Nokia reports Q1 2007 net sales of EUR 9.9 billion and EPS of EUR 0.25

 

The complete press release with tables is available at: http://www.nokia.com/results/results2007Q1e.pdf

 

 

 

 

 

 

- Estimated industry device volumes of 253 million units, down 13% sequentially and up 18% year on year.

- Nokia device volumes of 91.1 million units, down 14% sequentially and up 21% year on year.

- Nokia estimated device market share 36%, at the same level as Q4 2006 and up from 35% in Q1 2006.

- Nokia device ASP of EUR 89, at the same level as Q4 2006.

- Nokia gross margin of 33.1%, up sequentially from 32.4% in Q4 2006.

- Nokia operating margin of 13.6%, up sequentially from 13.3% in Q4 2006, excluding special items.

- Nokia diluted EPS of EUR 0.26 excluding special items.

- Nokia operating cash flow of EUR 1.6 billion.

- Multimedia and Enterprise Solutions net sales strong, up sequentially from Q4 2006.

- Key products started shipping: Nokia 6300, Nokia N95 and Nokia E65.

 

"I'm encouraged by Nokia's first quarter 2007 performance. Our profitability was strong, with both gross and operating margins up sequentially, excluding special items. We also saw good year on year device volume growth that led to an increase in our market share, further solidifying our number one position in the industry.

 

Our Multimedia business group achieved record net sales and operating margin in a seasonally challenging environment. Multimedia continues to lead in the convergence space, with close to eight million Nokia Nseries devices shipped during the quarter, including the ground-breaking Nokia N95 multimedia computer. Our Enterprise Solutions business group showed improved results, bolstered by sales of the new Nokia E65, and we are targeting break even for Enterprise Solutions in the second quarter 2007. Mobile Phones mid-range portfolio was strengthened by the Nokia 6300, which began initial shipments in the first quarter.

 

We're excited that Nokia Siemens Networks started operations on April 1, 2007. We believe that this new company will have the scale, portfolio and innovation to assume a leading position in the communications infrastructure market."

 

- Nokia expects industry mobile device volumes in the second quarter 2007 to be slightly up sequentially.

- We expect Nokia's device market share in the second quarter 2007 to be approximately at the same level sequentially.

- Nokia continues to expect 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 target an increase in its market share in mobile devices in 2007.

- Nokia continues to expect very slight market growth for the mobile and fixed infrastructure and related services market in euro terms in 2007.

 

(Comparisons are given to the first quarter 2006 results, unless otherwise indicated.)

 

Nokia's first quarter 2007 net sales increased 4% to EUR 9.9 billion, compared with EUR 9.5 billion in the first quarter 2006. At constant currency, group net sales would have increased 6%.

 

Nokia's first quarter 2007 operating profit decreased 7% to EUR 1 272 million (including the negative impact of EUR 69 million in special items), compared with EUR 1 367 million in the first quarter 2006 (including the negative impact of EUR 22 million in special items). Nokia's first quarter 2007 operating margin was 12.9% (14.4%) including the impact of the respective special items, and 13.6% (14.6%) excluding the special items.

 

Operating cash flow for the first quarter 2007 was EUR 1.6 billion, compared with EUR 1.0 billion for the first quarter 2006, and total combined cash and other liquid assets at March 31, 2007 were EUR 9.1 billion, compared with EUR 8.5 billion at December 31, 2006. At March 31, 2007, our net debt-equity ratio (gearing) was -72%, compared with -68% at December 31, 2006.

 

In the first quarter 2007, the total mobile device volume achieved by our Mobile Phones, Multimedia and Enterprise Solutions business groups reached 91.1 million units, representing 21% year on year growth and a 14% sequential decrease. The overall industry volume for the same period reached an estimated 253 million units, representing 18% year on year growth and a 13% sequential decrease.

 

Converged device industry volumes increased to an estimated 23.5 million units, compared with an estimated 17 million units in the first quarter 2006. Nokia's own converged device volumes rose to 11.8 million units, compared with 8.5 million units in the first quarter 2006. Nokia shipped close to eight million Nokia Nseries and more than one million Nokia Eseries devices during the first quarter 2007.

