2nd Qtr &Interim Rslts-Part 1
Nokia Corporation
27 July 2000
PART 1
Nokia in April - June
Preparing for third generation with outstanding results
Nokia reports record quarterly results with continued strong
growth for April - June 2000. Net sales totaled EUR 6 980 million,
an increase of 55% compared to the second quarter in 1999.
Operating profit increased by 60% to EUR 1 412 million, resulting
in an operating margin of 20.2%.
Jorma Ollila, Nokia Chairman and CEO, said: 'Strong growth in the
global mobile communications market continued during the second
quarter. According to preliminary estimates, the number of mobile
phone users worldwide rose to over 570 million by the end of June.
This is well in line with our projection of over one billion
mobile phone subscribers globally before the end of 2002. We
estimate that the mobile phone market growth for the full year
2000 will cause the total annual market volume to exceed 400
million units.'
'Nokia Networks' sales growth, together with our continuous
operational renewal, gives us confidence that we are well
positioned to strengthen our established market position in new
technologies. Our mobile phones sales grew 67%, while we sustained
an exceptional level of profitability. This once again proves the
combined strength of Nokia's strong product portfolio, leading
brand and superior demand supply chain, all of which we are
continuously further developing.'
'Overall growth prospects for Nokia in the later part of the year,
as well as for the long term, remain unchanged, stimulated by the
strong mobile communications market. We expect competition to
remain fierce, making it necessary to continuously improve
efficiency and master rapid growth without compromising customer
satisfaction. We feel we have an excellent opportunity to
strengthen our market position and to realize the benefits of
meeting emerging customer needs in the Mobile Information
Society', said Ollila.
'In the coming months Nokia Mobile Phones plans to commence
shipments of several advanced models. We anticipate Nokia's
earnings per share in the third quarter to be at least equal to
the level achieved in the third quarter of 1999. However, due to
the timing of the new product introductions as well as
seasonality, they are projected to be lower than in the second
quarter of this year. In the fourth quarter, we expect the
earnings per share to exceed the level achieved in the second
quarter of 2000.'
EUR Million 2Q/2000 2Q/1999 Change%, 1H/2000 1H/1999 1999
Net sales 6 980 4 493 + 55 13 517 8 363 19
772
Nokia Networks 1 925 1 390 + 38 3 427 2 498 5 673
Nokia Mobile Phones 4 883 2 922 + 67 9 722 5 499 13
182
Nokia Ventures 193 67 + 188 404 131 415
Organization
Operating profit 1 412 881 + 60 2 728 1 649 3 908
Nokia Networks 348 274 + 27 621 500 1 082
Nokia Mobile Phones 1 221 671 + 82 2 382 1 287 3 099
Nokia Ventures - 108 - 31 - 178 - 53 - 175
Organization
Common Group Expenses - 49 - 33 - 97 - 85 - 98
Profit before tax and 1 424 877 + 62 2 757 1 635 3 845
minority interests
Net profit 951 581 + 64 1 842 1 086 2 577
EPS, EUR
Basic 0.20 0.13 + 54 0.39 0.24 0.56
Diluted 0.20 0.12 + 67 0.39 0.22 0.54
NOKIA IN JANUARY - JUNE 2000
SECOND QUARTER 2000 RESULTS
(International Accounting Standards, IAS, comparisons given to the
second quarter 1999 results)
Nokia's net sales increased by 55% to EUR 6 980 million (EUR 4 493
million). Sales growth was substantial in all geographic regions.
Sales of Nokia Networks increased by 38% to EUR 1 925 million (EUR
1 390 million) and sales of Nokia Mobile Phones by 67% to EUR
4 883 million (EUR 2 922 million). Sales of Nokia Ventures
Organization increased by 188% and totaled EUR 193 million (EUR 67
million).
Operating profit increased by 60% to EUR 1 412 million (EUR 881
million), representing an operating margin of 20.2% (19.6%).
