Nokia sharpens strategy and provides updates to its targets and outlook
(Thomson Reuters ONE) -
Company announces targeted investments in key growth areas, operational changes
and significantly increased cost reduction target
Company lowers Devices & Services outlook for the second quarter 2012
Nokia Corporation
Stock exchange release
June 14, 2012 at 9.30 (CET+1)
Espoo, Finland - Nokia today outlined a range of planned actions aimed at
sharpening its strategy, improving its operating model and returning the company
to profitable growth. While planning to significantly reduce its operating
expenses, Nokia remains focused on the unique experiences offered by its
smartphones and feature phones, including an increased emphasis on location-
based services.
Nokia's strategy is about delivering great mobile products that sense the world.
Nokia plans to:
- Invest strongly in products and experiences that make Lumia smartphones stand
out and available to more consumers;
- Invest in location-based services as an area of competitive differentiation
for Nokia products and extend its location-based platform to new industries; and
- Improve the competitiveness and profitability of its feature phone business.
To execute this strategy, Nokia is making changes to its management team by
tapping into the strong leadership bench at the company.
To support this period of transition, Nokia intends to improve its operating
model by significantly reducing its Device & Services operating expenses,
substantially reducing its headcount and reducing its factory footprint. As a
result, Nokia intends to return to sustainable non-IFRS operating profitability
in Devices & Services as soon as possible.
"We are increasing our focus on the products and services that our consumers
value most while continuing to invest in the innovation that has always defined
Nokia," said Stephen Elop, Nokia president and CEO. "We intend to pursue an even
more focused effort on Lumia, continued innovation around our feature phones,
while placing increased emphasis on our location-based services. However, we
must re-shape our operating model and ensure that we create a structure that can
support our competitive ambitions."
Targeted investments
In Smart Devices, Nokia plans to extend its strategy by broadening the price
range of Lumia and continuing to differentiate with the Windows Phone platform,
new materials, new technologies and location-based services. In line with this
strategy, Nokia today announced the planned acquisition of assets from Sweden-
based Scalado, which currently has imaging technology on more than 1 billion
devices. This acquisition is aimed at strengthening Nokia's imaging assets.
Nokia's location-based platform is expected to be another principal area of
investment as Nokia plans to differentiate its portfolio of Lumia smartphones
with leading location-based services including navigation and visual search
applications such as the recently announced Nokia City Lens. Additionally, the
company plans to extend its mapping technology to multiple industries to
strengthen the platform and generate new revenue.
In Mobile Phones, Nokia intends to improve its competitiveness and
profitability. Nokia aims to further develop its Series 40 and Series 30
devices, and invest in key feature phone technologies like the Nokia Browser,
aiming to be the world's most data efficient mobile browser. Early results of
this innovation can be found in Nokia's latest Asha feature phones which offer a
full-touch screen experience at lower prices.
Operational changes and updated cost reduction target
Balancing its investment priorities, Nokia plans to rescale the company by
making additional reductions in Devices & Services. Nokia plans to pursue a
range of planned measures including:
- Reductions within certain research and development projects, resulting in the
planned closure of its facilities in Ulm, Germany and Burnaby, Canada;
- Consolidation of certain manufacturing operations, resulting in the planned
closure of its manufacturing facility in Salo, Finland. Research and Development
efforts in Salo to continue;
- Focusing of marketing and sales activities, including prioritizing key
markets;
- Streamlining of IT, corporate and support functions; and
- Reductions related to non-core assets, including possible divestments.
As a result of the planned changes announced today, Nokia plans to reduce up to
10,000 positions globally by the end of 2013. Nokia is beginning the process of
engaging with employee representatives in accordance with country-specific legal
requirements.
"These planned reductions are a difficult consequence of the intended actions we
believe we must take to ensure Nokia's long-term competitive strength," added
Elop. "We do not make plans that may impact our employees lightly, and as a
company we will work tirelessly to ensure that those at risk are offered the
support, options and advice necessary to find new opportunities."
