Nokia interim report q3 2013

On September 30, Nokia had investments of EUR million in unlisted funds that make similar investments, reported under Non-current assets, Available-for-sale investments. As a result of the noted transactions, the Group reviewed the structure of its cash generating units for the purposes of the goodwill impairment assessment. Previously, a discounted cash flow analysis with value in use basis was utilized to derive the estimated recoverable values for Smart Devices and Mobile Phones cash generating units.

Interim reports / Nokian Tires

Management does not expect that the parameters used and results of the impairment assessment would materially change during the fourth quarter There was no goodwill impairment charge recorded during the third quarter as a result of the goodwill impairment assessment, however an adverse change in any of the key assumptions used in measuring the recoverable value of our HERE business could have resulted in goodwill impairment as the current carrying value of this cash generating unit is only slightly lower than its' recoverable value.

While we believe the estimated recoverable values are reasonable, actual performance in the short-term and long-term could be materially different from our forecasts, which could impact future estimates of recoverable value of our reporting units and may result in impairment charges. During third quarter , Nokia Group also performed as a result of the above mentioned two transactions an assessment of the potential recoverability of deferred tax assets currently subject to valuation allowance.

The entity recognizes a deferred tax asset arising from unused losses or tax credits only to the extent there is convincing evidence that losses or unused tax credits can be utilized in the future. While no deferred tax assets were recognized for Finnish tax losses and other temporary differences, Nokia Group has at the end of the third quarter in total approximately EUR 2.

The majority of Nokia's Finnish deferred tax assets are indefinite in nature and available against future Finnish tax liabilities. IPR income is allocated to the geographic areas contained in this chart. On a year-on-year basis, net sales decreased in all regions, except for North America. In North America, the year-on-year sales increase was primarily due to our Smart Devices business unit. On a sequential basis, net sales increased in all regions except Latin America and Greater China. In Asia-Pacific and Europe the sequential sales increases were primarily due to higher sales in our Mobile Phones business.

In Latin America the sequential sales decrease was primarily due to lower sales in our Mobile Phones business unit. In Greater China the sequential decrease was primarily due to lower sales in our Smart Devices business unit. 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.

The year-on-year decrease was primarily related to a lower cost base as a result of business divestments and overall cost controls, partially offset by shared function cost categorization. The sequential decrease was primarily due to lower personnel related expenses. In the third quarter , other income and expenses was an expense of EUR 50 million, compared to an expense of EUR million in the third quarter In the third quarter , other income and expense was an expense of EUR 50 million, compared to an expense of EUR 2 million in the second quarter Of the total expected charges relating to restructuring activities of approximately EUR 1.

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. Does not include IPR income. 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 second and third quarters of Accordingly, third quarter operating expenses are not directly comparable to third quarter operating expenses.

Both year-on-year and sequentially, the increase in our Smart Devices net sales in the third quarter was due to higher volumes, partially offset by lower ASPs.


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The year-on-year increase in our Smart Devices volumes in the third quarter was primarily due to higher Lumia volumes, partially offset by lower Symbian volumes. Symbian volumes decreased from 3. Our Lumia volumes increased from 2.

On a sequential basis, the increase in our Smart Devices volumes in the third quarter was primarily due to the Lumia The year-on-year decrease in our Smart Devices ASP in the third quarter was primarily due to lower recognition of deferred revenue related to services sold in combination with our devices and lower sales of accessories, partially offset by a positive mix shift towards sales of our Lumia products which carry a higher ASP than our Symbian products and the net positive effect of foreign currency fluctuations. Sequentially, the decrease in our Smart Devices ASP in the third quarter was primarily due to our pricing actions, lower recognition of deferred revenue on services sold in combination with our devices and the net negative effect of foreign currency fluctuations, partially offset by a positive mix shift towards the Lumia which started to ship in the third quarter and the Lumia which started to ship in the second quarter The significant year-on-year increase in our Smart Devices gross margin in the third quarter was primarily due to a positive mix shift towards sales of our Lumia products which carry a higher gross margin than our Symbian products as well as inventory-related allowances.

