NOKIA STOCK EXCHANGE RELEASE January 25, 2007
Nokia reports fourth quarter 2006 net sales of EUR 11.7 billion, EPS of EUR
0.32
Nokia reports 2006 net sales of EUR 41.1 billion, EPS of EUR 1.05
Nokia achieves record quarterly and annual device volumes, net sales and EPS
Net sales grew 13% in Q4 and 20% in 2006
EPS grew 28% in Q4 and 27% in 2006
Nokia Board of Directors will propose a dividend of EUR 0.43 per share for
2006 (EUR 0.37 per share for 2005)
NOKIA Q4 and 2006
EUR million Q4/2006 Q4/2005 Change 2006 2005 Change
(%) (%)
Net sales 11701 10333 13 41121 34191 20
Mobile Phones 7076 6217 14 24769 20811 19
Multimedia 2136 2024 6 7877 5981 32
Enterprise Solutions 305 153 99 1031 861 20
Networks 2184 1951 12 7453 6557 14
Operating profit 1519 1368 11 5488 4639 18
Mobile Phones 1257 1060 19 4100 3598 14
Multimedia 326 310 5 1319 836 58
Enterprise Solutions -64 -136 -258 -258
Networks 129 268 -52 808 855 -6
Common Group Expenses -129 -134 -481 -392
Operating margin (%) 13.0 13.2 13.3 13.6
Mobile Phones (%) 17.8 17.1 16.6 17.3
Multimedia (%) 15.3 15.3 16.7 14.0
Enterprise Solutions -21.0 -88.9 -25.0 -30.0
(%)
Networks (%) 5.9 13.7 10.8 13.0
Net profit 1273 1073 19 4306 3616 19
EPS, EUR
Basic 0.32 0.25 28 1.06 0.83 28
Diluted 0.32 0.25 28 1.05 0.83 27
All reported Q4 and 2006 figures can be found in the tables on pages 8-10 and
18-23.
SPECIAL ITEMS
Fourth quarter 2006 special items
- EUR 39 million Nokia Siemens Networks related incremental costs expensed
during the fourth quarter (impacting Networks operating profit)
- EUR 84 million tax refund (included in taxes)
Excluding the net impact of these special items, diluted EPS was EUR 0.30
2006 special items
The following items had a net positive impact of EUR 87 million on operating
profit:
- EUR 128 million of charges primarily related to the restructuring of the CDMA
business and associated asset write-downs (included in Mobile Phones operating
profit)
- EUR 276 million gain representing Nokia's share of the proceeds from the
Telsim sale (included in Networks operating profit)
- EUR 14 million initial restructuring charge for the CDMA business in Mobile
Phones
- EUR 8 million restructuring charge in Enterprise Solutions
- EUR 39 million Nokia Siemens Networks related incremental costs expensed
during the fourth quarter (impacting Networks operating profit)
Other special items include:
- EUR 84 million tax refunds (included in taxes)
Excluding the net impact of these special items, diluted EPS was EUR 1.02
Fourth quarter 2005 special items
- EUR 29 million charge for Enterprise Solutions restructuring (impacting
operating profit)
- EUR 48 million tax refund (included in taxes)
Excluding the net impact of these special items, diluted EPS remained at EUR
0.25
2005 special items
The following items had a net positive impact of EUR 80 million on operating
profit:
- EUR 45 million gain for real estate sales (booked in the group common other
income)
- EUR 61 million gain related to the divestiture of Nokias Tetra business (EUR
42 million included in Networks and EUR 19 million included in Multimedia)
- EUR 18 million gain related to the partial sale of a minority investment
(included in Networks)
- EUR 15 million negative impact for restructuring in Multimedia
- EUR 29 million charge for Enterprise Solutions restructuring
Other special items included:
- EUR 57 million gain for the sale of the France Telecom bond (included in
financial income)
- EUR 48 million tax refund (included in taxes)
Excluding the net impact of these special items, diluted EPS was EUR 0.79
FOURTH QUARTER 2006 HIGHLIGHTS
- Nokia net sales up 16% sequentially and 13% year on year
- Nokia reported diluted EPS was EUR 0.32, and excluding special items was EUR
0.30
- Nokia gross margin 32.4%, up from 30.9% in Q3 2006, and gross margins were
sequentially up in all business groups
- Nokia operating margin 13.3%, up from 12.2% in Q3 2006 (excluding special
items)
- Nokia operating cash flow EUR 1.7 billion
- Nokia device ASP of EUR 89, down from EUR 93 in Q3 2006
- Nokia quarterly device volumes 106 million units, up 19% sequentially and 26%
year on year
- Nokia estimated device market share 36%, unchanged from Q3 2006 and up from
34% in Q4 2005
- Estimated industry Q4 device volumes 290 million units, up 19% sequentially
and year on year
- Nokias Networks business group net sales up 21% sequentially and 12% year on
year
OLLI-PEKKA KALLASVUO, NOKIA CEO:
I am very pleased with Nokias excellent quarterly and full year growth and
performance, and I would like to personally thank the Nokia team for their
great effort in making this happen. We achieved record device volumes, net
sales and EPS for both the fourth quarter and full year 2006. Also, on a
sequential basis profitability improved significantly, with gross margins for
the quarter up in all Nokia business groups.
Nokia was able to increase its share of the global device market significantly
in 2006 to an estimated 36%, clearly solidifying our number one position in the
industry. We achieved this result through the strengths of Nokias world class
brand, products, cost structure and efficiency, without sacrificing our
operating margins or cash flow.
I am also pleased with the net sales growth in Nokias Networks business group,
both in the fourth quarter and full year 2006, executing well on its strategy
to grow its market share. The Nokia Siemens Networks integration work is
progressing and the joint compliance review is under way. We expect to begin
operations as previously communicated.
During 2006, Nokia continued to have excellent operating cash flow of
EUR 4.5 billion, and we distributed EUR 4.9 billion to our shareholders
throughdividends and buybacks.
INDUSTRY AND NOKIA OUTLOOK FOR THE FIRST QUARTER AND FULL YEAR 2007
- Nokia expects industry mobile device volumes in the first quarter 2007 to
reflect normal industry seasonality following a strong fourth quarter 2006
selling period.
- We expect Nokias device market share in the first quarter 2007 to be at
approximately the same level sequentially.
- We expect net sales in Nokias Networks business group to experience a
sequential seasonal decline in the first quarter 2007.
- Nokia expects industry mobile device volumes in 2007 to grow by up to 10%
from the approximately 978 million units Nokia estimates for 2006.
- Nokia continues to expect the device industry to experience value growth in
2007, but expects some decline in industry ASPs, primarily reflecting the
increasing impact of the emerging markets and competitive factors in general.
- Nokia continues to expect slight growth in the mobile and fixed
infrastructure and related services market in euro terms in 2007.
- Nokia continues to target an increase in its market share in mobile devices
in 2007.
FOURTH QUARTER 2006 FINANCIAL HIGHLIGHTS
(Comparisons are given to the fourth quarter 2005 results, unless otherwise
indicated.)
Nokia Group
Nokias fourth quarter 2006 net sales increased 13% to EUR 11.7 billion,
compared to EUR 10.3 billion in the fourth quarter 2005. At constant currency,
group net sales would have been up 12% year on year.
Nokias fourth quarter 2006 operating profit increased 11% to EUR 1.5 billion
(including a negative special item of EUR 39 million), compared to
EUR 1.4 billion in the fourth quarter 2005 (including a negative special
item of EUR 29 million). Nokias fourth quarter 2006 operating margin
was 13.0% (13.2%).
Operating cash flow for the fourth quarter 2006 was EUR 1.7 billion, compared
to EUR 1.1 billion for the fourth quarter 2005. As of December 31, 2006, our
net debt-to-equity ratio (gearing) was -68% (-77% as of December 31, 2005).
Mobile devices
The combined mobile device volume of our Mobile Phones, Multimedia and
Enterprise Solutions business groups for the fourth quarter 2006 was a record
106 million units, up 19% sequentially and 26% year on year. Overall industry
volumes for the fourth quarter 2006 reached an estimated 290 million units, up
19% sequentially and year on year.