Taking into account these planned measures the company now targets to reduce its
Devices & Services non-IFRS operating expenses to an annualized run rate of
approximately EUR 3.0 billion by the end of 2013. This is an update to Nokia's
target to reduce Devices & Services non-IFRS operating expenses by more than EUR
1.0 billion for the full year 2013, compared to the full year 2010 Devices &
Services non-IFRS operating expenses of EUR 5.35 billion. This means that in
addition to the already achieved annualized run rate saving of approximately EUR
700 million at the end of first quarter 2012, the company targets to implement
approximately EUR 1.6 billion of additional cost reductions by the end of 2013.
As part of these planned changes, Nokia will closely assess the future of
certain non-core assets. In line with this, Nokia today announced plans to
divest Vertu, its luxury mobile phones business to EQT VI, a European private
equity firm.
Renewed leadership team
Nokia also announced today in a separate press release a number of changes to
its senior leadership. Nokia announced that it has appointed Juha Putkiranta as
executive vice president of Operations; Timo Toikkanen as executive vice
president of Mobile Phones; Chris Weber as executive vice president of Sales and
Marketing; Tuula Rytila as senior vice president of Marketing and Chief
Marketing Officer; and Susan Sheehan as senior vice president of Communications.
Putkiranta, Toikkanen and Weber will join the Nokia Leadership Team effective
July 1, 2012.
Jerri DeVard steps down as chief marketing officer; Mary McDowell steps down as
executive vice president of Mobile Phones; and Niklas Savander steps down as
executive vice president of Markets. DeVard, McDowell and Savander will all
continue in advisory roles through the transition of their roles; however, they
step down from the Nokia Leadership Team effective June 30, 2012.
Financial impact and outlook for Devices & Services
Nokia expects further charges of approximately EUR 1.0 billion relating to
restructuring activities in Devices & Services by the end of 2013 in connection
with its updated Devices & Services operating expense target. This is in
addition to cumulative charges of approximately EUR 900 million recognized as of
the end of first quarter 2012 in connection with previously announced
restructuring activities. By the end of the first quarter 2012, Nokia had
cumulative restructuring related cash outflows of approximately EUR 450 million.
From the second quarter 2012 onwards, Nokia expects restructuring related cash
outflows to be approximately EUR 650 million in 2012 and approximately EUR 600
million in 2013. Out of the total expected charges relating to restructuring
activities of EUR 1.9 billion, Nokia expects non-cash charges to be
approximately EUR 200 million.
These cost reduction measures are designed to return Nokia's Devices & Services
business to sustainable non-IFRS operating profitability as soon as possible.
During the second quarter 2012, competitive industry dynamics are negatively
affecting the Smart Devices business unit to a somewhat greater extent than
previously expected. Furthermore, while visibility remains limited, Nokia
expects competitive industry dynamics to continue to negatively impact Devices &
Services in the third quarter 2012. Nokia now expects its non-IFRS Devices &
Services operating margin in the second quarter 2012 to be below the first
quarter 2012 level of negative 3.0%. This compares to the previous outlook of
similar to or below the first quarter level of negative 3.0%.
"Nokia is significantly increasing its cost reduction target for Devices &
Services in support of the streamlined strategy announced today," said Timo
Ihamuotila, executive vice president and CFO. "With these planned actions, we
believe our Devices & Services business has a clear path to profitability. Nokia
intends to maintain its strong financial position while proceeding aggressively
with actions aimed at creating shareholder value."
Nokia will be hosting a conference call today at 13:00 UK time (8:00 EST). The
dial-in number for media (listen only - the question and answer session will be
limited to financial analysts and investors only) is +1 706 634 5012. Conference
ID: 90228970.
The dial-in number for financial analysts and investors is US: +1 888 636 1561.
Conference ID: 90228970. UK: +44 1452 560 299. Conference ID: 90489609.
