on-year change was affected by the
proportionate allocation of operating expenses being affected by the
relative mix of sales and gross profit performance between Mobile
Phones and Smart Devices. This resulted in higher and lower relative
allocations to Smart Devices and Mobile Phones, respectively. 
Devices & Services non-IFRS research and development expenses
decreased 37% year-on-year in the second quarter 2013. On a
sequential basis, Devices & Services
non-IFRS research and
development expenses decreased 8% in the second quarter 2013. The
year-on-year decline was primarily due to reductions in certain
Mobile Phones-related activities, ramping down Symbian and MeeGo
research and development efforts and overall cost controls. On a
sequential basis, the decline was primarily due to lower accrued
incentive expenses consistent with Devices & Services business
performance as well as overall cost controls. 
Devices & Services non-IFRS sales and marketing expenses decreased
38% year-on-year in the second quarter 2013. On a year-on-year basis,
sales and marketing expenses declined primarily due to overall cost
control, a lower cost base as a result of business divestments,
headcount reductions and lower product-specific marketing. On a
sequential basis, Devices & Services non-IFRS sales and marketing
expenses increased 5% in the second quarter 2013. Sequentially, sales
and marketing expenses increased primarily due to higher marketing
spending in support of newly launched Lumia and Asha products,
partially offset by lower accrued incentive expenses consistent with
Devices & Services business performance. 
Devices & Services non-IFRS administrative and general expenses
decreased 10%
year-on-year in the second quarter 2013 and decreased 7%
sequentially in the second quarter 2013. The year-on-year decrease
was primarily related to overall cost control and business
divestments, partially offset by shared function cost categorization.
The sequential decrease was primarily due to lower accrued incentive
expenses consistent with Devices & Services business performance as
well as overall cost controls. 
In the second quarter 2013, Devices & Services non-IFRS other income
and expense had both year-on-year and sequentially a positive impact
on profitability. 
In the second quarter 2013, Devices & Services reported other income
and expense had both year-on-year and sequentially a positive impact
on profitability. Both on a year-on-year and sequential basis the
less negative other income and expense was due to the absence of
restructuring-related charges and associated items. 
Non-IFRS Operating Margin 
The higher year-on-year Devices & Services non-IFRS operating margin
in the second quarter 2013 was primarily due to higher gross margin
and lower operating expenses as a percentage of net sales. 
The sequentially lower Devices & Services non-IFRS operating margin
in the second quarter 2013 was primarily due to a lower gross margin
and higher operating expenses as a percentage of net sales. 
Operating Margin 
The higher year-on-year Devices & Services operating margin in the
second quarter 2013 was primarily due to higher gross margin, lower
operating expenses as a percentage of net sales. The other income and
expenses was an expense of EUR 2 million, compared to an expense of
EUR 112 million in the second quarter 2012. 
The sequentially higher Devices & Services operating margin in the
second quarter 2013 was primarily due to lower other expenses as a
percentage of net sales compared to the first quarter 2013, partially
offset by lower gross margin and higher operating expenses as a
percentage of net sales. In the second quarter 2013, other income and
expense was an expense of EUR 2 million, compared to an expense of
EUR 54 million in the first quarter 2013. 
Cost Reduction Activities and Planned Operational Adjustments 
The following table sets forth a summary of our Devices & Services
cost reduction activities and planned operational adjustments. 


 
+----------------------------------------------------------------
---------+
|DEVICES & SERVICES RESTRUCTURING SUMMARY                                 |
+--------------+--------+-------------+------------+------------+---------+
|              |Q2/2013 |Cumulative up|Q3/2013     |2013        |Total    |
|EUR (million) |(approx-|to Q2/2013   |(approximate|(approximate|(approx- |
|              |imate)  |(approximate)|estimate)   |estimate)   |imate    |
|              |        |             |            |            |estimate)|
+--------------+--------+-------------+------------+------------+---------+
|Restructuring-|        |             |            |            |         |
|related       |        |             |            |            |         |
|charges       |       -|        1 450|Not provided|Not provided|    1 500|
+--------------+--------+-------------+------------+------------+---------+
|Restructuring-|        |             |            |            |         |
|related cash  |        |             |            |            |         |
|outflows      |      40|        1 250|          50|         250|    1 350|
+--------------+--------+-------------+------------+------------+----------
+

 
Nokia continues to target to reduce its Devices & Services non-IFRS
operating expenses to an annualized run rate of approximately EUR 3.0
billion by the end of 2013. 
At the end of the second quarter 2013, Devices & Services and
Corporate Common had approximately 31 400 employees, a reduction of
approximately 12 200 compared to the end of the second quarter 2012,
and approximately 200 compared to the end of the first quarter 2013. 
By the end of the second quarter 2013, we had recorded cumulative
Devices & Services
restructuring-related charges and other associated
items of approximately EUR 1.45 billion. In total, we expect now
cumulative Devices & Services restructuring-related charges of
approximately EUR 1.5 billion before the end of 2013. This is
approximately EUR 100 million less than what we estimated earlier. 
By the end of the second quarter 2013, Devices & Services had
cumulative restructuring-related cash outflows of approximately EUR
1.25 billion. Of the total expected charges relating to restructuring
activities of approximately EUR 1.5 billion, we expect Devices &
Services non-cash charges to be approximately EUR 150 million. This
means that we also now expect total restructuring-related cash
outflows to be approximately EUR 50 million less than what we
estimated earlier. 
SMART DEVICES 
The following table sets forth a summary of the results for our Smart
Devices business unit for the periods indicated, as well as the
year-on-year and sequential growth rates. 


 
+----------------------------------------------------------------
---------+
|SMART DEVICES RESULTS SUMMARY                                            |
+---------------------------+-------+-------+----------+-------+----------+
|                           |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+---------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)(1) |  1 164|  1 541|      -24%|  1 164|        0%|
+---------------------------+-------+-------+----------+-------+----------+
|Smart Devices volume       |    7.4|   10.2|      -27%|    6.1|       21%|
|(million units)            |       |       |          |       |          |
+---------------------------+-------+-------+----------+-------+----------+
|Smart Devices ASP (EUR)    |    157|    151|        4%|    191|      -18%|
+---------------------------+-------+-------+----------+-------+----------+
|Gross margin (%)           |  21.1%|   1.7%|          |  20.7%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Operating expenses (EUR    |    406|    540|      -25%|    420|       -3%|
|million)(2)                |       |       |          |       |          |
+---------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%)(2) | -14.1%| -32.9%|          | -16.2%|          |
+---------------------------+-------+-------+----------+-------+----------+