In converged devices, according to Nokia estimates, the total industry volume
reached approximately 24.6 million units for the fourth quarter 2006, compared
to an estimated 17.8 million units in the fourth quarter 2005. Nokias own
converged device volumes for the fourth quarter 2006 grew to 11.1 million
units, compared to 9.3 million units in the fourth quarter 2005. Almost 6
million Nokia Nseries multimedia computers were shipped in the fourth quarter.
The following chart sets out, by geographic area, Nokias mobile device volumes
for the periods indicated, and provides year on year and sequential growth
rates.
NOKIA MOBILE DEVICE VOLUME BY GEOGRAPHIC AREA
(million units) Q4 2006 Q4 2005 YoY Q3 2006 QoQ
Change Change
(%) (%)
Europe 33.3 29.9 11.4 24.8 33.9
Middle East & Africa 15.5 10.3 50.5 13.3 16.5
China 14.6 9.5 53.7 13.8 5.8
Asia-Pacific 23.7 14.8 60.1 20.9 13.4
North America 5.9 9.8 -39.8 5.8 1.7
Latin America 12.5 9.4 33.0 9.9 26.3
Total 105.5 83.7 25.9 88.5 19.1
Nokias estimated market share for the fourth quarter 2006 was 36%, flat
sequentially and up from 34% in the fourth quarter 2005. On a sequential basis,
Nokia gained market share in Europe. This gain was offset by market share
declines in Latin America, North America and Asia-Pacific, while our market
share in China and Middle East & Africa remained virtually unchanged
sequentially. On a year on year basis, Nokia gained market share in every area
except North America in the fourth quarter 2006.
The average selling price of Nokias mobile devices declined in the fourth
quarter 2006 to EUR 89, compared to EUR 93 in the third quarter 2006 and EUR 99
in the fourth quarter 2005. Sequentially, our ASP was impacted by a lower
percentage of sales from our higher end products, specifically from our
Multimedia business group, that more than offset the relatively stable ASPs in
our entry-level product sales. The year on year decline in our ASP was driven
primarily by the strong growth of the emerging markets, which have lower ASPs,
and the growth of Nokias market share in those markets, in addition to which
certain higher-end products in our portfolio were not viewed as sufficiently
competitive in various markets.
Mobile Phones: Fourth quarter 2006 net sales grew 14% to EUR 7.1 billion,
compared to EUR 6.2 billion in the fourth quarter 2005. Net sales growth was
driven by strong volume growth, especially in the entry level, and Nokias
ability to capture incremental volumes with its competitive entry-level product
portfolio and strong logistics. Volume growth was partially off-set by
declining ASPs. Net sales growth was strongest in Latin America, followed by
Asia-Pacific, Middle East & Africa, Europe and China. Net sales declined
significantly in North America, driven primarily by the continued lack of broad
acceptance of certain products in our portfolio, and lower volumes in our CDMA
business.
Mobile Phones fourth quarter 2006 operating profit increased 19% year on year
to EUR 1 257 million, compared to EUR 1 060 million in the fourth quarter 2005,
with an operating margin of 17.8% (17.1%). The strong operating profit growth
was driven by strong net sales and effective operating expense control.
Multimedia: Fourth quarter 2006 net sales grew 6% to EUR 2 136 million,
compared to EUR 2 024 million in the fourth quarter 2005. Multimedia continued
to benefit from good sales of Nokia Nseries multimedia computers, but net sales
were somewhat affected by the delay in ramp up of new products. Net sales
growth was strongest in Latin America, followed by China, Asia-Pacific and
Middle East & Africa. Net sales decreased in North America and Europe.
Multimedia fourth quarter 2006 operating profit grew 5% to EUR 326 million,
compared to EUR 310 million in the fourth quarter 2005, with an operating
margin of 15.3% (15.3%). Operating profit in the fourth quarter 2006 reflected
the challenges noted above, but also benefited from effective operating expense
control.
Enterprise Solutions: Fourth quarter 2006 net sales increased 99% to EUR 305
million, compared to EUR 153 million in the fourth quarter 2005. Net sales in
the fourth quarter 2006 were driven primarily by a buoyant enterprise device
market and Nokias strong volume growth in its enterprise device business,
especially from the Nokia Eseries. Net sales were up more than 100% in China,
Latin America, North America, Europe and Middle East & Africa, but less than
that in Asia-Pacific.
In the fourth quarter 2006, Enterprise Solutions had an operating loss of EUR
64 million, compared to an operating loss of EUR 136 million in the fourth
quarter 2005. The fourth quarter 2005 operating loss included a EUR 29 million
restructuring charge. The improved operating loss reflected the increased net
sales and improved operating expense control.
Networks: Fourth quarter 2006 net sales increased 12% to EUR 2 184 million,
compared to EUR 1 951 million in the fourth quarter 2005. Net sales growth was
strongest in Middle East & Africa, followed by Asia-Pacific, China, Latin
America and Europe. Net sales were down significantly in North America.
Networks fourth quarter 2006 operating profit decreased 52% to EUR 129 million
(including the negative impact of EUR 39 million incremental costs related to
Nokia Siemens Networks), compared to EUR 268 million in the fourth quarter
2005, with an operating margin of 5.9% (13.7%). Excluding the charge, the
operating margin would have been 7.7% in the fourth quarter 2006. The decline
in operating profit, excluding the incremental costs related to Nokia Siemens
Networks expensed during the fourth quarter, primarily reflected pricing
pressure and our efforts to gain market share, a greater proportion of sales
from the emerging markets and a higher share of services sales.
FOURTH QUARTER 2006 OPERATING HIGHLIGHTS
Mobile Phones
Highlights include:
- The strengthening of Nokias mid-range offering with the announcements of the
Nokia 6300, a thin phone with appealing design; the Nokia 6290, a 3G model with
a number of practical new features and Quick Cover access keys; and the Nokia
6086, a quad-band GSM and UMA-enabled camera phone.
- Nokias announcement with T-Mobile of the sleek and powerful Nokia 6133
handset with a 1.3 megapixel camera and an integrated music player.
- The announcement of the latest addition to Nokias family of "Active" phones
with the Nokia 5500 Sport Music Edition.
- An addition to Nokias entry portfolio with the announcement of the Nokia
2626, a colorful mobile phone designed for style-conscious consumers.
- The announcement of two CDMA entry models, the Nokia 1325 and Nokia 1265,
which feature a number of desirable features such as handsfree speakers and
voice recorders.
- An announcement from Nokia and Yahoo! on the extension of their partnership
to offer Yahoo! branded services including Yahoo! Mail and Messenger on Nokia's
wide range of mobile phones operating on the Series 40 platform.
Multimedia
Highlights include:
- The completion of Nokias acquisitions of gate5 AG, a leading supplier of
mapping, routing and navigation software and services; and Loudeye Corp, a
global leader of digital music platforms and digital media distribution
services.
- First sales of the Nokia Nseries music range: Nokia N70 and Nokia N73 music
editions, and Nokia N91 8GB.
- Nokia and SIPphones announcement of the availability of Gizmo VoIP Services
for the Nokia N80 Internet Edition.
- Nokias announcement of a DVB-H broadcast mobile TV pilot with Indian
national television broadcaster Doordarshan.
Enterprise Solutions
Highlights include:
- The announcement of the Nokia for Business Channel Program designed to
accelerate the widespread adoption of business mobility. Well over 600
companies had registered for the program by end of the fourth quarter.
- Strong growth in email licenses of Nokia Intellisync Mobile Suite, growing
from 1 million to 1.2 million.
- The announcement of multiple new customers for Nokia Intellisync Mobile
Suite, including EPUSH Software Solution Gmbh and the Associated Carrier Group
(ACG).
- Nokia and TietoEnators announcement of increased cooperation, with the
launch of next-generation mobility services.
- The expansion of Nokias security offerings with the launch of Nokia
Intrusion Prevention with Sourcefire, offering advanced protection for the
"dissolving" network perimeter.
Networks
Highlights include:
- Nokias selection by Sprint Nextel US as a key infrastructure provider for
its 4G WiMAX next generation mobility network.
