Nokia Corporation (NOK)

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Nokia Corporation (NOK)

Q4 2009 Earnings Call Transcript

January 28, 2010 8:00 am ET

Executives

Kristian Pullola - VP, Head of Treasury and IR

Olli-Pekka Kallasvuo - President and CEO

Timo Ihamuotila - EVP CFO

Analysts

Tim Boddy - Goldman Sachs

Michael Walkley - Piper Jaffray

Andrew Gardiner - Barclays Capital

Ittai Kidron - Oppenheimer

Sherief Bakr - Citi

Mark Sue - RBC

Andrew Griffin - Bank of America

Rod Hall - J.P. Morgan

Gareth Jenkins - UBS

Kulbinder Garcha - Credit Suisse

Presentation

Operator

At this time, I would like to welcome everyone to the Nokia fourth quarter and full year 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator instructions) I would now like to turn the call over to Kristian Pullola, Vice President, Head of Treasury, and Investor Relations. Sir, you may begin.

Kristian Pullola

Thank you. Ladies and gentlemen, welcome to Nokia's fourth quarter 2009 conference call. I'm Kristian Pullola, Head of Nokia Investor Relations; Olli-Pekka Kallasvuo, CEO; and, Timo Ihamuotila, CFO of Nokia are here with me as for today.

During this briefing and call, we will be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore materially differ materially from the results currently expected.

Factors that could cause such differences can be both external, such as general, economic, and industry conditions as well as internal operating factors. We have identified these in more detail on pages 11 to 28 in our 2008 20-F and in our press release issued today.

Our aim is to finish this call in approximately one hour. To view the supporting slides while listening to the call, please go to the IR Web site. Please note that today's press release and this presentation includes non-IFRS results information in addition to the reported results information. Our quarterly results release includes a detailed explanation of the content of the non-IFRS information as well as a reconciliation between the two.

With that, Olli-Pekka, please go ahead.

Olli-Pekka Kallasvuo

Thank you, Kristian. Good morning and good afternoon. I said on the last earnings call that Q4 would be the best quarter of the year in terms of devices and services net sales, volumes, and margins. It was that and more. Q4 showed Nokia’s ability to ramp up new, more compelling offerings even in a tough competitive environment. NSN also delivered a strong quarter. I am very encouraged with the focus and execution that I see throughout the organization, both at Nokia and NSN.

Before I provide some color on Q4, there’s one strategic item I’d like to talk about, our free navigation announcement last week. I want to emphasize what we offer is unique and game-changing. There are clear benefits for consumers, operators, and developers. This message is resonating with them and the feedback has been very positive.

We are now providing free walk and drive navigation as an integral part of our smart phone offering. There are three things I think really are groundbreaking, one, how the solution advances the user experience; two, how the solution is beneficial for the operators; and, three, how the solution advances Nokia’s business strategy.

First, with our new Ovi Maps client, we have dramatically improved the user experience. It’s much more intuitive and quick and we have upgraded the location search engine. Over time, we think Ovi Maps will enhance the daily lives of our consumers more and more as usage patterns increase and navigation evolves from being a stand-alone application to a platform that multiple services are blocked into. Using maps in mobile handsets will become as commonplace as taking pictures, and even more central and critical to the user experience.

Second, for operators, how the solution is differentiated. In addition to driving the uptake of data plans, our Ovi Maps application is built on a unique hybrid technology that is optimized for use on a mobile network. The bottom line is that our approach uses a fraction of bandwidth compared to most online map providers. It is a fundamentally different approach that is much more operator friendly and consumer friendly as well.

And third, from a strategic perspective, it is important at this phase to increase using engagement for our location-based services. High engagement and high use will be the foundation for contextual advertising over the long term. And of course, this will also attract developers. We are leveraging our unique assets to create new competitive advantages. More importantly in the near term, this will enhance the competitiveness of our smart phone portfolio. It is a way for us to drive higher credential rates, support ASPs, and capture value share. We think this solution can really take off in 2010.

Now on to a review of the quarter. In Q4, the demand environment for mobile handsets ended up being better than we anticipated and we took advantage of this upside. For the first time in 2009, industry volumes were up on year-on-year basis. We continue to see signs of recovery in the market. However, the sustainability of consumer demand remains uncertain.

Even though the competitive environment was stuck in Q4, Nokia delivered solid results, with unit shipments up 17% sequentially, compared to an estimated 14% for the market. This was driven by our improved product portfolio and strong collaboration between our supply chain and sales teams. These teams are world class and they delivered an outstanding performance in Q4.

Read the rest of this transcript for free on seekingalpha.com