 
Note 1: Does not include IPR income. IPR income is recognized in
Devices & Services Other net sales. 
Note 2: The year-on-year changes in operating expenses were affected
by the proportionate allocation of operating expenses being affected
by the relative mix of sales and gross profit performance between
Mobile Phones and Smart Devices, resulting in higher relative
allocations to Smart Devices in the first and second quarters 2013.
Accordingly, second quarter 2013 operating expenses are not directly
comparable to second quarter 2012 operating expenses. 
Net Sales 
On a year-on-year basis, the decline in our Smart Devices net sales
in the second quarter 2013 was due to lower volumes, partially offset
by higher ASPs. 
On a sequential basis, Smart Devices net sales were flat with higher
volumes offset by lower ASPs. 
Volume 
The year-on-year decline in
our Smart Devices volumes in the second quarter 2013 continued to be
driven by the strong momentum of competing smartphone platforms and
our portfolio transition from Symbian products to Lumia products. The
decline was primarily due to lower Symbian volumes, partially offset
by higher Lumia volumes. Our Symbian volumes decreased from 6 million
units in the second quarter 2012 to approximately zero in the second
quarter 2013. Our Lumia volumes increased from 4.0 million in the
second quarter 2012 to 7.4 million in the second quarter 2013. 
On a sequential basis, the increase in our Smart Devices volumes in
the second quarter 2013 was due to higher Lumia volumes, as we started
shipping the Lumia 520 and 720 in significant volumes. In the second
quarter 2013, the vast majority of Smart Devices volumes were from
Windows Phone 8-based Lumia products. 
Average Selling Price 
The year-on-year increase in our Smart Devices
ASP in the second quarter 2013 was primarily due to a positive mix
shift towards sales of our Lumia products which carry a higher ASP
than our Symbian products, partially offset by our pricing actions. 
Sequentially, the decrease in our Smart Devices ASP in the second
quarter 2013 was primarily due to a negative mix shift towards sales
of our lower priced Windows Phone 8-based Lumia products as well as
our pricing actions. 
Gross Margin 
The significant year-on-year increase in our Smart Devices gross
margin in the second quarter 2013 was primarily due to
inventory-related allowances. Specifically, in the second quarter
2013 Smart Devices gross margin benefited from the reversal of
approximately EUR 20 million of previously recognized
inventory-related allowances related to our Lumia devices. In
contrast, in the second quarter 2012, Smart Devices gross margin was
negatively impacted by approximately EUR 220 million of allowances
related to excess component inventory, future purchase commitments and
an inventory revaluation. In addition, the year-on-year gross margin
increase was due to lower warranty costs, reduction in certain fixed
costs and the introduction of Windows Phone 8-based Lumia products,
partially offset by a net negative impact related to foreign currency
fluctuations. 
On a sequential basis, the increase in our Smart Devices gross margin
in the second quarter 2013 was primarily due to a positive product mix
shift towards Windows Phone 8-based Lumia products, partially offset
by lower reversals related to inventory-related allowances.
Specifically, in the second quarter 2013 Smart Devices gross margin
benefited from the reversal of approximately EUR 20 million of
previously recognized inventory-related allowances related to our
Lumia devices, compared to a EUR 50 million benefit in the first
quarter 2013. 
Increases or decreases to Smart Devices inventory-related allowances
may be required in the future depending on several factors, including
consumer demand and continued ramp-up, particularly related to our new
Lumia products. 
MOBILE PHONES 
The following table sets forth a summary of the results for our
Mobile Phones business unit for the periods indicated, as well as the
year-on-year and sequential growth rates. 


 
+----------------------------------------------------------------
---------+
|MOBILE PHONES RESULTS SUMMARY                                            |
+---------------------------+-------+-------+----------+-------+----------+
|                           |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+---------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)(1) |  1 405|  2 291|      -39%|  1 590|      -12%|
+---------------------------+-------+-------+----------+-------+----------+
|Mobile Phones volume       |   53.7|   73.5|      -27%|   55.8|       -4%|
|(million units)            |       |       |          |       |          |
+---------------------------+-------+-------+----------+-------+----------+
|Mobile Phones ASP (EUR)    |     26|     31|      -16%|     28|       -7%|
+---------------------------+-------+-------+----------+-------+----------+
|Gross margin (%)           |  19.5%|  24.1%|          |  22.9%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Operating expenses (EUR    |    266|    450|      -41%|    267|        0%|
|million)(2)                |       |       |          |       |          |
+---------------------------+-------+-------+----------+-------+----------+
|Contribution margin (%)(2) |   0.2%|   4.3%|          |   5.5%|          |
+---------------------------+-------+-------+----------+-------+----------+

 
Note 1: Does not include IPR income. IPR income is recognized in
Devices & Services Other net sales. 
Note 2: The year-on-year changes in operating expenses were affected
by the allocation of operating expenses being affected by the
relative mix of sales and gross profit performance between Mobile
Phones and Smart Devices, resulting in lower relative allocations to
Mobile Phones in the first and second quarters 2013. Accordingly,
second quarter 2013 operating expenses are not directly comparable to
second quarter 2012 operating expenses. 
Net Sales 
On a year-on-year basis, the decline in our Mobile Phones net sales
in the second quarter 2013 was due to lower volumes and lower ASP. On
a sequential basis, the decline in our Mobile Phones net sales in the
second quarter 2013 was due to lower ASP and lower volumes. 
Volume 
During the second quarter 2013 we shipped 53.7 million Mobile Phones
units, of which 4.3 million were Asha full-touch smartphones. During
the second quarter 2013 we announced the new Asha 501 and started
shipments in mid-June. 
On a year-on-year basis, our Mobile Phones volumes in the second
quarter 2013 were negatively affected by competitive industry
dynamics, including intense smartphone competition at increasingly
lower price points and intense competition at the low end of our
product portfolio. Compared to the second quarter 2012, our Mobile
Phones volumes declined across our portfolio, most notably for our
non-full-touch devices that we sell to our customers for above EUR
30, partially offset by higher sales volumes of Asha full-touch
smartphones. 
On a sequential basis, our Mobile Phones volumes in the second
quarter 2013 were negatively affected by competitive industry
dynamics, including intense competition at the low end of our product
portfolio and smartphone competition at increasingly lower price
points affecting the rest of our Mobile Phones portfolio. Compared to
the first quarter 2013 we had lower sales of our devices that we sell
to our customers for above EUR 30. This decline was partially offset
by higher sales of our devices that we sell to our customers for
below EUR 30. 
Average Selling Price 
Both on a year-on-year and sequential basis, the decline in our
Mobile Phones ASP in the second quarter 2013 was primarily due to a
higher proportion of sales of lower priced devices as well as general
price erosion and our pricing actions. 
Gross Margin 
The year-on-year decline in our Mobile Phones gross
margin in the second quarter 2013 was primarily due to a negative
product mix shift towards lower gross margin devices, higher fixed
costs per unit because of lower sales volumes and a net negative
impact related to foreign currency fluctuation. This was partially
offset by higher cost erosion than price erosion. 
On a sequential basis, the decrease in our Mobile Phones gross margin
in the second quarter 2013 was primarily due to higher warranty costs
following lower than normal warranty costs in the first quarter 2013,
as well as a net negative impact related to foreign currency
fluctuations. 
Mobile Phones Planning Actions 
Nokia continuously works to improve the efficiency of its operations
and its
long-term competitive investments. In order to respond to
industry dynamics, Nokia's Mobile Phones business unit is planning to
focus its product offering with the aim of improving product
competitiveness and delivering more innovation. The planned
restructure is estimated to impact a maximum of 440 positions
globally, while also creating a number of new positions and offering
possibilities for redeployment. 
HERE 
The following table sets forth a summary of the results for HERE for
the periods
indicated, as well as the year-on-year and sequential
growth rates. 


