Capital Markets Day 2007 - Nokia · PDF file1 © 2007 Nokia Capital Markets Day 2007 ... Nokia. Motorola. Sony Ericsson. Samsung. LG. ... 31 © 2007 Nokia Capital Markets Day 2007

1 © 2007 Nokia Capital Markets Day 2007

Capital Markets Day 2007Rick SimonsonChief Financial Officer


Revenue growth – and strong margins


EPS growth outpacing sales and volume growth

* Excludes special items and purchase price accounting related items

29%

10%

25%

44%

0%

10%

20%

30%

40%

50%

Mobile device net sales

Mobile device units

Diluted EPS*

Q1-Q3 2006Q1-Q3 2007


Making money in all device segments –

In Nokia’s case, don’t equate low-end with poor profitability

EUR 82 ASP

EUR 93 ASP

22%36%

42%

EUR 0-30

EUR 31-75

EUR 76+

Product Mix (Unit Volumes)

21%

41%39%

Q3'06 Q3'07* Excludes special items

23 %

15 %

0%

10%

20%

30%TotalDeviceOperatingMargins*


10%

20%

30%

40%

Q3'06 Q4'06 Q1'07 Q2'07 Q3'07

Margin improvement

Excludes special items and purchase price accounting related items

Device Gross Margin %

Nokia Operating Margin %

Nokia Gross Margin %

Device Operating Margin %


Active portfolio management Actual product refresh example

EUR

16% spread*

37% spread*

* Not equivalent to gross margins

Product Revenue

Direct Product Cost

The final quartersof Product A’s life…

10

40

Q1’06 Q2’06 Q3’06 Q4’06 Q1’07


Active portfolio management Actual product refresh example

EUR

10

40

Q1’06 Q2’06 Q3’06 Q4’06 Q1’07

42% spread*

…overlaps with thelaunch of Product B

36% spread*

Product Revenue

Direct Product Cost

The final quartersof Product A’s life…

* Not equivalent to gross margins


25%

30%

35%

Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07

Mobile Phones gross margins

Nokia 5200/5300 XpressMusic

Nokia 6300

Nokia 8600 Luna

Nokia 2630 Barracuda

Nokia 5310

Nokia 6500 Classic

Nokia 6500 Slide

Nokia 1200

Nokia 1208

Nokia 7900

Nokia 7373

Nokia 1100

Nokia 1600

GrossMargin


Multimedia gross margins

Nokia N70/N73 Music Editions; Nokia N91 8GB Nokia N95

Nokia N81

Nokia N95 8GB

Nokia N81035%

40%

45%

Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07

GrossMargin


Enterprise Solutions gross margins

Nokia E90 Communicator

Nokia E51

Nokia E65

40%

45%

50%

Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07

GrossMargin


Sustainable core virtues

• Scale:

39% market share in Q3’07 vs. #2 at 15%

• Brand:

#5 worldwide and #1 in Asia

• Quality:

Low failure rates and warranty costs

• Manufacturing and logistics:

Leading the Fortune Global 500

• Distribution:

Substantial lead in China, India, and MEA

• IPR:

#1 share of WCDMA essential patents

Sources: Nokia estimates; Interbrand; AMR Research; Fairfield Resources International


Core virtue – Scale

Sony EricssonNokia Motorola Samsung LG

0%

10%

20%

30%

40%

Q3’05 Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1'07 Q2’07 Q3’07-10%

10%

30%

50%

70%

Q3’05 Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1’07 Q2’07 Q3’07

Estimated Handset Market Share Percent of Top 5 Profits 39% 67%

Source: company reports

Our scale+

geographic diversity+

broad product portfolio

Tough for others to win byjust focusing on a particular

geography or product segment=


Core virtue – Brand

Strength of preference – “will only buy this brand”

Source: Nokia Brand

Study, Q3 2007

25 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

Q3'06 Q4'06 Q1'07 Q2'07 Q3'07

Nokia Motorola Sony Ericsson Samsung LG


Source: AMR Research, 2007

1

2

3

4

5

Core virtue – Supply Chain

#1 out of Fortune Global 500


Core virtue – Distribution

China

Middle East

& AfricaNokia in ~100% of total ~120K points of sale

Nokia in ~80% of total ~80K points of sale

India

Nokia in ~100% of total ~100K points of sale

Source: Nokia estimates


WCDMA essential patents**

Nokia30%

11%

Core virtue – IPR

*Source: company reports**Source: Fairfield Resources International, 2007

0

5

10

15

20

25

30

35

1991199219931994199519961997199819992000200120022003200420052006

Cumulative R&D* (EUR billions)

Nokia

Qualcomm


Market share gain in 2008?

#1: Mathematical benefit –

Nokia’s > 50%

entry-level share in Q3’07*

Assumption: Entry level devices grow approximately 2x

faster than the overall market in 2008


Nokia’s ~50%

converged devices share in Q3’07*

Assumption: Converged devices grow approximately 3x

faster than the overall market in 2008


Nokia’s ~50%

GSM, ~35%

WCDMA, & ~5%

CDMA share in Q3’07*

Assumption: GSM/WCDMA grows significantly faster than CDMA in 2008

* Nokia estimates

Combination of #1 - #3 could yield 1%+ share gain*


Internet services


Reinvesting in the business for growth

* NAVTEQ acquisition pending

Mobile Gaming

Location Based Services

*

Media Sharing

Navigation and Mapping

Digital Music Platform

Email and Device Management

Mobile Advertising

http://darlamack.blogs.com/.shared/image.html?/photos/uncategorized/2007/08/26/ngage_logo.jpg

http://www.answers.com/topic/twango-gif

http://www.enpocket.com/


Internet Services – 2010 Market Opportunity

EUR 100 billion* for core markets that Nokia focuses on

* Nokia and external analysts’

estimates

Digital Imaging

Communities

Video & TV

Navigation

Gaming

Music

Messaging


Services and software revenue model – fee based

now…ad

driven

later

Ad revenues Recurring subscription and transactional revenues

Target opportunity:

All people Primarily higher- income people

# of expected customers:

Hundreds of millions Tens of millions


> 4 billion people expected to use mobile devices in 2010*

Internet capabilities pervasive*•

Java devices: ~60%

• Web browser (XHTML or HTML): ~60%

• High speed connection (3G+): ~30%

Convergence trends continue*•

Camera: ~60%

• Music player: ~50%

• Email: ~50%

• Navigation/GPS: ~20%

• Smartphones: ~20%*Nokia estimates


Financial targets


Nokia financial targets

* Next 1 to 2 years; does not include pending acquisition of NAVTEQ** Excludes special items and purchase price accounting related items

2007 CMD TARGET*

Operating Margin** 16-17%

Devices & Services** 20% +/-

Nokia Siemens Networks** Increasing to 10%

2006 CMD TARGET*Operating Margin 15%Devices (MP & M) 17%Nokia Siemens Networks 10%+

1%***

Q1-Q3’07 ACTUAL

14%

19%

*** Includes Q2’07 and Q3’07 only; Nokia Siemens Networks began operations on April 1, 2007


Other financial targets

2008E *

Tax Rate 26%Capex (m EUR) ~900Depr. and Amort. (m EUR) ~875Common Group Functions(m EUR expense)** ~200

* Approximate estimates for full year; does not include pending acquisition of NAVTEQ.** Excludes special items. Beginning 2008, Devices & Services will include approximately 2/3 of the expenses

previously reported under “Common Group Functions”.


Decreasing the volatility of OPEX (as a percent of net sales) Sequential Percentage Point Change in OPEX*

-10 %-8 %-6 %-4 %-2 %0 %2 %4 %6 %8 %

10 %Q1

'03

Q3'0

3

Q1'0

4

Q3'0

4

Q1'0

5

Q3'0

5

Q1'0

6

Q3'0

6

Q1'0

7

Q3'0

7



New organizational structure – strategic

and financial

benefits

Opportunities for synergies and savings

•

Harmonization of product roadmaps

•

Elimination of overlaps in R&D

•

Elimination of overlaps in sales and marketing

Devices &Services

CommonGroup

Functions

MobilePhones

Multimedia EnterpriseSolutions

CommonGroup

Functions

Old

New


Nokia aligned with shareholders’

interests


Quarterly Cash Flow


0

500

1,000

1,500

2,000

2,500

Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07

EURmillions Net cash from operating activities

Operating profit*


Distribution of excess cash to shareholders

Cash level

Diluted share countDown 18%

456789

10111213

Q1'04Q2'04Q3'04Q4'04Q1'05Q2'05Q3'05Q4'05Q1'06Q2'06Q3'06Q4'06Q1'07Q2'07Q3'07

Cash

(EU

R bi

llion

s)

3 500

3 700

3 900

4 100

4 300

4 500

4 700

4 900 Diluted share count (m

illions)


Return on Equity – latest reported fiscal year

Source: Company reports

36%

0%10%

20%30%40%50%

60%70%

DELL

NOK IBM

RIM

M

AAPL

CSCO

ERIC

QCOM MOT GE

GOOG HP

Q PG

INTC


Distributions to Net Income – latest reported

fiscal year

Source: Company reports

135%

0 %

50 %

100 %

150 %HP

Q

INTC

NOK

MOT

DELL

CSCO IBM PG GE

QCOM

RIM

M

ERIC

AAPL

GOOG

Share Repurchases/Net Income

Dividends/Net Income


Stock option dilution – latest reported fiscal year

Source: Company reports Dilution = exercisable options / (exercisable options + basic shares outstanding)

2%

0%

2%

4%

6%

8%

10%

12%

14%ER

IC

NOK GE

RIM

M

GOOG

AAPL

MOT

QCOM PG

INTC

HPQ

IBM

DELL

CSCO


Quarterly Disclosure – beginning Q1 2008

Press release will include:•

Net sales, gross margins, operating expenses, and operating margins for our reportable segments:

•

Devices & Services•

Nokia Siemens Networks•

NAVTEQ’s

mapping business (post closing of the pending acquisition)•

Nokia device ASPs•

Estimated industry device volumes and Nokia estimated device market share•

Nokia mobile device volume by geographic area•

Nokia converged device volumes•

Nokia Siemens Networks net sales by geographic area•

Special items and Nokia Siemens Networks Purchase Price Accounting related items

•

Industry and Nokia Outlook section


Quarterly Disclosure – beginning Q1 2008

Changes in presentation:•

ASPs will exclude services•

Common Group Functions –

Devices & Services will include approximately 2/3 of the expenses previously reported under “Common Group Functions”; historical amounts will be provided on an adjusted basis for comparison

In addition, we will provide commentary on:•

Factors that impact our business performance•

Industry device volumes by region•

Industry device volumes by technology (i.e. GSM/CDMA/WCDMA/Other)•

Product highlights•

Nokia Siemens Networks integration•

Share buybacks•

Impact of currency fluctuations

We are always trying to improve and we welcome your feedback


Summary

• Strategic focus on Internet services

• Nokia Siemens Networks integration and synergies on track

• Nokia is growing

• Strong margins and good product portfolio execution

• Nokia is aligned

with shareholders’

interests


Thank you.

Documents

Capital Markets Day 2007 - Nokia · PDF file1 © 2007 Nokia Capital Markets Day 2007 ... Nokia. Motorola. Sony Ericsson. Samsung. LG. ... 31 © 2007 Nokia Capital Markets Day 2007