- The announcement of a number of managed services deals including: a USD 400
million network expansion and Managed Services agreement with Bharti Airtel; a
USD 230 million Managed Services contract with Vodafone Australia; and Managed
Service contracts in Indonesia with Indosat and Hutchison Telecom Indonesia.
- The announcements of a GSM/GPRS/EDGE network expansion contract with Russias
MegaFon worth over EUR 320 million; a USD 110 million GSM/EDGE network
expansion contract with DTAC in Thailand; a USD 100 million GSM/EDGE network
and services contract with Thailands AIS; expansion deals with China Mobile
Zhejiang and Guangdong MCC; and network expansion and modernization contracts
with Wataniya in Kuwait and AVEA in Turkey.
- Nokia won a 3-year frame agreement for 3G core and radio network to Ukraines
Ukrtelecom, with Nokia the sole equipment supplier to the operator.
- Nokias selection to deploy WCDMA 3G for T-Mobile USA, for its modular Flexi
WCDMA Base Station. Another Flexi deal was won with Wind in Italy.
- The expansion of Nokias Flexi range with the announcement of the Nokia Flexi
WiMAX and Flexi EDGE Base Stations.
- Nokia supported Australias Optus, Polands Polkomtel, Orange France, and
Vodafone Australia and New Zealand with the launch of HSDPA trials or services
in the quarter; and along with Singapores M1 completed Southeast Asias first
HSUPA data call with a Nokia Flexi WCDMA Base Station.
NOKIA IN FOURTH QUARTER 2006
(International Financial Reporting Standards (IFRS) comparisons given to the
fourth quarter 2005 results, unless otherwise indicated.)
Nokias net sales increased 13% to EUR 11 701 million (EUR 10 333 million).
Sales of Mobile Phones increased by 14% to EUR 7 076 million
(EUR 6 217 million). Sales of Multimedia increased by 6% to
EUR 2 136 million (EUR 2 024 million). Sales of Enterprise Solutions
increased by 99% to EUR 305 million (EUR 153 million).Sales of Networks
increased by 12% to EUR 2 184 million (EUR 1 951 million).
Operating profit increased by 11% to EUR 1 519 million (EUR 1 368 million),
representing an operating margin of 13.0% (13.2%). Operating profit in Mobile
Phones increased 19% to EUR 1 257 million (EUR 1 060 million), representing an
operating margin of 17.8% (17.1%). Operating profit in Multimedia increased by
5% to EUR 326 million (EUR 310 million), representing an operating margin of
15.3% (15.3%). Enterprise Solutions reported an operating loss of
EUR 64 million (operating loss of EUR 136 million). Operating profit in
Networks decreased to EUR 129 million (EUR 268 million), representing an
operating margin of 5.9% (13.7%). Common Group expenses totaled EUR 129 million
(EUR 134 million).
Financial income was EUR 44 million (EUR 78 million). Profit before tax and
minority interests was EUR 1 568 million (EUR 1 453 million). Net profit
totaled EUR 1 273 million (EUR 1 073 million). Earnings per share increased to
EUR 0.32 (basic) and to EUR 0.32 (diluted), compared to EUR 0.25 (basic) and
EUR 0.25 (diluted) in the fourth quarter 2005.
PERSONNEL
The average number of employees from January to December 2006 was 65 324. At
December 31, 2006, Nokia employed a total of 68 483 people (58 874 people at
December 31, 2005).
SHARES AND SHARE CAPITAL
Nokia repurchased through its share repurchase plan a total of 45 350 000
shares on the Helsinki Stock Exchange at an aggregate price of EUR 699 988 150,
and an average price of EUR 15.44 per share, during the period from October 20,
2006 to December 19, 2006. The price paid was based on the market price at the
time of repurchase. The shares were repurchased to be used for the purposes
specified in the authorization held by the Board. The aggregate par value of
the shares purchased was EUR 2 721 000, representing approximately 1.1% of the
share capital of the company and of the total voting rights. These new holdings
did not have any significant effect on the relative holdings of the other
shareholders of the company nor on their voting power.
As announced on October 20, 2006, Nokia transferred a total of 222 042 Nokia
shares held by it as settlement under the Nokia Restricted Share Plan 2003 to
the Plan participants, personnel of Nokia Group. The aggregate par value of the
shares transferred was EUR 13 322.52, representing approximately 0.005% of the
share capital of the company and the total voting rights. The transfer did not
have a significant effect on the relative holdings of the other shareholders of
the company nor on their voting power.
On December 31, 2006, Nokia and its subsidiary companies owned 129 312 226
Nokia shares. The shares had an aggregate par value of EUR 7 758 733.56,
representing approximately 3.2% of the share capital of the company and the
total voting rights. The total number of shares at December 31, 2006 was
4 095 042 619. On December 31, 2006, Nokia's share capital was
EUR 245 702 557.14.
Q4 2006 BY BUSINESS GROUP, EUR million
(unaudited)
Mobile Multi- Enter- Net- Common Elimi- Group
Phones media prise works Group nati-
Solu- Func- ons
tions tions
Net 7 076 2 136 305 2 184 - 11 701
sales
Gross 2 103 820 134 726 10 3 793
profit
Gross 29.7 38.4 43.9 33.2 32.4
margin,
%
Research -312 -246 -82 -341 -84 -1 065
and
development
expenses
% of net 4.4 11.5 26.9 15.6 9.1
sales
Selling -502 -225 -101 -164 -15 -1 007
and
marketing
expenses
% of net 7.1 10.5 33.1 7.5 8.6
sales
Adminis- -21 -13 -15 -79 -54 -182
trative
and
general
expenses
% of net 0.3 0.6 4.9 3.6 1.6
sales
Other -11 -10 - -13 14 -20
operating
income
and expenses
Operating 1 257 326 -64 129 -129 1 519
profit
Operating 17.8 15.3 -21.0 5.9 13.0
margin, %
Q4 2005 BY BUSINESS GROUP, EUR million
(unaudited)
Mobile Multi- Enter- Net- Common Elimi- Group
Phones media prise works Group nati-
Solu- Func- ons
tions tions
Net 6 217 2 024 153 1 951 - -12 10 333
sales
Gross 1 868 802 68 784 1 - 3 523
profit
Gross 30.0 39.6 44.4 40.2 34.1
margin, %
Research -332 -242 -90 -325 -61 - -1 050
and
development
expenses
% of net 5.3 12.0 58.8 16.7 10.2
sales
Selling -451 -231 -62 -137 -5 - -886
and
marketing
expenses
% of net 7.3 11.4 40.5 7.0 8.6
sales
Adminis- -19 -11 -20 -54 -69 - -173
trative
and
general
expenses
% of net 0.3 0.5 13.1 2.8 1.7
sales
Other -6 -8 -32 - - -46
operating
income
and expenses
Operating 1 060 310 -136 268 -134 - 1 368
profit
Operating 17.1 15.3 -88.9 13.7 13.2
margin, %
NOKIA NET SALES BY GEOGRAPHIC AREA, EUR million
(audited)
10-12/ Y-o-Y 10-12/ 1-12/ Y-o-Y 1-12/
2006 change, % 2005 2006 change, % 2005
Europe 4 787 8 4 447 15 587 9 14 297
Middle-East & 1 334 20 1 108 5 277 16 4 554
Africa
China 1 414 25 1 127 5 361 39 3 846
Asia-Pacific 2 279 28 1 775 8 361 39 6 007
North America 683 -34 1 030 2 970 5 2 841
Latin America 1 204 42 846 3 565 35 2 646
Total 11 701 13 10 333 41 121 20 34 191
NOKIA PERSONNEL BY GEOGRAPHIC AREA
31.12.2006 Y-o-Y 31.12.2005
change, %
Europe 39 306 6 37 053
Middle-East & Africa 1 021 188 355
China 7 452 22 6 119
Asia-Pacific 9 868 118 4 518
North America 5 574 -12 6 369
Latin America 5 262 18 4 460
Total 68 483 16 58 874
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IFRS, EUR million
(10-12/2006 and 10-12/2005 unaudited, full year 2006 and 2005 audited)
10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
Net sales 11 701 10 333 41 121 34 191
Cost of sales -7 908 -6 810 -27 742 -22 209
Gross profit 3 793 3 523 13 379 11 982
Research and development expenses -1 065 -1 050 -3 897 -3 825
Selling and marketing expenses -1 007 -887 -3 314 -2 961
Administrative and general expenses -182 -171 -666 -609
Other income 76 18 522 285
Other expenses -96 -65 -536 -233
Operating profit 1 519 1 368 5 488 4 639
Share of results of associated 5 7 28 10
companies
Financial income and expenses 44 78 207 322
Profit before tax 1 568 1 453 5 723 4 971
Tax -286 -348 -1 357 -1 281
Profit before minority interests 1 282 1 105 4 366 3 690
Minority interests -9 -32 -60 -74
Profit attributable to equity holders 1 273 1 073 4 306 3 616
of the parent
Earnings per share, EUR
(for profit attributable to the equity
holders of the parent)
Basic 0.32 0.25 1.06 0.83
Diluted 0.32 0.25 1.05 0.83
Average number of shares (1 000
shares)
Basic 3990208 4243373 4062833 4365547
Diluted 4016956 4250639 4086529 4371239
Depreciation and amortization, total 179 189 712 712
Share-based compensation expense, 92 57 192 104
total
NOKIA IN JANUARY - DECEMBER 2006
(Comparisons are given to the 2005 results, unless otherwise indicated.)
