Nokia Gets Ready for Year 2000
NOKIA CORPORATION
NOKIA Year 2000 Readiness Disclosure
October 21, 1999
NOKIA YEAR 2000 READINESS DISCLOSURE AT SEPTEMBER 30, 1999
Nokia's activities related to the Year 2000 issues in the third
quarter 1999 focused primarily on contingency planning. Nokia also
continued its Year 2000 subprojects, covering products and
systems, production systems, R&D systems, after sales systems,
information systems, facilities and supplier readiness.
The Nokia Year 2000 Project
Nokia's Year 2000 Project includes identifying potential risk
areas, increasing risk awareness, and introducing action plans and
guidelines for managing Year 2000 issues. The Project is divided
into subprojects addressing the Year 2000 issues in products and
systems, production systems, R&D systems and after sales systems
within Nokia Networks (formerly Nokia Telecommunications), Nokia
Mobile Phones and Other Operations, which includes Nokia
Communications Products, Nokia Ventures Organization and Nokia
Research Center. The Year 2000 subprojects for information
systems, facilities systems and supplier readiness are Nokia-wide.
Pursuant to its policy to address Year 2000 issues related to
acquired business entities as part of the Nokia Year 2000 Project,
Nokia continued to assess the Year 2000 status of these newly
acquired business entities, including testing and verification. As
previously announced, certain timeframes announced for Nokia's
various Year 2000 subprojects as well as its general statements on
Year 2000 readiness status may not be applicable to the business
entities acquired or to the products of such entities.
Products and systems
Based on testing and verification to date, most of Nokia's
infrastructure related products and terminal products, including
mobile phones, display products, digital multimedia terminals and
battery chargers for mobile phones are Year 2000 compliant. For
non-compliant products, Nokia has introduced relevant compliance
solutions. The small number of Nokia's products that will not be
made compliant include a limited number of old products no longer
manufactured or for which new products have been substituted.
Production systems, R&D systems, after sales systems and other
information systems
Based on testing and verification to date, Nokia's critical
production systems, after-sales systems and its R&D systems are
Year 2000 compliant. Nokia intends to have its other critical
information systems compliant during the fourth quarter of 1999.
Facilities
Nokia has identified the relevant Year 2000 issues for its
facilities systems and equipment and categorized its facilities as
critical or non-critical. During the third quarter, Nokia
continued the necessary Year 2000 analysis and upgrades of the
critical facilities systems. As announced earlier, Nokia has plans
to have the necessary upgrades and testing, including independent
audits, completed by the end of the fourth quarter 1999 at its
critical sites.
Suppliers
Nokia continued to verify and audit the status of its sourced
items as well as the readiness of its suppliers for the year 2000.
Nokia has categorized its suppliers as critical or non-critical.
By the end of the third quarter of 1999, Nokia had completed the
verification of most of its critical suppliers. Due to incomplete
information received from certain suppliers as well as new
suppliers and products/components being sourced, Nokia will
continue its supplier verification process on an on-going basis
throughout the fourth quarter of 1999 with its overall target to
reduce the uncertainties related to the Year 2000 issues and to
minimize the related risks to the company, its customers or other
stakeholders.
Risk
Nokia realizes that failing to correct material Year 2000 issues
could potentially result in interruption or failure of certain
normal business activities and that such failures could have a
material adverse effect on the company's business, results and
financial condition. Nokia has identified potential worst-case
Year 2000 scenarios to include: disruptions in production or in
other critical parts of the total logistics chain for the
company's mobile phone and base station products; operational
failures in Nokia's critical information system; and, (not-
withstanding the company's efforts including testing and verifying
Nokia manufactured networks as well as other Nokia products) an
operational failure in a network containing elements supplied by
Nokia or in a Nokia terminal product.
In addition, third party supplies, including components,
subsystems and services, are of major concern for Nokia, as these
to a large extent remain outside the company's control.
Discontinuities or undetected Year 2000 issues with critical
suppliers may also impact Nokia's capabilities to remedy possible
defects that may occur in Nokia products delivered to customers as
a consequence of the Year 2000 issue. Nokia also acknowledges
that, due to possible shortages in certain electrical components
and the company's production-on-demand model, Nokia will not build
extensive additional component storage for production contingency
purposes. In addition, in some geographical areas, the
continuation of basic external services or supplies for
electricity, water or transportations is of concern and may, if
disruptions occur, have a significant adverse impact on Nokia and
its customers.