Operating profit in Nokia Networks increased by 27% to EUR 348
million (EUR 274 million), representing an operating margin of
18.1% (19.7%). Operating profit in Nokia Mobile Phones increased
by 82% to EUR 1 221 million (EUR 671 million), representing an
operating margin of 25.0% (23.0%). Nokia Ventures Organization
reported an operating loss of EUR 108 million (operating loss of
EUR 31 million). Common Group Expenses, which comprises Nokia Head
Office and Nokia Research Center, totaled EUR 49 million (EUR 33
million).
Financial income totaled EUR 13 million (financial expense EUR 2
million). Profit before tax and minority interests was EUR 1 424
million (EUR 877 million). Net profit totaled EUR 951 million (EUR
581 million).
Earnings per share increased to EUR 0.20 (basic) and to EUR 0.20
(diluted) compared to EUR 0.13 (basic) and EUR 0.12 (diluted) a
year before.
FIRST HALF YEAR 2000 RESULTS
(International Accounting Standards, IAS, comparisons given to the
first half year 1999 results)
Nokia's net sales increased by 62% and totaled EUR 13 517 million
(EUR 8 363 million). Sales of Nokia Networks increased by 37% to
EUR 3 427 million (EUR 2 498 million) and sales of Nokia Mobile
Phones by 77% to EUR 9 722 million (EUR 5 499 million). Sales of
Nokia Ventures Organization increased by 208% and totaled EUR 404
million (EUR 131 million). During the first six months, Europe
accounted for 51% (56%) of Nokia's net sales, Asia-Pacific for 25%
(23%) and the Americas for 24% (21%). Nokia's five largest country
markets were the United States, China, the UK, Germany and Italy.
Operating profit increased by 65% to EUR 2 728 million (EUR 1 649
million). Operating profit in Nokia Networks increased by 24% to
EUR 621 million (EUR 500 million). Operating profit in Nokia
Mobile Phones increased by 85% to EUR 2 382 million (EUR 1 287
million). Nokia Ventures Organization reported an operating loss
of EUR 178 million (operating loss of EUR 53 million). Common
Group expenses totaled EUR 97 million (EUR 85 million).
Financial income totaled EUR 33 million (financial expense EUR 10
million). Profit before tax and minority interests was EUR 2 757
million (EUR 1 635 million). Net profit totaled EUR 1 842 million
(EUR 1 086 million).
Earnings per share increased to EUR 0.39 (basic) and to EUR 0.39
(diluted) compared to EUR 0.24 (basic) and EUR 0.22 (diluted) a
year before. At the end of June 2000, the total number of issued
shares was 4 680 739 956.
At June 30, 2000, Nokia's net debt-to-equity ratio (gearing) was -
30% (-41% at the end of 1999). During the January - June period
2000, capital expenditures amounted to EUR 770 million (EUR 512
million).
The average number of employees during the first half year period
was 57 087. At June 30, Nokia employed a total of 60 166 people
(51 849 people at June 30, 1999).
On June 30, Nokia group companies owned 3 892 602 Nokia shares.
The shares have an aggregate par value of EUR 233 556.12 and
represent 0.08% of the total number of shares and total voting
rights.
SIGNIFICANT DEVELOPMENTS IN THE SECOND QUARTER 2000
During the second quarter 2000, Nokia continued its joint efforts
with other industry leaders to develop solutions and services for
the wireless Internet and mobile e-business markets, thus bringing
its vision of the Mobile Information Society closer to
realization.
Nokia further strengthened its systems integration capabilities
both independently and together with cooperation partners
especially in mobile Internet and enabling applications. Nokia
signed co-operation agreements with several leading companies
during the quarter, which included an agreement with Cisco
Systems, Inc. to enhance connectivity between mobile and Internet
Protocol (IP) backbone networks. Cap Gemini and Nokia will co-
operate in the development and delivery of end-to-end Mobile
Internet solutions. Nokia and Inktomi announced an agreement to
deliver carrier-class infrastructure software for mobile Network
operators. In China, Nokia signed an agreement to establish a
joint venture to develop and market advanced wireless data
solutions and services to leading operators with one of China's
largest software suppliers, Shenyang NEU-Alpine Software Co. Ltd.