Nokia Group
For 2006, Nokias net sales increased 20% to EUR 41.1 billion, compared to EUR
34.2 billion in 2005. At constant currency, group net sales would have grown
17% in 2006.
In 2006, Europe accounted for 38 % of Nokias net sales (42% in 2005), Asia-
Pacific 20% (18%), China 13% (11%), North America 7% (8%), Latin America 9%
(8%), and Middle East & Africa 13% (13%). The 10 markets in which Nokia
generated the greatest net sales in 2006 were, in descending order of
magnitude, China, the US, India, the UK, Germany, Russia, Italy, Spain,
Indonesia and Brazil, together representing 51% of total net sales in 2006. In
comparison, the 10 markets in which Nokia generated the greatest net sales in
2005 were China, the US, the UK, India, Germany, Russia, Italy, Spain, Saudi
Arabia and France, together representing 52% of total net sales in 2005.
Nokias gross margin in 2006 was 32.5%, compared to 35.0% in 2005. This lower
gross margin primarily reflected the inability of certain higher end products
in our portfolio to compete effectively in various markets, coupled with a
general shift to lower priced products driven primarily by the growth of the
emerging markets and Nokias strong position in those markets. Gross margin was
also negatively impacted by a decline in Networks gross margin, which was
primarily affected by pricing pressure and our efforts to gain market share, a
greater proportion of sales from the emerging markets and a higher share of
services sales.
In 2006, our sales and marketing expenses were EUR 3.3 billion, up 12% from EUR
3.0 billion in 2005, reflecting increased sales and marketing spend in all
business groups to support new product introductions. Sales and marketing
expenses represented 8.1% of net sales in 2006, down from 8.7% in 2005.
Research and development expenses were EUR 3.9 billion in 2006, up 1.9% from
EUR 3.8 billion in 2005. Research and development costs represented 9.5% of net
sales in 2006, down from 11.2% in 2005. The decrease in research and
development as a percentage of net sales reflected our continued effort to
improve the efficiency of our investments. As of December 31, 2006, we employed
21 453 people in research and development, representing approximately 31% of
Nokias total workforce, and had a strong research and development presence in
11 countries.
Administrative and general expenses were EUR 0.7 billion in 2006, compared to
EUR 0.6 billion in 2005. Administrative and general expenses were equal to 1.6%
of net sales in 2006 (1.8%).
Nokias operating profit for 2006 increased 18% to EUR 5.5 billion (including
net positive special items of EUR 87 million), compared to EUR 4.6 billion in
2005 (including net positive special items of EUR 80 million). An increase in
Mobile Phones and Multimedias operating profit in 2006 more than offset an
unchanged operating loss in Enterprise Solutions and an operating profit
decline in Networks. Nokias operating margin was 13.3% in 2006, compared to
13.6% in 2005.
Mobile devices
In our Mobile Phones, Multimedia and Enterprise Solutions business groups,
combined mobile device volumes were up 31% in 2006, compared to 2005, reaching
347 million units - a new annual volume record for Nokia. Market volume for the
same period was estimated at 978 million units, an increase of 23%. Based on
our preliminary market estimate, Nokias market share grew to 36% in 2006,
compared to 33% in 2005.
In converged devices, according to Nokia estimates, the total industry volume
reached approximately 80 million units in 2006, compared to an estimated 46.3
million units in 2005. Nokias own converged device volumes in 2006 grew to
39.0 million units, compared to 28.5 million units in 2005. In 2006, Nokia was
the world's largest camera manufacturer with approximately 140 million cameras
sold as well as close to 70 million music enabled devices, making Nokia the
world's largest manufacturer of music devices as well.
In 2006, we estimate Nokia was the market leader in Europe, Asia-Pacific and
Latin America. Nokia was also the market leader in some of the fastest growing
markets of the world including, China, Middle East & Africa, South East Asia
Pacific, India, as well as in WCDMA technology.
During 2006, Nokia gained device market share in China, Asia-Pacific and Latin
America. In China, Nokia had another year of excellent market share gains
driven by its extensive distribution system, broad product portfolio, brand and
a continued push into the rural markets. Nokias healthy market share gains in
Asia-Pacific were driven by gains in South East Asia Pacific, and we also
benefited from our strong position in the fastest growing markets like India.
In Asia-Pacific, Nokia continued to benefit from its brand, broad product
portfolio and extensive distribution system. In Latin America, Nokia's 2006
market share gains were driven by gains in markets like Brazil, Mexico and
Argentina. Nokias strength in Latin America was especially driven by its
strong entry-level product portfolio and improving mid-range offering.
In Europe, we estimate our market share was down slightly in 2006. Nokia 2006
share gains in markets like Italy, Russia, Spain and in WCDMA technology were
offset by share declines in other European markets, including the United
Kingdom, as a result of the intense competitive environment.
In Middle East & Africa, our volume growth was below regional industry volume
growth resulting in a loss of market share, while the overall high growth of
the area and Nokias strong market position positively contributed to our
global volume growth. Nokia continues to benefit in Middle East & Africa from
its brand, broad product portfolio and extensive distribution system.
In North America, conditions remain difficult. In 2006, the continued lack of
broad acceptance of certain products in our portfolio, and lower volumes in our
CDMA business in the fourth quarter, resulted in our volumes and market share
declining compared to 2005.
Nokia's device ASP in 2006 was EUR 96, declining 7% from EUR 103 in 2005.
Industry ASPs declined in 2006, driven primarily by the strong device volume
growth in the emerging markets, which have lower ASPs. For Nokia, the ASP
decline was caused primarily by our strong and growing market share in these
emerging markets, in addition to which certain higher-end products in our
portfolio were not viewed as sufficiently competitive in various markets.
Mobile Phones
In the Mobile Phones business group, 2006 net sales increased 19% to EUR 24.8
billion, compared to EUR 20.8 billion in 2005. At constant currency, Mobile
Phones net sales would have increased 15% in 2006. Net sales growth was driven
by strong volume growth, especially in the entry level, and Nokias ability to
capture incremental volumes with its competitive entry-level product portfolio
and strong logistics. Volume growth was partially off-set by declining ASPs.
Net sales increased in all areas and were strongest in Latin America, followed
by Asia-Pacific, China, Europe, Middle East & Africa and North America.
Mobile Phones operating profit in 2006 increased 14% to EUR 4.1 billion
(including negative special items of EUR 142 million), compared to EUR 3.6
billion in 2005. The business groups operating margin was 16.6% (17.3%). The
increase in operating profit was driven by strong net sales and effective
operating expense control. Operating profit was negatively impacted by a lack
of broad acceptance of certain higher end products in our portfolio.
Multimedia
In the Multimedia business group, 2006 net sales increased 32% to EUR 7.9
billion, compared to EUR 6.0 billion in 2005. At constant currency, Multimedia
net sales would have increased 27% in 2006. Net sales were driven by a robust
overall device market supporting sales of more than 16 million Nokia Nseries
multimedia computers during the year, led by the Nokia N70 and Nokia N73. Net
sales growth was strongest in China followed by Asia-Pacific, Latin America,
Middle East & Africa and Europe. Multimedia net sales declined in North America
and continued at a low level in 2006.