A replay of the call will be available soon after the call completion. The
replay number is US: +1 800 585 8367. Conference ID: 90228970 . UK:
+44 1452 550 000. Conference ID: 90489609.
Nokia will provide full second quarter results and more details when it reports
its second quarter 2012 results on July 19, 2012.
About Nokia
Nokia is a global leader in mobile communications whose products have become an
integral part of the lives of people around the world. Every day, more than 1.3
billion people use their Nokia to capture and share experiences, access
information, find their way or simply to speak to one another. Nokia's
technological and design innovations have made its brand one of the most
recognized in the world. For more information, visit http://www.nokia.com/about-
nokia
FORWARD-LOOKING STATEMENTS
It should be noted that certain statements herein that are not historical facts
are forward-looking statements, including, without limitation, those regarding:
A) the expected plans and benefits of our partnership with Microsoft to bring
together complementary assets and expertise to form a global mobile ecosystem
for smartphones; B) the timing and expected benefits of our new strategies,
including expected operational and financial benefits and targets as well as
changes in leadership and operational structure; C) the timing of the deliveries
of our products and services; D) our ability to innovate, develop, execute and
commercialize new technologies, products and services; E) expectations regarding
market developments and structural changes; F) expectations and targets
regarding our industry volumes, market share, prices, net sales and margins of
our products and services; G) expectations and targets regarding our operational
priorities and results of operations; H) expectations and targets regarding
collaboration and partnering arrangements; I) the outcome of pending and
threatened litigation; J) expectations regarding the successful completion of
restructurings, investments, acquisitions and divestments on a timely basis and
our ability to achieve the financial and operational targets set in connection
with any such restructurings, investments, acquisitions and divestments; and K)
statements preceded by "believe," "expect," "anticipate," "foresee," "target,"
"estimate," "designed," "aim", "plans," "intends," "will" or similar
expressions. These statements are based on management's best assumptions and
beliefs in light of the information currently available to it. Because they
involve risks and uncertainties, actual results may differ materially from the
results that we currently expect. Factors that could cause these differences
include, but are not limited to: 1) our ability to effectively and timely
implement planned changes to our operational structure, including the planned
restructuring measures, and to successfully complete the planned investments,
acquisitions and divestments in order to improve our operating model and achieve
targeted efficiencies and reductions in operating expenses; 2) our success in
the smartphone market, including our ability to introduce and bring to market
quantities of attractive, competitively priced Nokia products with Windows Phone
that are positively differentiated from our competitors' products, both outside
and within the Windows Phone ecosystem; 3) our ability to make Nokia products
with Windows Phone a competitive choice for consumers, and together with
Microsoft, our success in encouraging and supporting a competitive and
profitable global ecosystem for Windows Phone smartphones that achieves
sufficient scale, value and attractiveness to all market participants; 4) the
difficulties we experience in having a competitive offering of Symbian devices
and maintaining the economic viability of the Symbian smartphone platform during
the transition to Windows Phone as our primary smartphone platform; 5) our
ability to realize a return on our investment in next generation devices,
platforms and user experiences; 6) our ability to produce attractive and
competitive feature phones, including devices with more smartphone-like
features, in a timely and cost efficient manner with differentiated hardware,
software, localized services and applications; 7) the intensity of competition
in the various markets where we do business and our ability to maintain or
improve our market position or respond successfully to changes in the
competitive environment; 8) our ability to retain, motivate, develop and recruit
appropriately skilled employees; 9) the success of our Location & Commerce
strategy, including our ability to maintain current sources of revenue, provide
support for our Devices & Services business and create new sources of revenue
from our location-based services and commerce assets; 10) our success in
collaboration and partnering arrangements with third parties, including
Microsoft; 11) our ability to increase our speed of innovation, product
development and execution to bring new innovative and competitive mobile
products and location-based or other services to the market in a timely manner;
12) our dependence on the development of the mobile and communications industry,
including location-based and other services industries, in numerous diverse