 

The following chart sets out Nokia's mobile device volumes for the periods indicated, as well as the year on year and sequential growth rates by geographic area.

 

 

 

Based on our preliminary market estimate, Nokia's market share for the first quarter 2007 was 36%, compared with 35% in the first quarter 2006 and 36% in the fourth quarter 2006. Nokia's year on year market share increase was driven primarily by strong gains in Asia-Pacific and Europe that more than offset a significant market share decline in North America. Year on year market share was approximately at the same level in China, Latin America and Middle East & Africa. Sequentially, Nokia's market share was approximately at the same level as in fourth quarter 2006, globally as well as in each geographic area. The sequential decline in first quarter industry volumes was similar to previous years, however we believe there has been an impact in the market from the excess inventory of certain of our competitors' products.

 

Nokia's average selling price in the first quarter 2007 was EUR 89, down from EUR 103 in the first quarter 2006 and at the same level as in the fourth quarter 2006. The lower year on year ASP in the first quarter 2007 was primarily the result of a significantly higher proportion of entry-level device sales, where the industry growth especially in the emerging markets has been strong and where Nokia's share has been growing. In addition, certain ageing higher end products in our portfolio were viewed as less competitive in various markets. Sequentially, first quarter 2007 ASPs were impacted by a higher percentage of entry-level device sales. That sequential development was offset by strong sales of our higher ASP devices, particularly from the Multimedia business group.

 

Mobile Phones: First quarter 2007 net sales decreased 5% to EUR 5.6 billion, compared with EUR 5.9 billion in the first quarter 2006. Strong overall volume growth was not enough to offset a significant ASP decline year on year, driven primarily by a higher proportion of entry-level sales. Net sales decreased in all regions except Asia-Pacific. Net sales were down significantly in North America and to a lesser degree in Latin America, Middle East & Africa, Europe and China.

 

Mobile Phones reported operating profit in the first quarter 2007 decreased 14% to EUR 936 million, compared with EUR 1.1 billion in the first quarter 2006, with an operating margin of 16.8% (18.5%). Reported first quarter 2007 operating profit included total charges of EUR 35 million, of which EUR 25 million was related to the restructuring of a subsidiary company and EUR 10 million was mainly related to restructuring in Customer and Market Operations. First quarter 2006 reported operating profit included a EUR 14 million initial restructuring charge for the CDMA business. Operating profit for the first quarter 2007 excluding the charges was EUR 971 million, with an operating margin of 17.4% (18.7%). The decrease in operating profit for the first quarter 2007, excluding the special items, was primarily caused by lower sales of higher end, higher margin devices, and an increase in sales and marketing expenses, compared to the first quarter 2006.

 

Multimedia: First quarter 2007 net sales increased 28% to EUR 2.3 billion, compared with EUR 1.8 billion in the first quarter 2006. Net sales increased year on year in all regions except North America, where net sales continued at a low level. Multimedia net sales year on year growth was fastest in Latin America and China. Net sales growth was driven by high volumes of Nokia Nseries multimedia computers, especially the Nokia N73 and Nokia N70, combined with a stable ASP year on year.

 

Multimedia reported operating profit in the first quarter 2007 grew 31% to EUR 424 million, compared with EUR 323 million in the first quarter 2006, with an operating margin of 18.8% (18.4%). Reported first quarter 2007 operating profit in Multimedia included restructuring charges of EUR 3 million. Operating profit for the first quarter 2007 excluding these charges was EUR 427 million, with an operating margin of 19.0%. Operating profit growth in the first quarter 2007 was driven by strong net sales growth and effective operating cost control, compared to the first quarter 2006.

 

Enterprise Solutions: First quarter 2007 net sales increased 75% to EUR 326 million, compared with EUR 186 million in the first quarter 2006. Net sales increased year on year in all regions except North America and China, where net sales decreased. Enterprise Solutions net sales more than doubled year on year in Europe, Latin America and Asia-Pacific. Net sales were positively impacted by strong year on year volume growth of the Nokia Eseries.