Multimedias operating profit in 2006 increased 58% to EUR 1.3 billion,
compared to EUR 836 million in 2005 (including net positive special items of
EUR 4 million). The business groups operating margin was 16.7% (14.0%). The
increase in operating profit reflected the increase in sales of our Multimedia
products and effective operating expense control.
Enterprise Solutions
In the Enterprise Solutions business group, 2006 net sales increased 20% to EUR
1.0 billion, compared to EUR 861 million in 2005. At constant currency,
Enterprise Solutions net sales would have increased 17% in 2006. Net sales
growth was highest in China, North America, Europe, Latin America and Asia-
Pacific. Net sales declined in Middle East & Africa. The Nokia Eseries sold
almost 2 million units since its introduction in the second quarter 2006.
Enterprise Solutions operating loss of EUR 258 million (including a EUR 8
million restructuring charge) was flat in 2006, compared to 2005. 2005
operating profit included a EUR 29 million restructuring charge. In 2006,
higher net sales and effective operating expense control were off-set by the
negative impact of a mix shift to lower-end products.
Networks
In the Networks business group, 2006 net sales increased 14% to EUR 7.5
billion, compared to EUR 6.6 billion in 2005. At constant currency, Networks
net sales would have increased 12% in 2006. Strong net sales growth in Middle
East & Africa, Asia-Pacific, China and Latin America was partially offset by a
net sales decline in North America and Europe. Net sales growth for Networks
was especially strong in the emerging markets, like India, where the market
continued its robust growth and where Nokia estimates it gained market share.
Networks operating profit for 2006 was EUR 808 million (including net positive
special items of EUR 237 million), compared to EUR 855 million in 2005
(including net positive special items of EUR 60 million). The business groups
operating margin for 2006 was 10.8% (13.0%). The lower operating profit,
excluding the special items, primarily reflected pricing pressure and our
efforts to gain market share, a greater proportion of sales from the emerging
markets and a higher share of services sales.
OPERATING HIGHLIGHTS IN 2006
Mobile Phones
During 2006, Mobile Phones introduced 39 new mobile device models, including 11
CDMA models. Of the total devices introduced, 23 were in the mid range or high
end, while 7 were at the entry level. Highlights from 2006 include:
- Announcement of Nokias first Universal Mobile Access, or
UMA, products, the Nokia 6136 and Nokia 6086. The Nokia 6136 started shipping
during the year.
- The strengthening of Mobile Phones mid-range offering with the announcement
and first shipments of several GSM quadband (850/900/1800/1900) models, such as
the Nokia 6125, Nokia 6131 and Nokia 6133.
- The strengthening of Mobile Phones WCDMA offering with the announcement and
first shipments of the Nokia 6151 and Nokia 6288; the first shipments of the
Nokia 6233 and Nokia 6234; and the announcement of the Nokia 6290.
- Announcement of Nokias thinnest mobile device to date, the Nokia 6300.
- The refreshment of the look and feel of the popular Nokia 8800 with the
announcement and first shipments of the Nokia 8800 Sirocco Edition, featuring a
sliding stainless steel case.
- Announcement and first shipments of the "LAmour II" collection of fashion-
inspired mobile phones, in three different form factors and two color schemes,
including Nokias first fashion 3G phone.
- The expansion of Nokias range of music-optimized devices with the
announcement and first shipments of the Nokia 5300 XpressMusic, Nokia 5200 and
Nokia 3250 XpressMusic.
- A new edition to Nokias active product offering with the announcement and
first shipments of the Nokia 5500 Sport, a smartphone with a sleek, sporty
design and athletic lifestyle appeal.
- The refreshment of the popular Nokia 1100 series with the announcement and
first shipments of the Nokia 1110i and Nokia 1112 black and white display
models.
- Announcement and first shipments of the Nokia 2310, Nokia 2610 and Nokia 2626
color display models, widening Nokias color screen product offering for entry
users.
Multimedia
In 2006, Multimedia continued to build the Nokia Nseries sub-brand and
multimedia computer category by bringing new products and applications to the
market. Multimedia also continued sales of pre-Nokia Nseries multipurpose
mobile devices, such as the Nokia 7610 and Nokia 6600. Highlights from 2006
include:
- In the third quarter, we announced the acquisitions of Loudeye, a global
leader in digital music platforms, and gate5, a leading supplier of mapping and
navigation software. The acquisitions, both of which were completed during the
fourth quarter 2006, are intended to accelerate the development of Nokias
music and location-based experiences for consumers.
- Strong consumer demand for Nokia Nseries multimedia computers, including the
Nokia N70, Nokia N72 and Nokia N73.
- Shipments from the third quarter of the Nokia N93, the first Nokia device
featuring optical zoom and DVD-like quality video recording.
- The announcement of the Nokia N95, featuring support for high-speed mobile
connectivity over HSDPA and WLAN, as well and a Global Positioning System with
the Maps application.
- Shipments from the second quarter of the Nokia N91, featuring a 4GB hard disk
and WLAN connectivity.
- Shipments from the fourth quarter of the Nokia N92, featuring an integrated
DVB-H receiver that enables broadcast TV services on a mobile device.
- In the third quarter, we launched the Nokia podcasting application, which
enables people to discover and download Internet-based podcasts directly to
their Nokia Nseries multimedia computer. We also launched Music Recommenders,
an online music community, in the fourth quarter 2006.
Enterprise Solutions
Highlights from 2006 include:
- Nokia Eseries first shipments - Nokia E60, Nokia E61, Nokia E70, Nokia E50
and Nokia E62 - a range of devices designed for business users and the IT
organizations that support them. The devices differ in terms of physical design
and features, and use a single software platform that can be integrated with
different applications and corporate solutions.
- In February, Nokia acquired Intellisync Corporation, which has become an
integral part of the Mobility Solutions unit within Enterprise Solutions.
During the year we further developed the Intellisync device management software
offering, which enables operators to provide mobile device management services
to enterprise customers, and allows companies to self-manage their mobile
devices.
- Announcement of collaboration on business telephony with Alcatel. The
Intellisync Call Connect solution from Nokia integrates the Nokia Eseries
devices with the Alcatel OmniPCX telephone switch.
- Announcement of plans to offer Sourcefires Intrusion Prevention System in
Nokias portfolio of high-performance IP Security Platforms.
- The launch of a global Nokia for Business channel program to enable sales of
Nokia products and solutions through complementary Value Added Reseller, or
VAR, systems integrator, and distributor channels.
- First shipments of new security appliances for the firewall market, the Nokia
IP390 and Nokia IP560.
Networks
At the end of 2006, Networks had more than 150 customers in more than 60
countries, with our systems serving in excess of 400 million subscribers.
Highlights from 2006 include:
- A EUR 580 million GSM/GPRS network expansion frame agreement with China
Mobile.
- A contract to deploy 3G/WCDMA for T-Mobile in the United States.
- Major managed services contracts:
- A USD 400 million network expansion and managed services contract
with Bharti Airtel in India.
- A USD 230 million managed services deal with Vodafone Australia.
- A 5-year managed services deal with Hutchison Essar Limited in
India.
- The first public references for Nokias innovative Flexi WCDMA Base Station
were announced with TIM Hellas Greece, Telkomsel Indonesia, Vivatel Bulgaria,
Taiwan Mobile, Ukrtelecom in Ukraine, Wind Italy, Indosat Indonesia and T-
Mobile USA.
- The unveiling of the Nokia Flexi WiMAX Base Station and the Flexi EDGE Base
Station.
- Expansion of Nokias global footprint for HSDPA, with a cumulative total of
more than 40 customers by the end of 2006.
- Vodafone Group selection of Nokia as a preferred supplier of IP Multimedia
Subsystem, or IMS, to Vodafone affiliates worldwide.
- A USD 150 million contract with Canadas TELUS to deploy a next-generation IP
broadband access network.
- Nokia reached the 100th mobile softswitch customer milestone following a deal
with SFR France.