 
+----------------------------------------------------------------
---------+
|HERE RESULTS SUMMARY                                                     |
+---------------------------+-------+-------+----------+-------+----------+
|                           |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+---------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)    |    233|    283|      -18%|    216|        8%|
+---------------------------+-------+-------+----------+-------+----------+
|External net sales (EUR    |       |       |          |       |          |
|million)                   |    195|    180|        8%|    164|       19%|
+---------------------------+-------+-------+----------+-------+----------+
|Internal net sales (EUR    |       |       |          |       |          |
|million)                   |     38|    103|      -63%|     52|      -27%|
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS gross margin (%)  |  76.1%|  77.4%|          |  75.5%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating expenses|       |       |          |       |          |
|(EUR million)              |    169|    185|       -9%|    168|        1%|
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating         |       |       |          |       |          |
|margin (%)                 |   3.4%|  14.5%|          |  -2.3%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Operating margin (%)       | -38.2%| -33.6%|          | -44.9%|          |
+---------------------------+-------+-------+----------+-------+----------+

 
Net Sales 
In the second quarter 2013, the year-on-year increase in external
HERE net sales were primarily due to higher sales to vehicle
customers as well as non-recurrence of a negative sales adjustment
made in the year ago quarter related to historical license fees in
the normal course of business for a particular customer. 
In the second quarter 2013, the sequential increase in external HERE
net sales were primarily due to higher sales to vehicle customers and
to a lesser extent higher sales to our personal navigation device
customers. 
In the second quarter 2013, the year-on-year and sequential declines
in internal HERE net sales were due to declines in sales, including
lower recognition of deferred revenue, primarily related to our Smart
Devices business unit. 
Gross Margin 
On a year-on-year basis, the decrease in HERE non-IFRS gross margin
in the second quarter 2013 was primarily due to lower gross margins
related to internal net sales, partially offset by higher sales to
our vehicle and personal navigation device customers which carry
higher gross margins. 
On a sequential basis, the increase in HERE non-IFRS gross margin in
the second quarter 2013 was primarily due to higher sales to our
vehicle and personal navigation device customers which carry higher
gross margins, partially offset by lower gross margins related to
internal net sales. 
Operating Expenses 
HERE non-IFRS research and development expenses decreased 10%
year-on-year due to cost reduction actions. On a sequential basis,
research and development expenses increased 1% in the second quarter
2013 primarily due to increased expenses related to shared function
cost categorization. 
HERE non-IFRS sales and marketing expenses were flat year-on-year. On
a sequential basis, sales and marketing expenses increased 8% in the
second quarter 2013, primarily due to greater seasonal marketing
spend. 
HERE non-IFRS general and administrative expenses declined 14%
year-on-year primarily due to cost reduction actions. On a sequential
basis, general and administrative expenses decreased 10% in the
second quarter 2013 primarily due to decreased expenses related to
shared function cost categorization. 
HERE non-IFRS other income and expense for the second quarter 2013
was an expense of EUR 1 million, compared to an income of EUR 7
million in the second quarter 2012 and approximately zero in the
first quarter 2013. 
Non-IFRS Operating Margin 
The year-on-year decrease in HERE non-IFRS operating margin in the
second quarter 2013 was primarily due to higher operating expenses as
a percentage of net sales and lower gross margin. 
The sequential improvement in HERE non-IFRS operating margin in the
second quarter 2013 was primarily due to lower operating expenses as a
percentage of net sales and higher gross margin. 
Operating Margin 
The year-on-year decrease in HERE operating margin in the second
quarter 2013 was primarily due to flat operating expenses as a
percentage of net sales and lower gross margin. The other income and
expenses was an expense of EUR 11 million, compared to an expense of
EUR 3 million in the second quarter 2012. 
The sequential improvement in HERE operating margin in the second
quarter 2013 was primarily due to lower operating expenses as a
percentage of net sales and higher gross margin. The other income and
expenses was an expense of EUR 11 million, compared to an expense of
EUR 5 million in the first quarter 2013. 
NOKIA SIEMENS NETWORKS 
The following table sets forth a summary of the results for Nokia
Siemens Networks for the periods indicated, as well as the
year-on-year and sequential growth rates. 


 
+----------------------------------------------------------------
---------+
|NOKIA SIEMENS NETWORKS RESULTS SUMMARY                                   |
+---------------------------+-------+-------+----------+-------+----------+
|                           |Q2/2013|Q2/2012|YoY Change|Q1/2013|QoQ Change|
+---------------------------+-------+-------+----------+-------+----------+
|Net sales (EUR million)    |  2 781|  3 343|      -17%|  2 804|       -1%|
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS gross margin (%)  |  38.3%|  26.6%|          |  34.0%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating expenses|       |       |          |       |          |
(EUR million)               |    766|    835|       -8%|    763|        0%|
+---------------------------+-------+-------+----------+-------+----------+
|Non-IFRS operating         |       |       |          |       |          |
|margin (%)                 |  11.8%|   0.8%|          |   7.0%|          |
+---------------------------+-------+-------+----------+-------+----------+
|Operating margin (%)       |   0.3%|  -6.8%|          |   0.1%|          |
+---------------------------+-------+-------+----------+-------+----------+

 
Net Sales The following table sets forth Nokia Siemens Networks net
sales for the periods
indicated, as well as the year-on-year and
sequential growth rates, by geographic area. 