Together with several other industry players, Nokia announced a
joint effort to develop an open and common framework for secure
mobile electronic transactions (MeT). The objective of this
initiative is to use existing and emerging standards to facilitate
the rapid adoption of secure mobile e-business.
Nokia also joined the Mobey Forum, a global forum created by major
financial institutions and leading mobile phone manufacturers, to
encourage the use of mobile technology in financial services and
to foster the adoption of open standards in this field.
Nokia also entered into important cooperation agreements with
Lotus, SAP, BEA Systems and Bull to offer WAP technology to
corporate customers.
Standardization work for third generation proceeded well. Nokia
welcomed the completion of the Release '99 of the 3G WCDMA
specification in 3GPP (3rd Generation Partnership Project) during
the first half of this year. This new standard is now clearly
becoming the preferred global technology for the new ITU third
generation frequency band. This open specification will set the
scene for a competitive supply of infrastructure and handsets from
many competitors, resulting in excellent value for operators and
consumers as well as remarkable growth opportunities.
As an original promoter of WCDMA technology, Nokia has been
strongly contributing to its specification, and has secured a
solid intellectual property rights portfolio in WCDMA as well as
in other global third generation technologies. Nokia has made
strong R&D investments in third generation technologies resulting
in a competitive product offering in both infrastructure and
terminals.
Nokia joined the Oxygen Alliance, a group of companies that will
work with some 250 MIT researchers in the USD 50 million five-year
Oxygen project. The goal of the project is to develop a new breed
of pervasive, human-centered communications systems and devices to
serve people's needs.
In China, Nokia's cooperation with Chinese research units to
develop next generation Internet technologies and applications
based on the use of IPv6 protocol proceeded firmly. The first
phase of the experimental network technology cooperation program
covers all of the 10 regional centers of CERNET (China Education
and Research Network).
Nokia Networks
In the second quarter of 2000, Nokia's 3G solutions were well
received, as evidenced by major contracts. Nokia signed a contract
for the supply of a third generation network solution to VIAG
EuroPlatform AG in Liechtenstein. Nokia also agreed with StarHub
in Singapore on the provision of a 3G network, including Nokia's
advanced WCDMA 3G core and radio access network solutions. This
marks the first contract for the delivery of a complete 3G System
in Asia. Earlier, Nokia was chosen as a supplier by Japan Telecom
and Finnish 2G and 3G for the delivery of third generation
solutions. Nokia sees strong demand for its infrastructure
solutions that will be available next year. It is Nokia's aim to
be among the first companies on the market with products based on
open interfaces.
Nokia also continued to introduce new, innovative 3G network
solutions. New products launched during the quarter included
Nokia's revolutionary concept for IP-based 3G core networks, the
Nokia 3G All-IP Core, based on the IPv6 standard, which
complements Nokia's IP Radio Access Network concept, launched
earlier this year. Nokia also introduced 3G functionality for
mobile switches with the Nokia 3G Mobile Switching Center and a
package of new 3G solutions for network management and 3G service
creation, along with Mobile IP packet data functionalities for
TETRA networks.
Nokia and AT&T Wireless Services of the United States agreed to
jointly develop and test enhancements to the third generation
wireless standard EDGE, which will enable simultaneous delivery of
voice and data, as well as advanced multimedia applications. Major
milestones in cooperation with Korean operator SK Telecom were
achieved, defining extensive planning guidelines for third
generation networks.