RESEARCH AND DEVELOPMENT, AND TECHNOLOGY
Highlights from 2006 include:
- Nokia announced a new low-power radio technology called Wibree.
- Nokia Research Center, celebrating its 20th anniversary, opened two new
research centers with strategic university collaborations in the US. Nokia
Research Center in Cambridge, Massachusetts, is a joint research facility with
the Massachusetts Institute of Technology (MIT). The Nokia Research Center site
in Palo Alto, California, works in close collaboration with Stanford
University.
- S60 on Symbian OS, the market-leading smartphone software, was chosen as a
preferred software platform by operators Vodafone and Orange.
NOKIA IN 2006
(International Financial Reporting Standards (IFRS) comparisons given to Nokia
2005 results, unless otherwise indicated.)
Nokias net sales increased 20% to EUR 41 121 million (EUR 34 191 million).
Sales of Mobile Phones increased 19% to EUR 24 769 million (EUR 20 811
million). Sales of Multimedia increased 32% to EUR 7 877 million (EUR 5 981
million). Sales of Enterprise Solutions increased 20% to EUR 1 031 million (EUR
861 million). Sales of Networks increased 14% to EUR 7 453 million (EUR 6 557
million).
Nokias operating profit for 2006 increased 18% to EUR 5 488 million, including
net positive special items of EUR 87 million (operating profit of EUR 4 639
million in 2005, including net positive special items of EUR 80 million),
representing a 2006 operating margin of 13.3% (13.6%). Operating profit in
Mobile Phones increased 14% to EUR 4 100 million (operating profit of EUR 3 598
million in 2005), representing a 2006 operating margin of 16.6% (17.3%).
Operating profit in Multimedia increased to EUR 1 319 million (operating profit
of EUR 836 million in 2005), representing a 2006 operating margin of 16.7%
(14.0%). Enterprise Solutions operating loss was EUR 258 million (operating
loss of EUR 258 million in 2005). Operating profit in Networks decreased to EUR
808 million, including net positive special items of EUR 237 million (operating
profit of EUR 855 million in 2005, including net positive special items of EUR
60 million) representing a 2006 operating margin of 10.8% (13.0%).
Common Group expenses totaled EUR 481 million in 2006. Common Group expenses in
2005 totaled 392 million, including EUR 45 million gain for real estate sales.
In January - December, net financial income was EUR 207 million (EUR 322
million, including EUR 57 million gain for the sale of the France Telecom bond
in 2005).
Profit before tax and minority interests was EUR 5 723 million (EUR 4 971
million). Net profit totaled EUR 4 306 million (EUR 3 616 million). Earnings
per share increased to EUR 1.06 (basic) and EUR 1.05 (diluted), compared to EUR
0.83 (basic) and EUR 0.83 (diluted) in 2005.
Operating cash flow for the year ended December 31, 2006 was EUR 4.5 billion
(EUR 4.1 billion in 2005) and total combined cash and other liquid assets were
EUR 8.5 billion (EUR 9.9 billion in 2005). As of December 31, 2006,
our net debt-to-equity ratio (gearing) was -68% (-77% as of December
31, 2005). In January - December, capital expenditure amounted to EUR 650
million (EUR 607 million).
ACQUISITIONS AND DIVESTMENTS
In February 2006, Nokia acquired 100% of the outstanding common shares of
Intellisync Corporation for cash consideration of approximately EUR 368
million. Intellisync delivers wireless email and other applications over an
array of devices and application platforms across carrier networks. Intellisync
has been integrated into the Enterprise Solutions business group, and its
results of operations are included in our consolidated financial statements as
from the acquisition date.
In early 2006, Nokia and SANYO conducted negotiations to form a new jointly-
owned CDMA mobile device company, but in June 2006 the parties announced that
they had concluded it was more beneficial to pursue other options individually
for their CDMA handset businesses. Working together with co-development
partners, Nokia intends to selectively participate in key CDMA markets, with a
special focus on North America, China and India. Accordingly, Nokia is ramping
down its CDMA research, development and production, which will cease by April
2007.
In June 2006, Nokia announced the completion of its acquisition of LCC
International Inc.'s U.S. deployment business. The addition of deployment
operations to Nokia's delivery services in North America is designed to enhance
a growing portfolio of network and professional services for communications
providers.
In June 2006, Nokia and Siemens announced that they intend to merge the
Networks Business Group of Nokia and the carrier-related operations of Siemens
into a new company to be called Nokia Siemens Networks. Based on the 2005
calendar year, the combined company had EUR 15.8 billion in pro forma annual
revenues. In December 2006, Nokia and Siemens announced that the planned merger
to create Nokia Siemens Networks is expected to close in the first quarter 2007
subject to an agreement between Nokia and Siemens on the results and
consequences of a Siemens compliance review. Closing will also be subject to
customary regulatory approvals, the completion of standard closing conditions,
and the agreement of a number of detailed implementation steps.
In October 2006, Nokia announced the completion of its acquisition of gate5 AG,
a leading supplier of mapping, routing and navigation software and services. By
acquiring gate5, Nokia seeks to offer consumers world-leading mobile location
applications, such as maps, routing and navigation at an accelerated speed.
In October 2006, Nokia announced the completion of its acquisition of Loudeye
Corp., a global leader in digital music platforms and digital media
distribution services. By acquiring Loudeye, Nokia seeks to offer consumers a
comprehensive mobile music experience, including devices, applications and the
ability to purchase digital music.
PERSONNEL
The average number of personnel for 2006 was 65 324 (56 896 for 2005). At the
end of 2006, Nokia employed 68 483 people worldwide (58 874 at year end 2005).
In 2006, Nokia's personnel increased by a total of 9 609 employees (increase of
3 369 in 2005).
SHARES AND SHARE CAPITAL
In 2006, Nokia's share capital increased by EUR 182 764.74 as a result of the
issue of 3 046 079 new shares upon exercise of stock options issued to
personnel in 2003 and 2005. As a result of the new share issues, Nokia received
a total of EUR 43 344 431.88 in additional shareholders' equity in 2006.
Effective April 6, 2006, a total of 341 890 000 shares held by the company were
cancelled pursuant to the shareholders resolution taken at the Annual General
Meeting on March 30, 2006. As a result of the cancellation, the share capital
was reduced by the aggregate par value of the shares cancelled, EUR 20 513 400,
which corresponded to less than 8.4% of the share capital of the company and
the total voting rights at that time. The cancellation did not reduce the
shareholders equity. Neither the aforementioned issuances nor the cancellation
of shares had any significant effect on the relative holdings of the other
shareholders of the company nor on their voting power.
Nokia repurchased through its share repurchase plan a total of 211 840 000
shares on the Helsinki Stock Exchange at an aggregate price of approximately
EUR 3 403 million during the period from February 15, 2006 to December 19,
2006. The price paid was based on the market price at the time of repurchase.
The shares were repurchased to be used for the purposes specified in the
authorizations given by the Annual General Meetings of 2005 and 2006 to the
Board. The aggregate par value of the shares purchased was EUR 12 710 400,
representing approximately 5.2% of the share capital of the company and the
total voting rights. These new holdings did not have any significant effect on
the relative holdings of the other shareholders of the company nor on their
voting power.
As announced on April 21, 2006, Nokia transferred a total of 2 014 437 Nokia
shares held by it as settlement under the Performance Share Plan 2004 to the
Plan participants, personnel of Nokia Group. The aggregate par value of the
shares transferred was EUR 120 866.22, representing approximately 0.05% of the
share capital of the company and the total voting rights. Nokia also
transferred a total of 222 042 Nokia shares held by it as settlement under the
Nokia Restricted Share Plan 2003 to the Plan participants, personnel of Nokia
Group, as announced on October 20, 2006. The aggregate par value of the shares
transferred was EUR 13 322.52, representing approximately 0.005% of the share
capital of the company and the total voting rights. These transfers did not
have a significant effect on the relative holdings of the other shareholders of
the company nor on their voting power.
On December 31, 2006, Nokia and its subsidiary companies owned 129 312 226
Nokia shares. The shares had an aggregate par value of EUR 7 758 733.56,
representing approximately 3.2% of the share capital of the company and the
total voting rights. The total number of shares at December 31, 2006 was 4 095
042 619. On December 31, 2006, Nokia's share capital was EUR 245 702 557.14.