 
+----------------------------------------------------------------
---------+
| NOKIA SIEMENS NETWORKS NET SALES BY GEOGRAPHIC AREA                     |
+--------------------+--------+--------+-----------+---------+------------+
| EUR million        |Q2/2013 |Q2/2012 |YoY Change | Q1/2013 | QoQ Change |
+--------------------+--------+--------+-----------+---------+------------+
|Europe              |    775 |    990 |      -22% |     731 |         6% |
|                    |        |        |           |         |            |
|Middle East & Africa|    268 |    304 |      -12% |     259 |         3% |
|                    |        |        |           |         |            |
|Greater China       |    260 |    340 |      -24% |     223 |        17% |
|                    |        |        |           |         |            |
|Asia-Pacific        |    784 |  1 028 |      -24% |     872 |       -10% |
|                    |        |        |           |         |            |
|North America       |    348 |    300 |       16% |     424 |       -18% |
|                    |        |        |           |         |            |
|Latin America       |    346 |    381 |       -9% |     295 |        17% |
+--------------------+--------+--------+-----------+---------+------------+
|Total               |  2 781 |  3 343 |      -17% |   2 804 |        -1% |
+-------------------------------------------------------------------------+

 
In the second quarter 2013, Global Services represented approximately
52% of Nokia Siemens Networks net sales, compared to approximately 51%
in the second quarter 2012 and approximately 51% in the first quarter
2013. In the second quarter 2013, Mobile Broadband represented
approximately 46% of Nokia Siemens Networks net sales, compared to
approximately 43% in the second quarter 2012 and approximately 44% in
the first quarter 2013. 
The year-on-year decrease of 17% in Nokia Siemens Networks net sales
in the second quarter 2013 was partially due to divestments of
businesses not consistent with Nokia Siemens Networks strategic
focus, as well as the exiting of certain customer contracts and
countries. Excluding these two factors, Nokia Siemens Networks net
sales in the second quarter 2013 declined by approximately 11% due to
reduced wireless infrastructure deployment activity, which affected
both Mobile Broadband and Global Services. The year-on-year decrease
in Mobile Broadband was primarily due to lower GSM and Voice and IP
transformation net sales partially offset by higher LTE net sales.
The year-on-year decrease in Global Services was primarily due to a
reduction in network implementation activity, as some major network
deployment projects near completion. On a geographical basis, the
year-on-year decline was primarily due to Asia-Pacific, Europe and
Greater China. In Asia Pacific, the year-on-year net sales decline
was due to lower sales in Japan following high wireless
infrastructure deployment activity in the year ago quarter. In
Europe, the year-on-year net sales decline was related to network
modernization and constrained operator spending. In Greater China,
the year-on-year decrease in net sales was due to constrained
operator spending in anticipation of a technology shift to TD-LTE. 
The sequential decrease in Nokia Siemens Networks net sales in the
second quarter 2013 was due to divestments of businesses not
consistent with Nokia Siemens Networks strategic focus as well as the
exiting of certain customer contracts and countries. Excluding these
two factors, Nokia Siemens Networks net sales in the second quarter
2013 increased by 4%, with higher sales in both Global Services and
Mobile Broadband. The sequential increase in Global Services net
sales was primarily due to higher sales in customer care services and
professional services, partially offset by lower network
implementation activity. The sequential increase in Mobile Broadband
net sales was primarily due to higher WCDMA and GSM sales, partially
offset by declines in LTE and CDMA sales. On a geographical basis,
the sequential increases in Latin America, Europe and Greater China
were primarily due to stronger seasonal sales. This was partially
offset by sequential decreases in Asia Pacific and North America due
to lower sales following high wireless infrastructure deployment
activity in the previous quarter. 
In the second quarter 2013, Nokia Siemens Networks net sales
benefited from non-recurring IPR income of approximately EUR 20
million. 
At constant currency, Nokia Siemens Networks net sales would have
decreased 17% year-on-year and 1% sequentially. 
Gross Margin 
On a year-on-year basis, the increase in Nokia Siemens Networks
non-IFRS gross margin in the second quarter 2013 was primarily due to
higher gross margin in both Mobile Broadband and Global Services and
non-recurring IPR income of approximately EUR 20 million, as well as
a slightly higher proportion of Mobile Broadband within the total
sales mix. 
On a sequential basis, the increase in Nokia Siemens Networks
non-IFRS gross margin in the second quarter 2013 was due to
significantly higher gross margin in Global Services as well as
non-recurring IPR income of approximately EUR 20  million, partially
offset by lower gross margin in Mobile Broadband. The gross margin in
Global Services benefited from a greater sequential revenue
recognition triggered by certain project acceptances. Nokia Siemens
Networks does not expect a similar benefit in the third quarter 2013. 
Operating Expenses 
Nokia Siemens Networks non-IFRS research and development expenses
decreased 10% year-on-year and 3% sequentially in the second quarter
2013. Both on a year-on-year and sequential basis the lower non-IFRS
research and development expenses were primarily due to reduced
investments in business activities that are not consistent with the
Nokia Siemens Networks focused strategy as well as increased research
and development efficiency, partially offset by higher investments in
areas that are consistent with the Nokia Siemens Networks focused
strategy most notably LTE. 
On a year-on-year basis, Nokia Siemens Networks non-IFRS sales and
marketing expenses decreased 16% in the second quarter 2013 primarily
due to structural cost savings from Nokia Siemens Networks'
transformation and restructuring program. On a sequential basis,
Nokia Siemens Networks non-IFRS sales and marketing expenses
increased 2% in the second quarter 2013. 
Nokia Siemens Networks non-IFRS general and administrative expenses
increased 19% year-on-year and 15% sequentially in the second quarter
2013. Both on a year-on-year and sequential basis, the higher non-IFRS
general and administrative expenses were primarily due to costs
associated with certain finance and information technology-related
projects and divestments. 
Nokia Siemens Networks non-IFRS other income and expense for the
second quarter 2013 was income of EUR 30 million, compared to expense
of EUR 25 million in the second quarter 2012, and income of EUR 7
million in the first quarter 2013. On a year-on-year basis, the
non-IFRS other income and expense change was primarily due to a
reduction in doubtful account allowances, gain on sale of real estate
and a net positive impact related to foreign currency fluctuation. On
a sequential basis, the change was primarily due to a reduction in
doubtful account allowances, and a gain on sale of real estate,
partially offset by a net negative impact related to foreign currency
fluctuations. 
Non-IFRS Operating Margin 
In the second quarter 2013, non-IFRS operating margin for Global
Services was higher than non-IFRS operating margin for Mobile
Broadband. 
The year-on-year increase in Nokia Siemens Networks non-IFRS
operating margin in the second quarter 2013 was primarily due to
higher gross margin, partially offset by higher operating expenses as
a percentage of net sales. On a year-on-year basis, non-IFRS
operating margin increased for both Global Services and Mobile
Broadband. 
The sequential increase in Nokia Siemens Networks non-IFRS operating
margin in the second quarter 2013 was primarily due to higher gross
margin. On a sequential basis, non-IFRS operating margin increased
for Global Services. 
Operating Margin 
The year-on-year increase in Nokia Siemens Networks operating margin
in the second quarter 2013 was primarily due to higher gross margin,
partially offset by higher operating expenses as a percentage of net
sales. The other income and expenses was an expense of EUR 278
million, compared to an expense of EUR 156 million in the second
quarter 2012. 
The sequential increase in Nokia Siemens Networks operating margin in
the second quarter 2013 was primarily due to higher gross margin and
lower operating expenses as a percentage of net sales. The other
income and expenses was an expense of EUR 278 million, compared to an
expense of EUR 122 million in the first quarter 2013. 
On both a year-on-year and sequential basis, the decline in Nokia
Siemens Networks operating expenses was primarily due to the absence
of purchase price accounting-related items arising from the formation
of Nokia Siemens Networks, which had been fully amortized as of the
end of the first quarter  2013. 
Global Restructuring Program 
The following table sets forth a summary of Nokia Siemens Networks
cost reduction activities and planned operational adjustments. 