Any of these potential worst case scenarios or any other critical
failure in Nokia's own operations, in the operations of its
critical suppliers or in any of the critical interdependant
systems in use at Nokia may materially and adversely affect Nokia
and its customers. Information to-date also suggests that,
depending upon the circumstances, litigation may materialize out
of the Year 2000 readiness issues. Due to the over-all
uncertainties related to Year 2000 issues, it is difficult for
Nokia to evaluate the probability of claims being made against
Nokia as well as the consequences of such litigation, although
they could have a significant adverse impact on Nokia.
Contingency planning and costs
Nokia believes that the planning and implementation of necessary
Year 2000 upgrades together with contingency plans to meet the
anticipated as well as unforeseen Year 2000 issues will reduce the
possible Year 2000 risks related to its products, services and its
own operations. During the third quarter of 1999, Nokia arranged
is first contingency plan rehearsals. During the fourth quarter of
1999, Nokia is arranging company-wide, integrated rehearsals.
Nokia will also have special on-duty and on-call taskforces
available throughout the critical changeover period.
Nokia's Year 2000 contingency plans during the fourth quarter of
1999 include: setting up a Nokia-wide Millennium Center to
coordinate the operations of the various Nokia Year 2000
Operations Centers that will be operational through the change of
the millennium within the Nokia Year 2000 subprojects; performing
compliant integration tests through logistics chains for various
products and including critical component, subsystem and services
suppliers; and assisting critical component, subsystem and
services suppliers in their Year 2000 upgrading.
Nokia's estimate of its direct Year 2000 costs remains at EUR 75.7
million. At the end of September 1999, Nokia had spent
approximately 90% of the estimated aggregate amount. Cost
estimates may vary in the future and will be updated as Nokia
learns additional information concerning the status of its own and
relevant third parties' Year 2000 compliance.
Currency rate September 30, 1999 1 EUR = 1.037 USD
It should be noted that certain statements herein which are not
historical facts, including, without limitation those regarding 1)
the projected extent and timing of Year 2000 compliance for
Nokia's products, systems, and facilities as well as those of
third parties with which Nokia is involved, 2) the estimated costs
of Year 2000 compliance activities, including actions currently
contemplated and actions, including operating models and
contingency plans decided upon in the future, 3) the continuation
of production activities over year-end 1999, 4) the estimated
impact on Nokia's business, results and financial condition of
failures by it or third parties with which Nokia is involved to
adequately address Year 2000 issues, and 5) certain statements
preceded by 'believes', 'expects', 'aims', 'intends', 'estimates',
'anticipates', or similar expressions, are forward looking
statements. Because such statements involve risks and
uncertainties, actual events may differ materially from those
currently expected by Nokia. Factors that could cause such
differences include, but are not limited to 1) additional
information Nokia may discover concerning the status of Year 2000
compliance of the products, systems and facilities or those of
third parties as part of Nokia's Year 2000 Project, 2) failures of
others, including public utilities, financial institutions,
communications companies, transportation providers, customers,
suppliers, computer manufacturers and software providers, as well
as other providers of resources on which Nokia relies, to
identify, disclose and address Year 2000 issues accurately and on
a timely basis, 3) the inability of Year 2000 consultants, experts
and advisers to adequately identify and address Year 2000 issues
as planned, 4) changes in technologies or methodologies used in
identifying and addressing Year 2000 issues in products, systems
and facilities, 5) the effectiveness and costs of operating models
and contingency plans Nokia may develop as it learns more about
the status of its own and others' Year 2000 compliance and
readiness, and 6) factors that could affect Nokia's business,
results and financial condition generally, including the risk
factors specified in Nokia' s Form 20-F for the year ended
December 31, 1998.
The Nokia Year 2000 Readiness Disclosure published on October 21,
1999 continues Nokia's quarterly reporting on Year 2000 issues and
updates the disclosures published on November 16, 1998, January
29, 1999, April 22, 1999 and July 22, 1999. Nokia also has plans
to disclose a summary of the actual millenium change related
impacts, if any, on the company on February 1, 2000.
Further information
Marja-Terttu Verho
Senior Manager, Corporate Communications, Nokia
tel. +358 9 1807 286
fax +358 9 652 409
www.nokia.com
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