markets, as well as on general economic conditions globally and regionally; 13)
our ability to protect numerous patented standardized or proprietary
technologies from third-party infringement or actions to invalidate the
intellectual property rights of these technologies; 14) our ability to maintain
and leverage our traditional strengths in the mobile product market if we are
unable to retain the loyalty of our mobile operator and distributor customers
and consumers as a result of the implementation of our strategies or other
factors; 15) the success, financial condition and performance of our suppliers,
collaboration partners and customers; 16) our ability to manage efficiently our
manufacturing and logistics, as well as to ensure the quality, safety, security
and timely delivery of our products and services; 17) our ability to source
sufficient amounts of fully functional quality components, sub-assemblies,
software and services on a timely basis without interruption and on favorable
terms; 18) our ability to manage our inventory and timely adapt our supply to
meet changing demands for our products; 19) any actual or even alleged defects
or other quality, safety and security issues in our product; 20) the impact of a
cybersecurity breach or other factors leading to any actual or alleged loss,
improper disclosure or leakage of any personal or consumer data collected by us
or our partners or subcontractors, made available to us or stored in or through
our products; 21) our ability to successfully manage the pricing of our products
and costs related to our products and operations; 22) exchange rate
fluctuations, including, in particular, fluctuations between the euro, which is
our reporting currency, and the US dollar, the Japanese yen and the Chinese
yuan, as well as certain other currencies; 23) our ability to protect the
technologies, which 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 services; 24) the impact of economic, political, regulatory or
other developments on our sales, manufacturing facilities and assets located in
emerging market countries; 25) the impact of changes in government policies,
trade policies, laws or regulations where our assets are located and where we do
business; 26) the potential complex tax issues and obligations we may incur to
pay additional taxes in the various jurisdictions in which we do business; 27)
any disruption to information technology systems and networks that our
operations rely on; 28) unfavorable outcome of litigations; 29) allegations of
possible health risks from electromagnetic fields generated by base stations and
mobile products and lawsuits related to them, regardless of merit; 30) Nokia
Siemens Networks ability to implement its new strategy and restructuring plan
effectively and in a timely manner to improve its overall competitiveness and
profitability; 31) Nokia Siemens Networks' success in the telecommunications
infrastructure services market and Nokia Siemens Networks' ability to
effectively and profitably adapt its business and operations in a timely manner
to the increasingly diverse service needs of its customers; 32) Nokia Siemens
Networks' ability to maintain or improve its market position or respond
successfully to changes in the competitive environment; 33) Nokia Siemens
Networks' liquidity and its ability to meet its working capital requirements;
34) Nokia Siemens Networks' ability to timely introduce new competitive
products, services, upgrades and technologies; 35) Nokia Siemens Networks'
ability to execute successfully its strategy for the acquired Motorola Solutions
wireless network infrastructure assets; 36) developments under large, multi-year
contracts or in relation to major customers in the networks infrastructure and
related services business; 37) the management of our customer financing
exposure, particularly in the networks infrastructure and related services
business; 38) whether ongoing or any additional governmental investigations into
alleged violations of law by some former employees of Siemens may involve and
affect the carrier-related assets and employees transferred by Siemens to Nokia
Siemens Networks; and 39) any impairment of Nokia Siemens Networks customer
relationships resulting from ongoing or any additional governmental
investigations involving the Siemens carrier-related operations transferred to
Nokia Siemens Networks, as well as the risk factors specified on pages 13-47 of
Nokia's annual report on Form 20-F for the year ended December 31, 2011 under
Item 3D. "Risk Factors." Other unknown or unpredictable factors or underlying
assumptions subsequently proving to be incorrect could cause actual results to
differ materially from those in the forward-looking statements. Nokia does not
undertake any obligation to publicly update or revise forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent legally required.
Media Enquiries:
Nokia
Communications
Tel. +358 7180 34900
Email: press.services(at)nokia.com
www.nokia.com
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: NOKIA via Thomson Reuters ONE
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Datum: 14.06.2012 - 08:32 Uhr
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News-ID 156420
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