 
+----------------------------------------------------------------
---------+
|NOKIA SIEMENS NETWORKS RESTRUCTURING SUMMARY                             |
+---------+--------+-------------+---------+--------+--------+------------+
|EUR      |Q2/2013 |Cumulative up|Q3/2013  |2013    |2014    |Total       |
|(million)|(approx-|to Q2/2013   |(approx- |(approx-|(approx-|(approx-    |
|         |imate)  |(approximate)|imate)   |imate)  |imate)  |imate)      |
|         |        |             |estimate |estimate|estimate|estimate    |
+---------+--------+-------------+---------+--------+--------+------------+
|Restruct-|        |             |         |        |        |            |
|uring-   |        |             |         |        |        |            |
|related  |     308|        1 700|Not      |Not     |Not     |       1 800|
|charges  |        |             |provided |provided|provided|            |
+---------+--------+-------------+---------+--------+--------+------------+
|Restruct-|        |             |         |        |        |            |
|uring-   |        |             |         |        |        |            |
|related  |        |             |         |        |        |            |
|cash     |        |             |         |        |        |            |
|outflows |     190|        1 000|      200|     700|     200|       1 600|
+---------+--------+-------------+---------+--------+--------+------------+

 
The reduction in operating expenses and production overheads in the
second quarter 2013 contributed to the improvement in overall
profitability in the quarter and is expected to contribute further
cost savings in the second half of 2013. As a result of the increased
savings in the first half of 2013, and an accelerated pace of
execution, Nokia Siemens Networks has increased its target for a
reduction in annualized operating expenses and production overheads,
excluding specific items, to more than EUR 1.5 billion by the end of
2013. The reduction in operating expenses is expected from across the
restructuring and transformation program. Overall savings are
expected to come largely from the previously announced organizational
streamlining, Nokia Siemens Networks has also targeted 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. 
Non-cash charges and timing differences account for the differences
between the above charges and the corresponding cash out-flows.
Changes in estimates of timing or amounts of costs to be incurred and
associated cash flows may become necessary as the transformation and
restructuring program is implemented. 
At the end of the second quarter 2013, Nokia Siemens Networks had
approximately 50 500 employees, a reduction of approximately 12 900
compared to the end of the second quarter 2012, and approximately 6
200 compared to the end of the first quarter 2013. 
SECOND QUARTER 2013 OPERATING HIGHLIGHTS 
Operating highlights for previous quarters are available in the
respective interim reports. 
Devices & Services OPERATING HIGHLIGHTS 
* Nokia started production at its new manufacturing facility in
Hanoi, Vietnam. The new site has been established to produce our most
affordable Asha smartphones and feature phones. 
* Nokia was ranked ninth in Interbrand's Best Global Green Brands
survey, ahead of all its peers in the mobile industry. 
SMART DEVICES 
* Nokia announced and started shipments in select markets of the
Nokia Lumia 925, a new interpretation of its award-winning flagship,
the Nokia Lumia 920. The Nokia Lumia 925 introduces metal for the
first time to the Nokia Lumia range and includes the most advanced
lens technology and next-generation imaging software to capture
clearer and sharper pictures and video even in low light conditions.
The Nokia Lumia 925 offers a variety of exclusive services such as
Nokia Music for unlimited streaming of free playlists, integrated
HERE services, and the option to add wireless charging with a snap-on
wireless charging cover. 
* Nokia announced the Nokia Lumia 928 smartphone, exclusive to
Verizon Wireless. With a 8.7MP camera and Nokia's PureView imaging
innovation, the Nokia Lumia 928 delivers superior imaging and video
performance that enables people to capture bright, blur free photos
and videos, even in low light conditions. The sleek and stylish
smartphone comes with the latest high-end Nokia Lumia experiences,
including Nokia Music, HERE services, and built-in wireless charging. 
* Nokia started shipping in volumes the Nokia Lumia 520, its most
affordable Windows Phone 8 smartphone, delivering experiences
normally found only in high-end smartphones, such as the same digital
camera lenses found on the Nokia Lumia 920, Nokia Music for free
music out of the box and even offline, and HERE services. 
* Nokia's Lumia range of smartphones continued to attract
businesses, including Miele & Cie. KG, a global leader in domestic
appliances and commercial machinery, which has chosen the Nokia Lumia
range as the smartphone of choice for its global employees. 
* The Windows Phone Store continued to strengthen in terms of the
quantity and quality of applications. The Windows Phone Store today
offers more than 165 000 applications and games. 
MOBILE PHONES 
* Nokia announced and started shipments of the Nokia Asha 501, the
first of a new generation of smartphones to run on the new Asha
platform. Retailing at a suggested price of USD 99, the Nokia Asha 501
offers users affordable smartphone design with bold color, a
high-quality build and an innovative user interface. The new Asha
platform also allows developers who write applications for the Nokia
Asha 501 to reach all smartphones based on the new Asha platform
without having to re-write code. 
* Nokia started shipments of the Nokia 105, the most affordable
phone in its portfolio, retailing at a recommended price of EUR 15.
The Nokia 105 is the ideal device for the first-time phone buyer,
featuring a bright color screen, a flashlight, a dust- and
splash-proof keymat and battery life of up to 35 days. 
HERE OPERATING HIGHLIGHTS 
* Rand McNally, one of the largest commercial truck routing
software companies in North America, chose HERE as its preferred map
provider. HERE contributes information specific to truck
transportation, such as the height of a bridge overpass, road weight
restrictions for trucks and posted speed limits. 
* The U.S. Federal Highway Administration will use HERE Traffic
covering all major highways and border crossings in the U.S. to
develop performance measures. 
* TRANSCOM will use HERE Traffic to support 16 government agencies
with real-time traffic data in New York, New Jersey and Connecticut. 
This data is used by toll authorities, departments of transportation,
transit agencies, and public safety organizations.  It will also be
used for traveler information services by the agencies. 
* HERE continued to strengthen its long-lasting relationships