DIVIDEND
Nokias Board of Directors will propose a dividend of EUR 0.43 per share
for 2006.
1-12/2006 BY BUSINESS GROUP, EUR million
(audited)
Mobile Multi- Enter- Net- Common Elimi- Group
Phones media prise works Group nati-
Solu- Func- ons
tions tions
Net 24 769 7 877 1 031 7 453 -9 41 121
sales
Gross 7 280 3 077 449 2 543 30 - 13 379
profit
Gross 29.4 39.1 43.5 34.1 32.5
margin, %
Research -1 227 -902 -319 -1 180 -269 - -3 897
and
development
expenses
% of net 5.0 11.5 30.9 15.8 9.5
sales
Selling -1 649 -780 -306 -544 -35 - -3 314
and
marketing
expenses
% of net 6.7 9.9 29.7 7.3 8.1
sales
Adminis- -79 -45 -75 -245 -222 - -666
trative
and
general
expenses
% of net 0.3 0.6 7.3 3.3 1.6
sales
Other -225 -31 -7 234 15 - -14
operating
income and
expenses
Operating 4 100 1 319 -258 808 -481 - 5 488
profit
Operating 16.6 16.7 -25.0 10.8 13.3
margin, %
1-12/2005 BY BUSINESS GROUP, EUR million
(audited)
Mobile Multi- Enter- Net- Common Elimi- Group
Phones media prise works Group nati-
Solu- Func- ons
tions tions
Net 20 811 5 981 861 6 557 - -19 34 191
sales
Gross 6 480 2 489 402 2 590 21 - 11 982
profit
Gross 31.1 41.6 46.7 39.5 35.0
margin, %
Research -1 245 -860 -329 -1 170 -221 - -3 825
and
development
expenses
% of net 6.0 14.4 38.2 17.8 11.2
sales
Selling -1 541 -705 -221 -475 -19 - -2 961
and
marketing
expenses
% of net 7.4 11.8 25.7 7.2 8.7
sales
Adminis- -68 -38 -74 -211 -218 - -609
trative
and
general
expenses
% of net 0.3 0.6 8.6 3.2 1.8
sales
Other -28 -50 -36 121 45 52
operating
income and
expenses
Operating 3 598 836 -258 855 -392 - 4 639
profit
Operating 17.3 14.0 -30.0 13.0 13.6
margin, %
CONSOLIDATED PROFIT AND LOSS ACCOUNT, IFRS, EUR million
(audited)
1-12/2006 1-12/2005
Net sales 41 121 34 191
Cost of sales -27 742 -22 209
Gross profit 13 379 11 982
Research and development expenses -3 897 -3 825
Selling and marketing expenses -3 314 -2 961
Administrative and general expenses -666 -609
Other income 522 285
Other expenses -536 -233
Operating profit 5 488 4 639
Share of results of 28 10
associated companies
Financial income 207 322
and expenses
Profit before tax 5 723 4 971
Tax -1 357 -1 281
Profit before minority 4 366 3 690
interests
Minority interests -60 -74
Profit attributable to 4 306 3 616
equity holders of the parent
Earnings per share, EUR
Basic 1.06 0.83
Diluted 1.05 0.83
Average number of shares
(1 000 shares)
Basic 4 062 833 4 365 547
Diluted 4 086 529 4 371 239
Depreciation and amortization, 712 712
total
Share-based compensation expense, 192 104
total
CONSOLIDATED BALANCE SHEET, IFRS, EUR million (audited)
ASSETS 31.12.2006 31.12.2005
Non-current assets
Capitalized development costs 251 260
Goodwill 532 90
Other intangible assets 298 211
Property, plant and equipment 1 602 1 585
Investments in associated companies 224 193
Available-for-sale investments 288 246
Deferred tax assets 1) 809 846
Long-term loans receivable 19 63
Other non-current assets 8 7
4 031 3 501
Current assets
Inventories 1 554 1 668
Accounts receivable 5 888 5 346
Prepaid expenses and accrued income 2 496 1 938
Other financial assets 111 89
Available-for-sale investments, liquid assets 5 012 6 852
Available-for-sale investments, cash 2 046 1 493
equivalents
Bank and cash 1 479 1 565
18 586 18 951
Total assets 22 617 22 452
SHAREHOLDERS' EQUITY AND LIABILITIES
Capital and reserves attributable to equity
holders of the parent
Share capital 246 266
Share issue premium 2 707 2 458
Treasury shares -2 060 -3 616
Translation differences -34 69
Fair value and other reserves -14 -176
Retained earnings 1) 11 123 13 308
11 968 12 309
Minority interests 92 205
Total equity 12 060 12 514
Non-current liabilities
Long-term interest-bearing liabilities 69 21
Deferred tax liabilities 205 151
Other long-term liabilities 122 96
396 268
Current liabilities
Short-term borrowing 247 377
Accounts payable 3 732 3 494
Accrued expenses 3 796 3 320
Provisions 2 386 2 479
10 161 9 670
Total shareholders' equity and liabilities 22 617 22 452
Interest-bearing liabilities 316 398
Shareholders' equity per share, EUR 3.02 2.95
Number of shares (1 000 shares) 2) 3 965 730 4 172 376
1) See note in Consolidated Statement of Changes
in Shareholders' Equity
2) Shares owned by Group companies are excluded.
CONSOLIDATED CASH FLOW STATEMENT, IFRS, EUR million
(audited)
1-12/2006 1-12/2005
Cash flow from operating activities
Profit attributable to equity holders of the parent 4 306 3 616
Adjustments, total 1 857 1 774
Profit attributable to equity holders of the parent 6 163 5 390
before change in net working capital
Change in net working capital -793 -366
Cash generated from operations 5 370 5 024
Interest received 235 353
Interest paid -18 -26
Other financial income and expenses, net 54 47
received
Income taxes paid -1 163 -1 254
Net cash from operating activities 4 478 4 144
Cash flow from investing activities
Acquisition of Group companies, net of acquired cash -517 -92
Purchase of current available-for-sale investments, -3 219 -7 277
liquid assets
Purchase of non-current available-for-sale -88 -89
investments
Purchase of shares in associated companies -15 -16
Additions to capitalized development costs -127 -153
Long-term loans made to customers -11 -56
Proceeds from repayment and sale of long-term loans 56 -
receivable
Recovery of impaired long-term loans made to 276 -
customers
Proceeds from (+), payment of (-) other long-term -3 14
loans receivable
Proceeds from (+), payment of (-) short-term loans 199 182
receivable
Capital expenditures -650 -607
Proceeds from disposal of shares in Group companies, - 5
net of disposed cash
Proceeds from disposal of shares in associated 1 18
companies
Proceeds from disposal of businesses - 95
Proceeds from maturities and sale of current 5 058 9 402
available-for-sale investments, liquid assets
Proceeds from sale of current available-for-sale - 247
investments
Proceeds from sale of non-current available-for-sale 17 3
investments
Proceeds form sale of fixed assets 29 167
Dividends received - 1
Net cash from investing activities 1 006 1 844
Cash flow from financing activities
Proceeds from stock option exercises 46 2
Purchase of treasury shares -3 371 -4 258
Proceeds from long-term borrowings 56 5
Repayment of long-term borrowings -7 -
Proceeds from (+), payment of (-) short-term -137 212
borrowings
Dividends paid -1 553 -1 531
Net cash used in financing activities -4 966 -5 570
Foreign exchange adjustment -51 183
Net increase (+)/decrease (-) in cash and cash 467 601
equivalents
Cash and cash equivalents at beginning of period 3 058 2 457
Cash and cash equivalents at end of period 3 525 3 058
NB: The figures in the consolidated cash flow statement cannot be directly
traced from the balance sheet without additional information as a result of
acquisitions and disposals of subsidiaries and net foreign exchange
differences arising on consolidation.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, IFRS, EUR million
(audited)
Sha- Sha- Trea- Trans- Fair Re- Be- Mino- Total
re re sury lation value tai- fore rity equ-
capi- issue sha- diffe- and ned mino- inte- ity
tal pre- res rence other ear- rity rest
mium re- nings
ser- 1)
ves
Bal- 280 2366 -2022 -126 13 13874 14385 168 14553
ance
at
Decem-
ber
31,
2004
Tax -2 -2 -2
Bene-
fit
on
stock
opti-
ons
exer-
cised
Trans- 406 406 31 437
lation
dif-
fer-
rences
Net -211 -211 -211
In-
vest-
ment
hedge
losses
Cash -132 -132 -132
flow
hed-
ges,
net of
tax
Avai- -57 -57 -57
lable-
for-
sale
in-
vest-
ments,
net of
tax
Other -55 -55 1 -54
Dec-
rease,
net
Profit 3616 3616 74 3690
Total - -2 - 195 -189 3561 3565 106 3671
Recog-
nized
income
and
ex-
pense
Stock 2 2 2
Opti-
ons
exer-
cised
Stock -1 -1 -1
Opti-