Specifically, regarding inventory-related allowances, in the third quarter , Smart Devices gross margin was negatively affected by approximately EUR 20 million of net allowances related to excess component inventory and future purchase commitments. In the third quarter , Smart Devices gross margin was negatively impacted by approximately EUR million of net allowances related to excess component inventory, future purchase commitments and an inventory revaluation.

In the third quarter , the year-on-year increase in our Smart Devices gross margin was also due to lower fixed costs per unit because of higher sales volumes. The year-on-year increase in our Smart Devices gross margin was partially offset by higher warranty costs in the third quarter due to the reversal of previously recognized warranty costs in the third quarter related to our Symbian devices. On a sequential basis, the decrease in our Smart Devices gross margin in the third quarter was primarily due to inventory-related allowances. Specifically, in the third quarter , Smart Devices gross margin was negatively affected by approximately EUR 20 million of excess component inventory and future purchase commitments, whereas in the second quarter our Smart Devices gross margin benefited from the reversal of approximately EUR 20 million of previously recognized excess component inventory and future purchase commitments.

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. 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.

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 second and third quarters of On a year-on-year basis, the decline in our Mobile Phones net sales in the third quarter was due to lower volumes and lower ASPs. On a sequential basis, the increase in our Mobile Phones net sales in the third quarter was due to higher ASPs and higher volumes.

During the third quarter we shipped On a year-on-year basis, our Mobile Phones volumes in the third quarter were negatively affected by competitive industry dynamics, including intense competition at the low end of our product portfolio and intense smartphone competition at increasingly lower price points. On a sequential basis, our Mobile Phones volumes in the third quarter were positively affected by solid performance across the majority of our product portfolio due to recently launched devices, in particular the Nokia , the Asha , and the Nokia The year-on-year decline in our Mobile Phones ASP in the third quarter was primarily due to a higher proportion of sales of lower priced devices as well as general price erosion and our pricing actions.

The sequential increase in our Mobile Phones ASP in the third quarter was primarily due to a higher proportion of sales of higher priced devices, particularly the Asha The sequential increase was partially offset by the net negative effect of foreign currency fluctuations, as well as general price erosion and our pricing actions.

On a year-on-year basis, our Mobile Phones gross margin in the third quarter was approximately flat. On a year-on-year basis, our Mobile Phones gross margin in the third quarter benefitted from higher cost erosion than price erosion. On a year-on-year basis, our Mobile Phones gross margin in the third quarter was negatively impacted by higher fixed costs per unit because of lower sales volumes as well as the net negative effect of foreign currency fluctuations. On a sequential basis, the increase in our Mobile Phones gross margin in the third quarter was primarily due to a higher proportion of higher gross margin devices, particularly the Asha and the Nokia , and the net positive effect of foreign currency fluctuations, partially offset by higher warranty costs in the third quarter , due to the reversal of previously recognized warranty costs in the second quarter 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.

In the third quarter , the year-on-year decline in external HERE net sales was primarily due to the net negative effect of foreign currency fluctuations, lower sales to personal navigation device PND customers consistent with declines in the PND industry and a non-recurring sale of data in the third quarter , partially offset by higher sales to vehicle customers and non-recurrence of a negative sales adjustment made in the third quarter related to historical license fees in the normal course of business for a particular customer.

At constant currency, external HERE net sales would have grown on a year-on-year basis. In the third quarter , the sequential decline in external HERE net sales was primarily due to lower seasonal sales to vehicle customers and the net negative effect of foreign currency fluctuations.

Nokia Says Lumia & Other Phone Sales Declined In Q4 As It Prepares To Sell Division To Microsoft

In the third quarter , HERE had sales of new vehicle licenses of 2. On a year-on-year basis, unit sales to vehicle customers increased primarily due to higher adoption of in-vehicle navigation, whereas on a sequential basis unit sales to vehicle customers decreased primarily due to seasonality.