within the automotive industry, with a number of companies choosing
to integrate our automotive grade quality maps, traffic and location
services. These include EUROPE: Hyundai in 15 EU countries, Ford
Traffic in Germany; RUSSIA: Honda Russia, Renault Russia, Opel
Russia; AMERICAS: Mitsubishi Motors North America, Inc., Toyota
Argentina, Toyota Brazil; ASIA PACIFIC: Mitsubishi Australia, Nissan
Australia, Honda Malaysia and Renault India. 
* Spokeo, a leading online people search platform that organizes
data from various sources and boasts 20 million monthly visitors,
selected HERE platform for maps, satellite imagery and geocoding for
North America. HERE will enable Spokeo to continue to enhance the way
data is featured in maps and will deliver geo-related data to improve
the overall people search experience. 
* SAP selected HERE to serve as the location technology for its
TwoGo car-sharing service. 
* HERE announced traffic information for 16 new cities in Russia, a
country afflicted with some of the world's worst traffic conditions.
The expansion of HERE brings real-time traffic content through
broadcast radio and web to more customers in the Russian market and
total HERE Traffic coverage in the country to 31 cities. 
* HERE updated aerial imagery on here.com, resulting in improved
resolution and more detailed views when zoomed in. HERE today
provides aerial imagery of this level of resolution covering 14
million square kilometers. 
* HERE increased the number of buildings for which it provides
venue maps by 70%, from 29 000 to 49 000 buildings. 
* HERE launched LiveSight, an augmented reality technology, for
HERE  Maps. 
* HERE released an update of its street maps for Windows Phone 8
and here.com, providing more detail and features. The update includes
better maps for a number of countries, including Tunisia, Senegal and
Croatia, as well as better public transit capabilities for Hong Kong,
Macau and Taiwan. With the new version, updates are simply added to
the existing map, removing the need to re-download content and
reducing overall data consumption. 
NOKIA SIEMENS NETWORKS OPERATING HIGHLIGHTS 
* Mobile broadband deal momentum continued and during the quarter
Nokia Siemens Networks was selected by TIM Brasil to build its 4G LTE
network ahead of the 2014 football World Cup; chosen by AIS to roll
out 3G services in Thailand to meet growing demand; modernized the 3G
network for M1 in Singapore; launched 4G mobile broadband services
for Ooredoo in Qatar; and enabled a 4G network for Claro Chile, a
wholly-owned subsidiary of the America Movil group. Nokia Siemens
Networks also completed the fourth set of interoperability testing of
its GSM-Railway (GSM-R) infrastructure with another European supplier
against requirements specified by the European Union (EU). 
* Nokia Siemens Networks continues to invest to stay at the
forefront of mobile broadband, and in May launched new software
applications for the Liquid Radio WCDMA Software Suite to help mobile
broadband operators manage the smartphone boom and substantially
reduce the network signaling overload. Nokia Siemens Networks
enhanced its Smart Wi-Fi solution to provide the industry's most
comprehensive traffic steering capabilities between cellular and
Wi-Fi networks. The company is also launching a new 3G Femtocell
Access Point for seamless connectivity in residential areas to enable
seamless connectivity and positive customer experience across all
networks. 
* ABI Research has ranked Nokia Siemens Networks number one in
its macro base station vendor competitive assessment, with high scores
in implementation and innovation, and a best-in-class rank for
essential IP, advanced features, multi-protocol support and LTE RAN
contracts criteria. 
* Nokia Siemens Networks continues to push the limits of 4G
technology with a series of unmatched speed records. In June, Nokia
Siemens Networks achieved a record-breaking 56 Mbps peak upload
throughput in a TD-LTE network using its commercial 4G base station
with multiple antenna technology and a single     20 MHz carrier. A1
Telekom Austria conducted a successful demonstration of  
LTE-Advanced carrier aggregation using Nokia Siemens Networks current
base station hardware, showcasing download speeds of far more than
twice the  current 4G LTE peak rates. 
* With its Technology Vision 2020, Nokia Siemens Networks is
implementing a   hands-on innovation approach to enable mobile
broadband networks to profitably deliver 1 gigabyte of personalized
data per user per day by 2020. In June 2013, it was announced that
Nokia Siemens Networks is putting its Technology Vision 2020 into
practice, with its big data telco platform prototype analyzing 1
million live messages a second, bridging the best of IT and telco
technologies. 
* Nokia Siemens Networks was recognized for its progress in
innovation. In May, Nokia Siemens Networks won two Emerging
Technologies Awards at CTIA 2013, for its Fuel Cell solution and
Liquid Applications, further strengthening the company's commitment
to helping operators reduce their     carbon footprints and to
transforming the base station into an intelligent   part of an
operator's network, enabling it to serve and deliver local   content.
Nokia Siemens Networks was a three-time winner with its operator  
customers at the prestigious Global Telecoms Business Innovation
Awards. The   three awards, in the 'Wireless network infrastructure
innovation' category,   recognized joint projects with SK Telecom
(Liquid Applications), touch   Telecom (centralized Network and
Operations Center) and Zain Kuwait   (Customer Experience Index) that
demonstrated innovation to better serve the   industry's end
customers.   * In May, Nokia Siemens Networks opened a Global Delivery
Center (GDC) hub in  China. The new facility will provide tools,
processes and skilled resources  to remotely manage mobile broadband
networks for operators in China and  around the world. 
* Nokia Siemens Networks has extended its Customer Experience
Management (CEM)  portfolio to enable operators to pinpoint their best
customers by service  and location. The operator, touch, selected
Nokia Siemens Networks to help   improve its customer experience
management in Lebanon using Nokia Siemens  Networks' unique
operations support systems (OSS) portfolio and related  integration
services to transform its service operations cost-efficiently  and
pave the way for the operator to achieve service assurance. Zain
Kuwait  has deployed Nokia Siemens Networks' Customer Experience
Management (CEM),   to introduce a superior service experience for
its mobile broadband  customers. 
NOKIA IN JANUARY-JUNE 2013 
The following discussion is of Nokia's reported results for
January-June 2013. Comparisons are given to January-June 2012 results,
unless otherwise indicated. 
The following table sets forth a summary of the reported results for
the periods indicated, as well as the year-on-year growth rates. 