 

In the first quarter 2007, Enterprise Solutions had a reported operating loss of EUR 38 million, compared with a reported operating loss of EUR 66 million in the first quarter 2006. The reported first quarter 2007 operating loss included restructuring charges of EUR 17 million. Excluding these charges, the operating loss for the first quarter 2007 was EUR 21 million. The reported first quarter 2006 operating loss included a EUR 8 million restructuring charge. The significantly improved operating performance for the first quarter 2007, excluding these charges, reflected strong net sales growth and effective operating cost control compared to the first quarter 2006.

 

Networks: First quarter 2007 net sales of EUR 1.7 billion was at the same level as the first quarter 2006. Net sales increased significantly in Middle East & Africa and to a lesser extent in Asia Pacific, China and Europe. Net sales declined significantly year on year in North America and to a lesser extent in Latin America.

 

Networks reported operating profit in the first quarter 2007 decreased 48% to EUR 78 million, compared with EUR 149 million in the first quarter 2006, with an operating margin of 4.6% (8.8%). Reported first quarter 2007 operating profit included a charge of EUR 12 million related to Nokia Siemens Networks incremental costs expensed during the quarter. Operating profit for the first quarter 2007 excluding these charges was EUR 90 million, with an operating margin of 5.3%. The decrease in operating profit in the first quarter 2007 was primarily caused by a greater proportion of sales from the emerging markets, a higher share of services sales, and continued pricing pressure in the industry.

 

- First shipments of the slim and stylish Nokia 6300.

- Announcement of the Nokia 6110 Navigator, an HSDPA (High Speed Downlink Packet Access) device with GPS (Global Positioning System) and AGPS (Assisted Global Positioning System).

- Announcement of the Nokia 6131 NFC phone, the world's first fully integrated, commercial NFC (Near Field Communications) handset. It enables information sharing, service initiation, and payment and ticketing capability with a single tap of the device.

- Expansion of Nokia's music phone offering with the Nokia 5700 XpressMusic (a 3G converged device with a dedicated audio chip, iconic twist design, music player, 2 megapixel camera and video calling), and the Nokia 5070 (with integrated FM radio, a VGA camera, pre-installed java games and a built in web browser).

- The enhancement of the popular L'Amour collection with the introduction of the Nokia 7373 Special Edition in two contemporary colors paired with signature Giambattista Valli phone accessories; and the first CDMA model in the L'Amour Collection, the Nokia 7088.

- Introduction of the Nokia 3110 classic, a triband GSM phone in a robust and durable design with a 1.3 megapixel camera, music player with expandable memory, and an FM stereo radio.

 

- Product launches included the Nokia N76, Nokia N93i, Nokia N77 and Nokia N800 multimedia computers, including features such as DVB-H for mobile TV, DVD like-quality video, music players and touch screen functionality.

- First shipments of the Nokia N95, featuring connectivity over GPS, HSDPA and WLAN.

- Nokia announced the availability of the smart2go mapping and navigation platform for the most popular mobile operating systems. The platform allows for mapping and routing in more than 150 countries and has support for full turn-by-turn satellite navigation in more than 30 countries.

- Nokia announced new games, publishers and developers for its new N-Gage mobile gaming platform. These new developments will help to bring connected mobile gaming experiences to millions of Nokia mobile device owners worldwide starting in September 2007.

- Nokia announced cooperation with YouTube that allows people to enjoy YouTube videos on the go via Nokia Nseries devices. Nokia also announced cooperation with Six Apart to make it easy for people to upload video and photos, and update their blogs directly from their compatible Nokia Nseries devices to the Vox blogging service.

 

- Second generation Nokia Eseries products - Nokia E61i, Nokia E65 and Nokia E90 Communicator - were launched at the 3GSM World Congress in February.

- The launch of Intellisync Mobile Suite 8.0, the first major update to the Intellisync platform since the Intellisync acquisition, with several major feature and performance enhancements including a powerful new email experience for S60 devices. 

 

- As announced during Q1 2007, Nokia Siemens Networks started operations on April 1, 2007. Nokia and Siemens also announced that they would increase their respective net asset contributions to Nokia Siemens Networks, with Siemens to contribute EUR 2.4 billion and Nokia to contribute EUR 1.7 billion. From April 1, 2007, the financial results of Nokia Siemens Networks will be consolidated to Nokia. Nokia is in the process of evaluating the net assets acquired and expects to finalize the purchase price allocation and to realize a gain on this transaction in the second quarter 2007.