Nokia reinforced its leading position in GPRS networks. At the end
of the quarter, Nokia had already delivered its GPRS core network
solution to well over 40 operators worldwide. Demand for Nokia's
GPRS core networks has been especially strong during the second
quarter, when time schedules for commercial availability were
confirmed. Nokia believes that the world's first GPRS services
based on the final commercial GPRS standard will be launched in
networks provided by Nokia during the third quarter, 2000. GSM
operators have also continued to expand their existing networks.
Expansion agreements were signed in Poland, the Philippines,
Morocco, Taiwan, the UK, Turkey and the United States, and Nokia
won two new GSM customers in Israel and Bolivia. Nokia Networks
signed its largest ever infrastructure deal to date, a USD 900
million contract with Telsim in Turkey
In the second quarter, the number of Nokia Networks' announced
agreements for the WAP module of Nokia Artus Messaging Platform
increased to 29, including contracts with ONE in Austria, Jilin
Mobile Communication in China, Norweb Telecom in the UK, Ukrainian
Mobile Communications in the Ukraine, Zygo Communications in the
UK, four branches of China Unicom in China and Finland's third
nationwide mobile operator Finnish 2 G.
Nokia continued to achieve success in the global marketplace with
its DSL solutions, as the demand for fast access to the Internet
continued to grow. Major roll-outs are beginning in Taiwan and
Korea as well as in Europe as a result of the unbundling of the
local loop. Major contracts were signed with KPN, KPN Qwest and
Telia.
Nokia Networks has continued to restructure its organization in
order to meet customer demands and market changes. It has also
continued outsourcing its non-core manufacturing by selling its
units located in Aanekoski, Central Finland to Scanfil, a Finnish
contract manufacturer. The level of outsourced manufacturing for
Nokia Networks is now over 60%.
NOKIA MOBILE PHONES
Nokia is preparing to commence delivery of several new mobile
phones during the second half of the year. Deliveries of the Nokia
8890 premium category world phone for GSM 900/1900 began already
in June. Three new WAP-enabled GSM mobile phones were announced
earlier this year. The Nokia 6210 classic model is scheduled to
become available in the third quarter and the Nokia 6250 tough
model in the fourth quarter. The Nokia 9110i Communicator will be
shipping in volume in the third quarter. Shipments of the
previously announced Nokia 7160 (TDMA) and 7190 (GSM 1900) WAP-
enabled phones for the Americas market are also planned to start
in the third quarter.
The Nokia 8290, a GSM 1900 phone and the Nokia 8260, a TDMA
800/1900/AMPS dual-band dual-mode phone, both introduced in the
second quarter, will become available through a number of wireless
network operators in the Americas beginning in the third quarter
of 2000. The tri-mode Nokia 5185i for CDMA 800/1900/AMPS will
start shipping in the third quarter, and the Nokia 6185i - another
tri-mode CDMA model - in the fourth quarter.
A founding member of the SyncML initiative, Nokia recently
announced its success in demonstrating the world's first wireless
Internet synchronization using SyncML protocol. Nokia and
RealNetworks Inc. announced an agreement to develop and distribute
Internet media technology for future mobile devices. Nokia also
announced its support of Java technology in a wide selection of
its future mobile terminal categories.
In order to facilitate Nokia's entry into the Korean CDMA market,
Nokia announced in June that it had signed an agreement with
Telson Electronics for the joint development, manufacture and
supply of CDMA products for Korea and other markets. The agreement
strengthens Nokia's focus on the Korean market and complements its
portfolio of CDMA products.
During the first half of 2000, Nokia continued to strenghen its
focus on CDMA by increasing and establishing CDMA R&D resources in
San Diego, Seoul, and Vancouver, demonstrating Nokia's overall
commitment to both IS95 CDMA and 1XRTT handset development.
Nokia Ventures Organization
In the second quarter of 2000, Nokia and Internet Security Systems
(ISS) announced RealSecure for Nokia, the first enterprise-class
intrusion detection appliance. In Asia, Nokia and Cable & Wireless
HKT joined forces to provide Virtual Private Network solutions for
corporate customers with Nokia's network security products.