 
+----------------------------------------------------------------
---------+
|NOKIA GROUP RESULTS SUMMARY                                              |
+----------------------------------------+----------+----------+----------+
|                                        |Q1-Q2/2013|Q1-Q2/2012|YoY Change|
|Net sales (EUR million)                 |    11 547|    14 896|      -22%|
+----------------------------------------+----------+----------+----------+
|Gross margin (%)                        |       32%|       26%|          |
+----------------------------------------+----------+----------+----------|
|Operating expenses (EUR million)        |    -3 574|    -4 800|      -26%|
+----------------------------------------+----------+----------+----------+
|Operating margin (%)                    |       -2%|      -15%|          |
+----------------------------------------+----------+----------+----------|
|Financial income and expense, net       |      -163|      -177|          |
+----------------------------------------+----------+----------+----------+
|Tax                                     |      -185|      -753|      -75%|
+----------------------------------------+----------+----------+----------|
|Loss                                    |      -617|    -3 097|          |
+----------------------------------------+----------+----------+----------+
|Loss attributable to equity holders of  |      -499|    -2 336|          |
|the parent                              |          |          |          |
+----------------------------------------+----------+----------+----------|
|EPS, diluted                            |     -0.13|     -0.63|          |
+----------------------------------------+----------+----------+----------+