- At the 3GSM World Congress in Barcelona, Nokia Siemens Networks outlined its vision of 5 billion people connected and 'always on' by 2015, and unveiled a proposed product portfolio plan that will play a key role in helping customers meet the needs of these billions of future subscribers.

- Nokia and Siemens Networks and NEC Corporation announced they had signed a Memorandum of Understanding for co-operation in the area of WCDMA radio networks. Nokia said that it will expand its 3G radio access multi-operator solution to enable the sharing of a radio access network between as many as four operators.

- Nokia won a deal with U.S. Sprint Nextel to become a key infrastructure and consumer electronic device provider for the operator's 4G WiMAX next generation mobility network. Nokia was later awarded the four Texas markets of Dallas, Fort Worth, San Antonio and Austin for the initial build-out of Sprint Nextel's mobile WiMAX network.

- Nokia's won services deals in the quarter include network expansion and managed services extension contracts from Telenor Pakistan and 3GIS Sweden, and a WCDMA and GSM managed services contract from T-Mobile in the Netherlands. Nokia also said it would provide hosted mobile email to Wind in Italy.

- Nokia announced contracts with four new customers in the quarter, winning a 3G network deal with Romania's RCS & RDS; a GSM/EDGE network and managed services contract with new Slovenian operator Tusmobil; a GSM and GPRS network deal with Telefónica Móviles Panamá; and a core network deal with television broadcaster Cyfrowy Polsat, which is entering the Polish telecom market as an MVNO.

 

For more information on the operating highlights mentioned above, please refer to related press announcements, which can be accessed at: http://www.nokia.com/press.

 

 

(International Financial Reporting Standards (IFRS) comparisons given to the first quarter 2006 results, unless otherwise indicated.)

 

Nokia's net sales increased 4% to EUR 9 856 million (EUR 9 507 million). Net sales of Mobile Phones decreased by 5% to EUR 5 583 million (EUR 5 869 million). Net sales of Multimedia increased by 28% to EUR 2 252 million (EUR 1 758 million). Net sales of Enterprise Solutions increased by 75% to EUR 326 million (EUR 186 million). Net sales of Networks remained at the same level, EUR 1 697 million (EUR 1 699 million).

 

Operating profit decreased by 7% to EUR 1 272 million (EUR 1 367 million), representing an operating margin of 12.9% (14.4%). Operating profit in Mobile Phones decreased 14% to EUR 936 million (EUR 1 085 million), representing an operating margin of 16.8% (18.5%). Operating profit in Multimedia increased by 31% to EUR 424 million (EUR 323 million), representing an operating margin of 18.8% (18.4%). Enterprise Solutions reported an operating loss of EUR 38 million (operating loss of EUR 66 million). Operating profit in

Networks decreased 48% to EUR 78 million (EUR 149 million), representing an operating margin of 4.6% (8.8%). Common Group expenses totaled EUR 128 million (EUR 124 million).

 

Financial income was EUR 48 million (EUR 74 million). Profit before tax and minority interests was EUR 1 325 million (EUR 1 445 million). Net profit totaled EUR 979 million (EUR 1 048 million). Earnings per share was EUR 0.25 (basic) and EUR 0.25 (diluted), compared to EUR 0.25 (basic) and EUR 0.25 (diluted) in the first quarter 2006.

 

The average number of employees from January to March 2007 was 68 418. At March 31, 2007, Nokia employed a total of 68 321 people (68 483 people at December 31, 2006).

 

 On March 31, 2007, Nokia and its subsidiary companies owned 174 417 543 Nokia shares. The shares had an aggregate par value of EUR 10 465 052.58, representing approximately 4.3% of all the shares of the company and of the total voting rights. The total number of shares on March 31, 2007 was 4 095 042 619 and the share capital was EUR 245 702 557.14. Nokia announced on March 29, 2007 that it had decided to cancel 169 500 000 Nokia shares held by the company. The cancellation was effected on April 4, 2007, reducing the total number of shares correspondingly.

 

 

Nokia, Helsinki - April 19, 2007

 

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

 

- Nokia plans to report its Q2 and Q3 2007 results on August 2 and October 18, 2007 respectively.