ons
exer-
cised
re-
lated
to
acqui-
si-
tions
Share- 79 79 79
based
com-
pen-
sation
Acqui- -4268 -4268 -4268
sition
of
trea-
sury
shares
Reis- 10 10 10
su-
ance
of
trea-
sury
shares
Can- -14 14 2664 -2664 - -
cel-
lation
of
trea-
sury
shares
Divi- -1463 -1463 -69 -1532
dend
Total -14 94 -1594 - - -4127 -5641 -69 -5710
other
equity
move-
ments
Bal- 266 2458 -3616 69 -176 13308 12309 205 12514
ance
at
Dec-
ember
31,
2005
Tax 23 23 23
benefit
on
stock
opti-
ons
exer-
cised
Excess 14 14 14
tax
bene-
fit
on
share-
based
com-
pen-
sation
Trans- -141 -141 -13 -154
lation
dif-
fer-
rences
Net 38 38 38
In-
vest-
ment
hedge
gains,
net of
tax
Cash 171 171 171
flow
hed-
ges,
net of
tax
Avai- -9 -9 -9
lable-
for-
sale
in-
vest-
ments,
net of
tax
Other -52 -52 -1 -53
Inc-
rease,
net
Profit 4306 4306 60 4366
Total - 37 - -103 162 4254 4350 46 4396
Recog-
nized
income
and ex-
pense
Stock 43 43 43
Opti-
ons
exer-
cised
Stock -1 -1 -1
Opti-
ons
exer-
cised
re-
lated
to
acqui-
si-
tions
Share- 219 219 219
based
com-
pen-
sation
Sett- -69 38 -31 -31
lement
of
per-
for-
mance
and
rest-
ricted
shares
Acqui- -3413 -3413 -3413
sition
of
trea-
sury
shares
Reis- 4 4 4
su-
ance
of
trea-
sury
shares
Can- -20 20 4927 -4927 - -
cel-
lation
of
trea-
sury
shares
Divi- -1512 -1512 -40 -1552
dend
Acqui- - -119 -119
sition
of
mino-
rity
inte-
rests
Total -20 212 1556 - - -6439 -4691 -159 -4850
Other
equity
move-
ments
Bal- 246 2707 -2060 -34 -14 11123 11968 92 12060
ance
at Dec-
ember
31,
2006
1) Opening deferred tax asset and retained earnings have each been increased
by EUR 154 million for recognition of certain additional items relating to
periods prior to 2002.
COMMITMENTS AND CONTINGENCIES, EUR million
(audited)
GROUP
31.12.2006 31.12.2005
Collateral for own commitments
Property under mortgages 18 18
Assets pledged 27 10
Contingent liabilities on behalf of Group
companies
Other guarantees 358 276
Contingent liabilities on behalf of other
companies
Guarantees for loans 23 -
Other guarantees 2 2
Leasing obligations 665 664
Financing commitments
Customer finance commitments 164 13
Venture fund commitments 208 230
NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS, EUR
million 1)
(audited)
31.12.2006 31.12.2005
Foreign exchange forward contracts 2) 29 859 29 991
Currency options bought 2) 404 284
Currency options sold 2) 193 165
Interest rate swaps and futures - 50
Cash settled equity options 3) 45 150
1) Includes the gross amount of all
notional values for contracts that have
not yet been settled or cancelled. The
amount of notional value outstanding is
not necessarily a measure or indication of
market risk, as the exposure of certain
contracts may be offset by that of other
contracts.
2) Notional amounts include contracts used
to hedge the shareholders' equity of
foreign subsidiaries.
3) Cash settled equity options can be used
to hedge risks relating to incentive
programs and investment activities.
1 EUR = 1.312 USD
It should be noted that certain statements herein which are not historical
facts, including, without limitation, those regarding: A) the timing of product
and solution deliveries; B) our ability to develop, implement and commercialize
new products, solutions and technologies; C) expectations regarding market
growth, developments and structural changes; D) expectations regarding our
mobile device volume growth, market share, prices and margins; E) expectations
and targets for our results of operations; F) the outcome of pending and
threatened litigation; G) expected timing, scope and effects of the merger of
Nokia's and Siemens' communications service provider businesses; and H)
statements preceded by "believe," "expect," "anticipate," "foresee," "target,"
"estimate," "designed," "plans," "will" or similar expressions are forward-
looking statements. Because these statements involve risks and uncertainties,
actual results may differ materially from the results that we currently expect.
Factors that could cause these differences include, but are not limited to: 1)
the extent of the growth of the mobile communications industry, as well as the
growth and profitability of the new market segments within that industry which
we target; 2) the availability of new products and services by network
operators and other market participants; 3) our ability to identify key market
trends and to respond timely and successfully to the needs of our customers; 4)
the impact of changes in technology and our ability to develop or otherwise
acquire complex technologies as required by the market, with full rights needed
to use; 5) competitiveness of our product portfolio; 6) timely and successful
commercialization of new advanced products and solutions; 7) price erosion and
cost management; 8) the intensity of competition in the mobile communications
industry and our ability to maintain or improve our market position and respond
to changes in the competitive landscape; 9) 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 solutions; 10) inventory
management risks resulting from shifts in market demand; 11) our ability to
source quality components without interruption and at acceptable prices; 12)
our success in collaboration arrangements relating to development of
technologies or new products and solutions; 13) the success, financial
condition and performance of our collaboration partners, suppliers and
customers; 14) any disruption to information technology systems and networks
that our operations rely on; 15) our ability to protect the complex
technologies that we or others develop or that we license from claims that we
have infringed third parties' intellectual property rights, as well as our
unrestricted use on commercially acceptable terms of certain technologies in
our products and solution offerings; 16) general economic conditions globally
and, in particular, economic or political turmoil in emerging market countries
where we do business; 17) developments under large, multi-year contracts or in
relation to major customers; 18) exchange rate fluctuations, including, in
particular, fluctuations between the euro, which is our reporting currency, and
the US dollar, the Chinese yuan, the UK pound sterling and the Japanese yen;
19) the management of our customer financing exposure; 20) our ability to
recruit, retain and develop appropriately skilled employees; 21) the impact of
changes in government policies, laws or regulations; and 22) satisfaction of
the conditions to the merger of Nokia's and Siemens' communications service
provider businesses, including achievement of agreement between Nokia and
Siemens on the results and consequences of a Siemens compliance review, and
closing of transaction, and Nokia's and Siemens' ability to successfully
integrate the operations and employees of their respective businesses; as well
as 23) the risk factors specified on pages 12 - 22 of the company's annual
report on Form 20-F for the year ended December 31, 2005 under "Item 3.D Risk
Factors." Other unknown or unpredictable factors or underlying assumptions
subsequently proving to be incorrect could cause actual results to differ
materially from those in the forward-looking statements. Nokia does not
undertake any obligation to update publicly or revise forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent legally required.
Nokia, Helsinki - January 25, 2007
Media and Investor Contacts:
Corporate Communications, tel. +358 7180 34495 or +358 7180 34900
Investor Relations Europe, tel. +358 7180 34289
Investor Relations US, tel. +1 914 368 0555
www.nokia.com
- Nokia plans to report Q1 2007 results on April 19, 2007.
- The Annual General Meeting will be held on May 3, 2007.