 
The decline in the Nokia Group net sales in the first six months of
2013 resulted from lower net sales in Devices & Services, as well as
lower net sales in Nokia Siemens Networks and HERE. Within Devices &
Services the net sales of Mobile Phones declined more than net sales
in Smart Devices. Mobile Phones net sales decline was due to lower
volumes and ASPs, affected by competitive industry dynamics,
including intense smartphone competition at increasingly lower price
points and intense competition at the low end of our product
portfolio. The net sales decline in Smart Devices was due to lower
volumes offset by higher ASPs, affected by competitive industry
dynamics including the strong momentum of competing smartphone
platforms as well as our portfolio transition from Symbian products
to Lumia products. The decline in HERE net sales was primarily due to
a decline in internal net sales, primarily related to our Smart
Devices business unit. The decline in Nokia Siemens Networks net
sales was due to lower net sales in Global Services as well as lower
net sales in businesses not consistent with Nokia Siemens Networks
strategic focus. In addition, net sales in Mobile Broadband also
declined on an overall basis, while delivering strong growth in LTE. 
The increase in Nokia Group gross margin in the first six months of
2013 was primarily due to higher gross margins in Nokia Siemens
Networks and Devices & Services. The HERE business gross margin was
down during the same time period, due to lower internal net sales
which carry higher gross margin. Nokia Siemens Networks gross margin
primarily increased due to higher gross margin in both Mobile
Broadband and Global Services, as well as a higher proportion of
Mobile Broadband within the total sales mix. Devices & Services gross
margin increased primarily due to Smart Devices, partially offset by
Mobile Phones and to a lesser degree Devices & Services Other, due to
the divestment of Vertu during the fourth quarter 2012. 
The decrease in the Nokia Group operating expenses in the first six
months of 2013 was primarily due to Devices & Services and Nokia
Siemens Networks. In both Devices & Services and Nokia Siemens
Networks the decrease was primarily due to structural cost savings as
well as overall cost controls. 
The Nokia Group net financial income and expense in the first six
months of 2013 was a lower expense than in the first six months of
2012. The lower net expense was primarily due to the income received
from one of Nokia's investments and lower net foreign
exchange-related losses. 
The Nokia Group taxes in the first six months of 2013 were
significantly lower than in the first six months of 2012. The lower
tax expense was primarily due to the absence of a non-cash valuation
allowances related to deferred tax assets of EUR 800 million in the
second quarter 2012. 
The Nokia Group loss in the first six months of 2013 was a smaller
loss primarily due to lower operating expenses, lower other expenses,
and lower tax expense primarily due to the absence of a non-cash
valuation allowances related to deferred tax assets of EUR 800
million in the second quarter 2012. 
RISKS AND FORWARD-LOOKING STATEMENTS 
It should be noted that Nokia and its business are exposed to various
risks and uncertainties and certain statements herein that are not
historical facts are forward-looking statements, including, without
limitation, those regarding: A) the expected plans and benefits of
our partnership with Microsoft to bring together complementary assets
and expertise to form a global mobile ecosystem for smartphones; B)
the timing and expected benefits of our strategies, including
expected operational and financial benefits and targets as well as
changes in leadership and operational structure; C) the timing of the
deliveries of our products and services; D) our ability to innovate,
develop, execute and commercialize new technologies, products and
services; E) expectations regarding market developments and
structural changes; F) expectations and targets regarding our
industry volumes, market share, prices, net sales and margins of our
products and services; G) expectations and targets regarding our
operational priorities and results of operations; H) expectations and
targets regarding collaboration and partnering arrangements; I) the
outcome of pending and threatened litigation, regulatory proceedings
or investigations by authorities; J) expectations regarding the
successful completion of  restructurings, investments, acquisitions
and divestments on a timely basis and our ability to achieve the
financial and operational targets set in connection with any such
restructurings, investments, divestments and acquisitions , including
our acquisition of Siemens' entire stake in Nokia Siemens Networks
and the closing of such acquisition, as well as any expected plans
and benefits related to or caused by such acquisition; and K)
statements preceded by "believe," "expect," "anticipate," "foresee,"
"target," "estimate," "designed," "aim", "plans," "intends," "will"
or similar expressions. These statements are based on management's
best assumptions and beliefs in light of the information currently
available to it. Because they involve risks and uncertainties, actual
results may differ materially from the results that we currently
expect. Factors, including risks and uncertainties that could cause
these differences include, but are not limited to: 1) our ability to
make the Windows Phone ecosystem a competitive and profitable global
ecosystem that achieves sufficient scale, value and attractiveness to
relevant market participants, making Nokia products with Windows
Phone a competitive choice for consumers; 2) our success in the
smartphone market, including our ability to introduce and bring to
market quantities of attractive, competitively priced Nokia products
with Windows Phone that are positively differentiated from our
competitors' products, both outside and within the Windows Phone
ecosystem; 3) our ability to produce attractive and competitive
devices in our Mobile Phones business unit, including feature phones
and devices with features such as full touch that can be categorized
as smartphones, in a timely and cost efficient manner with
differentiated hardware, software, localized services and
applications; 4) the success of our HERE strategy, including our
ability to establish a successful location-based platform and extend
our location-based services across devices and operating systems; 5)
our ability to provide support for our Devices & Services business
and maintain current and create new sources of revenue from our
location-based service and commerce assets; 6) our ability to protect
numerous patented standardized or proprietary technologies from
third-party infringement or actions to invalidate the intellectual
property rights of these technologies; 7) our ability to maintain the
existing sources of intellectual property related revenue and
establish new such sources; 8) the intensity of competition in the
various markets where we do business and our ability to maintain or
improve our market position or respond successfully to changes in the
competitive environment; 9) our ability to keep momentum and increase
our speed of innovation, product development and execution in order
to bring new innovative and competitive mobile products and
location-based or other services to the market in a timely manner;
10) the success of our partnership with Microsoft in connection with
the Windows Phone ecosystem; 11) our ability to effectively and
smoothly implement the planned changes in our operational structure
and achieve targeted efficiencies and reductions in operating expenses
and our ability to complete the planned divestments and acquisition,
including obtaining any needed regulatory approvals; 12) our ability
to retain, motivate, develop and recruit appropriately skilled
employees; 13) our dependence on the development of the mobile and
communications industry, including location-based and other services
industries, in numerous diverse markets, as well as on general
economic conditions globally and regionally; 14) our ability to
maintain and leverage our traditional strengths in the mobile
products market, especially if we are unable retain the loyalty of
our mobile operator and distributor customers and consumers as a
result of the implementation of our strategies or other factors; 15)
the performance of the parties we partner and collaborate with,
including Microsoft and our ability to achieve successful
collaboration or partnering arrangements; 16) our ability to deliver
our mobile products profitably, in line with quality requirements and
on time, especially if the limited number of suppliers we depend on,
many of which are geographically concentrated with a majority based
in Asia, fail to deliver sufficient quantities of fully functional
products, components, sub-assemblies, software and services on
favorable terms and in compliance with our supplier requirements; 17)
our ability to manage efficiently our manufacturing and logistics, as
well as to ensure the quality, safety, security and timely delivery
of our products and services; 18) any actual or even alleged defects
or other quality, safety and security issues in our products; 19) any
inefficiency, malfunction or disruption of a system or network that
our operations rely on; 20) the impact of cybersecurity breach or
other factors leading to an actual or alleged loss, improper
disclosure or leakage of any personal or consumer data collected by us
or our partners or subcontractors, made available to us or stored in
or through our products; 21) our ability to successfully manage the
pricing of our products and costs related to our products and our
operations; 22) the potential complex tax issues and obligations we
may face, including the obligation to pay additional taxes in various
jurisdictions and our actual or anticipated performance, among other
factors, could result in allowances related to deferred tax assets;
23) exchange rate fluctuations, particularly between the euro, which
is our reporting currency, and the US dollar, the Japanese yen and
the Chineseyuan, as well as certain other currencies; 24) our ability
to protect the technologies, which we or others develop or which we
license, from claims that we have infringed third parties'
intellectual property rights, as well as our unrestricted use on
commercially acceptable terms of certain technologies in our product
and services; 25) the impact of economic, regulatory, political or
other development on our sales, manufacturing facilities and assets
located in emerging market countries as well as the impact of
regulations against imports to those countries; 26) the impact of
changes in and enforcement of government policies, technical
standards, trade policies, laws or regulations in countries where our
assets are located and where we do business; 27) investigations or
claims by contracting parties in relation  to exits from countries,
areas or contractual arrangements; 28) unfavorable outcome of
litigation, regulatory proceedings or investigations by authorities;
29) allegations of possible health risks from electromagnetic fields
generated by base stations and mobile devices, and the lawsuits and
publicity related to them, regardless of merit; 30) Nokia Siemens
Networks' success in the mobile broadband infrastructure and related
services market and its ability to effectively, profitably and timely
adapt business and operations to the diverse needs of its customers;
31) Nokia Siemens Networks' ability to maintain and improve its
market position and respond successfully to changes and competition
in the mobile broadband infrastructure and related services market;
32) Nokia Siemens Networks' success in implementing its restructuring
plan and reducing its operating expenses and other costs; 33) Nokia
Siemens Networks' ability to invest in and timely introduce new
competitive products, services, upgrades and technologies; 34) Nokia
Siemens Networks' dependence on limited number of customers and
large, multi-year contracts; 35) Nokia Siemens Networks' liquidity
and its ability to meet its working capital requirements, including
access to available credit under its financing arrangements and other
credit lines as well as cash at hand; 36) the management of Nokia
Siemens Networks' customer financing exposure; 37) whether ongoing or
any additional governmental investigations of alleged violations of
law by some former employees of Siemens may involve and affect the
carrier-related assets and employees transferred by Siemens to Nokia
Siemens Networks; 38) any impairment of Nokia Siemens Networks
customer relationships resulting from ongoing or any additional
governmental investigations involving the Siemens carrier-related
operations transferred to Nokia Siemens Networks, as well as the risk
factors specified on pages 12-47 of Nokia's annual report on Form
20-F for the year ended December 31, 2012 under Item 3D. "Risk
Factors." Other unknown or unpredictable factors or underlying
assumptions subsequently proving to be incorrect could cause actual
results to differ materially from those in the forward-looking
statements. Nokia does not undertake any obligation to publicly
update or revise forward-looking statements, whether as a result of
new information, future events or otherwise, except to the extent
legally required. 
Nokia, Helsinki - July 18, 2013 
Nokia plans to publish its third quarter 2013 interim report on
October 17, 2013 
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants
that: 
(i) the releases contained herein are protected by copyright and    
other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and     
originality of the information contained therein. 
Source: NOKIA via Thomson Reuters ONE 
[HUG#1717320] 
Media and Investor Contacts: 
Nokia
Corporate Communications
tel. +358 7180 34900
email: press.services@nokia.com 
Investor Relations Europe
tel. +358 7180 34927 
Investor Relations US
tel. +1 914 368 0555 
www.nokia.com
 
 
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