In the third quarter , the year-on-year and sequential declines in internal HERE net sales were primarily due to lower recognition of deferred revenue related to our Smart Devices business unit. On a year-on-year basis, the increase in HERE non-IFRS gross margin in the third quarter was primarily due to a higher proportion of external sales, which generally carry a higher gross margin, and lower costs related to service delivery.

On a sequential basis, the increase in HERE non-IFRS gross margin in the third quarter was primarily due to lower sales of update units to vehicle customers, which generally carry a lower margin, and lower costs related to service delivery. In the third quarter , HERE operating margin improved significantly to 6.

The year-on-year and sequential improvements in HERE operating margin in the third quarter were primarily due to the absence of significant purchase price accounting-related items arising from the purchase of NAVTEQ, the vast majority of which had been fully amortized as of the end second quarter The following table sets forth a summary of the results for NSN and its reportable segments, Mobile Broadband and Global Services, for the periods indicated, as well as the year-on-year and sequential growth rates. The following table sets forth NSN net sales for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area.

On a constant currency basis, LTE sales grew year-on-year. The year-on-year decrease in Global Services was primarily due to a reduction in network implementation activity, consistent with lower levels of large scale Mobile Broadband deployments, and the exiting of certain contracts in line with NSN's strategic focus. On a regional basis, we had lower cyclical sales in Asia Pacific following high levels of spending a year ago. In Europe, the year-on-year sales decline was primarily related to network modernization and divestments in line with our strategy.

The year-on-year sales decline in Latin America was primarily driven by constrained operator spending and certain contract exits.

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Finally, the year-on-year decline in Middle East and Africa was primarily due to country exits. The sequential decrease in Global Services net sales was primarily due to lower sales in professional services and customer care services, partially offset by higher sales in network implementation activity. The slight sequential decrease in Mobile Broadband net sales was primarily due to lower seasonal sales.

On a regional basis, NSN net sales decline was primarily due to Europe related to lower seasonal spending and Latin America related to lower investments from operators. On a year-on-year basis, the increase in NSN non-IFRS gross margin in the third quarter was primarily due to a higher gross margin in Global Services related to significant efficiency improvements as a result of NSN's restructuring program and the positive impact related to certain customer contract exits and the divestment of businesses which carried a lower gross margin, partially offset by a slightly lower gross margin in Mobile Broadband.

On a sequential basis, the decrease in NSN non-IFRS gross margin in the third quarter was primarily due to lower gross margins in Global Services and Mobile Broadband and the absence of non-recurring IPR income of approximately EUR 20 million that was recognized in the second quarter , partially offset by a better product mix due to a higher proportion of Mobile Broadband net sales. The lower gross margin in Global Services was primarily driven by lower seasonal sales and the absence of the revenue triggered by certain project acceptances which was recognized in the second quarter The gross margin decline in Mobile Broadband was primarily due to costs incurred in anticipation of a technology shift to TD-LTE related to major projects in China and lower seasonal sales.

On a year-on-year basis, non-IFRS research and development expenses were lower primarily due to reduced investments in business activities that are not consistent with our focused strategy as well as increased research and development efficiency, partially offset by higher investments in areas that are consistent with our focused strategy, most notably LTE.

On a sequential basis, non-IFRS research and development expenses were approximately flat in the third quarter On a year-on-year basis, non-IFRS general and administrative expenses were higher, primarily due to consultancy fees related to information technology and other projects. The year-on-year decrease in NSN non-IFRS operating margin in the third quarter was primarily due to a lower contribution margin in Mobile Broadband, partially offset by a higher contribution margin in Global Services.

On a year-on-year basis, the The year-on-year 9. On a sequential basis non-IFRS operating margin decreased due to lower contribution margin for both Global Services and Mobile Broadband which declined by 2. The complete fourth quarter and full year report with tables is available at http: Investors should not rely on summaries of our interim reports only, but should review the complete interim reports with tables.

This reflected strong gross margin and continued progress relative to its strategy in a seasonally strong quarter, partially offset by higher than normal non-IFRS other expenses. Samsung will pay compensation to Nokia for the period commencing from January 1, The amount to be paid by Samsung will be finally settled in a binding arbitration, which is expected to be concluded during Balance sheet highlights: In Q4 , discontinued operations net sales were EUR 2.