Nokia also continued to strengthen its leading end-to-end WAP
solutions through developer programs and strategic product
extensions. In particular, Nokia announced the availability of
Nokia Activ - a new, one-button feature, which introduces the over-
the-air provisioning tool available with the Nokia WAP Server 1.1.
During the past quarter, Nokia also introduced the Nokia Mobile
Entertainment Service, offering developer tools and a service
platform that provides a simpler way for game application
developers and on-line content publishers to create 'entertainment
on the move' for WAP enabled mobile phones.
More than 10,000 developers have already registered for the Nokia
Mobile Entertainment Service.
The markets for multimedia terminals continued to grow during the
second quarter as well, and sales of multimedia terminals
increased, particularly in Europe. Nokia Home Communications
introduced its first Home Gateway product, intended for North and
South America, the Nokia MW 1122. The Nokia Ventures Fund
continued to invest in start-up companies in the high growth
mobile Internet sector and the size of the fund was increased by
USD 50 million to USD 150 million.
Statement by Jorma Ollila, Chairman and CEO:
Once again I have the pleasure to announce record-breaking
results, which confirm our leadership in bringing mobile and
Internet technologies to consumers and companies around the globe.
Strong growth in the global mobile communications market continued
during the second quarter. According to preliminary estimates, the
number of mobile phone users worldwide rose to over 570 million by
the end of June. This is well in line with our projection of over
one billion mobile phone subscribers globally before the end of
2002. We estimate that the mobile phone market growth for the full
year 2000 will cause the total annual market volume to exceed 400
million units.
While operators have been expanding their capacity, most have also
been actively preparing for the arrival of mobile Internet
services and third generation by investing in GPRS and other new
network technologies. A large majority of operators are expected
to start offering GPRS services in their GSM networks during the
next 6-12 months. We have reached volume sales of our GPRS system
and have already delivered equipment to well over 40 operators.
During the second quarter, we have established ourselves as the
leading GPRS core network supplier. Nokia's customers will be the
first ones to launch GPRS services, complying fully to the GPRS
standards, during the third quarter of 2000. GPRS is an important
building block on the road towards third generation, allowing
operators an early start with new mobile Internet services.
Nokia Networks' sales growth, together with our continuous
operational renewal, gives us confidence that we are well
positioned to strengthen our established market position in new
technologies.
In mobile phones, our sales grew 67%, while we sustained an
exceptional level of profitability. This once again proves the
combined strength of Nokia's strong product portfolio, leading
brand and superior demand supply chain, all of which we are
continuously further developing.
In CDMA, we began an important co-operation with Telson
Electronics to gain entry into the Korean CDMA market, and
continued our efforts to enhance our capabilities in narrowband
CDMA technology and products. We intend to achieve a position
within CDMA comparable to our leading position in other
corresponding technologies.
In the coming months, Nokia Mobile Phones plans to commence
shipments of several advanced models, including various WAP-
enabled phones designed for specific customer categories. Until
these new products are shipped in volume, Nokia Mobile Phones'
profitability is expected to be negatively impacted in the third
quarter. We expect that the contribution of the new products will
at least substantially offset these margin pressures in the fourth
quarter.
Looking at the third quarter as a whole, we anticipate Nokia's
earnings per share to be at least equal to the level achieved in
the third quarter of 1999. However, due to the timing of the new
product introductions in Nokia Mobile Phones as well as
seasonality, they are projected to be lower than in the second
quarter of this year. In the fourth quarter, we expect the
earnings per share to exceed the level achieved in the second
quarter of 2000.
Overall growth prospects for Nokia in the later part of the year,
as well as for the long term, remain unchanged, stimulated by the
strong mobile communications market. We expect competition to
remain fierce, making it necessary to continuously improve
efficiency and master rapid growth without compromising customer
satisfaction. We feel we have an excellent opportunity to
strengthen our market position and to realize the benefits of
meeting emerging customer needs in the Mobile Information Society.
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