Full year discontinued operations net sales were EUR Within discontinued operations, we continue to focus on innovation as well as working capital efficiency and the overall cash flow performance. Having received overwhelmingly strong support from our shareholders at our extraordinary general meeting in November for the sale of our phones business to Microsoft, we are diligently working towards defining Nokia's future direction.

I am pleased with the progress we have made thus far in our strategy evaluation and excited by the opportunities ahead for each of our three continuing businesses: While the first quarter of the year is seasonally weak for our continuing operations, we continue to expect the closing of the Microsoft transaction to significantly improve Nokia's earnings profile. The strength of NSN's underlying profitability highlights just how fundamentally different the company is today, compared with two years ago when it started its restructuring and transformation program.

Today, we are more focused, more innovative and more disciplined. With these fundamental elements in place, we believe NSN is well-positioned to deliver solid business performance for the year ahead. For HERE, we see long-term transformational growth opportunities in the automotive market, as well as in other industries. Thus, we are planning to increase investment levels in to capture these exciting opportunities in the coming years.

For Advanced Technologies, we are focused on continuing to invest in innovation, implementing our successful business strategy of licensing our industry leading intellectual property to companies interested in Nokia's innovations, and are planning to add further value to our partners through technology licensing. Note 1 relating to results information and non-IFRS also referred to as "underlying" results: The results information in this report is unaudited.

Non-IFRS results exclude all material special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i the formation of NSN and ii all business acquisitions completed after June 30, Nokia believes that our non-IFRS results provide meaningful supplemental information to both management and investors regarding Nokia's underlying business performance by excluding the above-described items that may not be indicative of Nokia's business operating results.

These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure s , but should be used in conjunction with the most directly comparable IFRS measure s in the reported results. See note 2 below for information about the exclusions from our non-IFRS results. More information, including a reconciliation of our Q4 and Q4 non-IFRS results to our reported results, can be found in our complete Q4 and full year report with tables on pages 15 and A reconciliation of our Q3 non-IFRS results to our reported results can be found in our complete Q3 interim report with tables on pages 24 and published on October 29, Note 2 relating to non-IFRS exclusions for continuing operations: Q4 - EUR million net consisting of: Nokia introduced a new reporting structure starting with the reporting of the fourth quarter and full year results report.

Nokia has three continuing businesses: NSN is one of the leading global providers of telecommunications infrastructure hardware, software and services, with the focus on the mobile broadband market. In accordance with this transaction, the Siemens name has been phased out from Nokia Siemens Networks' company name and branding. The new name and brand is Nokia Solutions and Networks, also referred to as NSN, which is being used also for financial reporting purposes. Until the end of the second quarter , NSN has been reported as a single reportable segment for Nokia financial reporting purposes.

Mobile Broadband provides mobile operators with radio and core network software together with the hardware needed to deliver mobile voice and data services. Global Services provides mobile operators with a broad range of services, including professional services, network implementation and customer care services. NSN also contains NSN Other, which includes net sales and related cost of sales and operating expenses of non-core businesses as well as Optical Networks through May 6, when its divestment was completed.

HERE focuses on the development of location-based services and local commerce.


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  • Advanced Technologies business builds on several of Nokia's current Chief Technology Office CTO and Intellectual Property Rights activities through advanced research, development and concept products in areas such as connectivity, sensing and material technologies, as well as web and cloud technologies. At the same time, Advanced Technologies plans to continue to build Nokia's patent portfolio from this innovation and targets to expand its industry-leading technology licensing program, spanning technologies that enable mobility today and tomorrow. Historical results information for past periods before the fourth quarter has been regrouped for historical comparative purposes.

    As is customary, certain judgments have been made when regrouping historical results information and allocating items in the regrouped results. The historical comparative financials presented in this report include certain changes to previously reported information. These changes result from the retrospective application of a revised IFRS accounting standard IAS19, Employee Benefits and mainly relate to consolidated statements of comprehensive income and financial position.

    For more information on the adjustments between the previously reported information and the adjusted information, please see the related disclosure starting on page 39 of the complete Q1 interim report with tables published on April 18, Note 5 relating to January-December results: Further information about the results for the period from January 1 to December 31, can be found on pages , and 47 of the complete Q4 and full year report with tables. Note 6 relating to Nokia net cash and other liquid assets: Calculated as total cash and other liquid assets less interest-bearing liabilities.

    For selected information on Nokia Group interest-bearing liabilities, please see the table on pages of the complete Q4 and full year report with tables. This outlook is based on Nokia's expectations regarding a number of factors, including: This outlook is based on Nokia's expectation that the first quarter will be seasonally weak, in addition to the factors mentioned above.

    This compares to Advanced Technologies' current annualized net sales run rate of approximately EUR million. The Nokia Board of Directors will convene the meeting and publish the notice and related proposals at a later date. This evaluation is comprised of evaluations of strategies for each of Nokia's three continuing businesses and possible synergies between them, as well as an evaluation of the optimal corporate and capital structure for Nokia after the closing of the transaction. After this evaluation is complete, deemed excess capital is planned to be distributed to shareholders. The Nokia Board of Directors will decide on its proposal to the Annual General Meeting on distributions to shareholders only after the anticipated closing of the transaction and the completion of the strategy evaluation.

    The transaction is expected to close in the first quarter of , subject to regulatory approvals and other customary closing conditions. As of the end of , Nokia has received the majority of regulatory approvals for the transaction. The following discussion includes information on a non-IFRS, or underlying business performance, basis. 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. Note 1: Change in net sales at constant currency excludes the impact of changes in exchange rates in comparison to the Euro, our reporting currency.

    The following table sets forth Nokia's continuing operations financial position at the end of the periods indicated, as well as the year-on-year and sequential growth rates. Total cash and other liquid assets minus interest-bearing liabilities. In the fourth quarter , Nokia's total cash and other liquid assets decreased by EUR million and Nokia's net cash and other liquid assets decreased by EUR million, compared to the third quarter The sequential decline in Nokia's net cash and other liquid assets was primarily due to cash outflows from discontinued operations, which more than offset cash inflows from Nokia's continuing operations.

    The cash inflows from Nokia's continuing operations were primarily driven by an increase in NSN's profitability on a sequential basis. Excluding approximately EUR million of restructuring-related cash outflows, NSN had cash inflows from net working capital in the fourth quarter of approximately EUR 80 million. In the fourth quarter , Nokia's continuing operations financial income and expenses was a net expense of EUR 50 million, compared to a net expense of 52 million in the fourth quarter and a net expense of EUR 63 million in the third quarter On a year-on-year basis, the decrease was primarily due to lower net foreign exchange-related losses, partially offset by higher interest expenses.

    On a sequential basis, the decrease was primarily due to the recognition of income related to one of our investments and lower interest expenses, partially offset by higher net foreign exchange-related losses. At the end of the fourth quarter , Nokia's continuing operations in Finland had approximately EUR 2. The majority of Nokia's Finnish deferred tax assets are indefinite in nature and available against future Finnish tax income. Given the likely impact of the expected transaction and related licensing agreements with Microsoft on the continuing Nokia businesses as well as the recent financial performance of NSN, the company will continue closely monitoring the need for the valuation allowance.

    Net Sales The following table sets forth NSN net sales for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area. Additionally, NSN net sales were negatively affected by foreign currency fluctuations. The year-on-year decrease in Global Services was primarily due to a reduction in network implementation activity, consistent with lower levels of large scale Mobile Broadband deployments, and the exiting of certain contracts in line with NSN's strategic focus.

    Financial Statement Release Presentation Audio of the result presentation. Interim report January-September Presentation Audio of the result presentation. Interim Report Q Presentation Audio of the result presentation. Half year financial report Presentation material Audio of the result presentation.

    Financial Statement Bulletin Presentation Audio of the result presentation. Interim Report, 2nd quarter , Thursday 5 August, at 8: Interim Report, 1st quarter , Thursday 6 May, at 8: