Nokia Corporation (NOK)

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Nokia Corporation (NOK)

Q1 2013 Earnings Call

April 18, 2013 8:00 am ET

Executives

Matt Shimao – Head-Investor Relations

Stephen Elop – President and Chief Executive Officer

Timo Ihamuotila – Executive Vice President and Chief Financial Officer

Analysts

Jim Suva – Citigroup Global Markets, Inc.

Mike Walkley – Canaccord Genuity

Stuart Jeffrey – Nomura

Andrew Gardiner – Barclays Capital

Francois Meunier – Morgan Stanley & Co.

Sandeep Deshpande – JPMorgan Securities LLC

Alexander Peterc – Exane BNP Paribas

Pierre Ferragu – Sanford C. Bernstein Ltd.

Tim Long – BMO Capital Markets

Simon Schafer – Goldman Sachs International

Gareth Jenkins – UBS

Presentation

Operator

Good morning and good afternoon. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nokia First Quarter 2013 Earnings Conference. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I will now turn the conference over to Matt Shimao, Head of Investor Relations. Please go ahead sir.

Matt Shimao

Thank you. Ladies and gentlemen, welcome to Nokia’s first quarter 2013 conference call. I’m Matt Shimao, Head of Nokia Investor Relations. Stephen Elop, President and CEO of Nokia; and Timo Ihamuotila, CFO of Nokia are here in Espoo with me today.

During this call, we’ll 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 differ materially from the results we currently expect.

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 12 through 47 of our 2012 20-F and in our quarterly results press release issued today.

Please note that our quarterly results press release, the complete interim report with tables, and the presentation on our website include non-IFRS results information in addition to the reported results information. Our complete interim report with tables available on our website includes a detailed explanation of the content of the non-IFRS information and a reconciliation between the non-IFRS and the reported information.

With that, Stephen, over to you.

Stephen Elop

Thank you, Matt. And, thank you everyone for joining us today. At the highest level, I am pleased that in Q1 2013 Nokia Group achieved underlying operating profitability for the third quarter in a row. In a moment, I will share my perspective on Nokia’s Q1 performance. However, I wanted to first note that we believe this quarter further underscored that Nokia, and other industry participants continue to operate in one of the most exciting and fast moving business environments in the world today.

Compared to a year ago a lot has changed in our industry, and I wanted to share some of the trends we’re seeing. For example, the distance between the various Android participants seems starker than ever before as the dominance of one hardware vendor becomes more visible. Additionally, unbranded Android and forked Android players continue to emerge from China and India creating new dynamics both within and increasingly outside of Asia. With this growth in low-priced fragmented versions of Android the Android experience is becoming inconsistent across the lower-end price range.

In February, Mobile World Congress highlighted the growth in startup alternative platforms with many new entrants placing bets on next generation technologies like HTML5. While we have not yet seen one of these alternative platforms gain broad scale we should not underestimate what could happen if a dominant Android provider shifts some of its focus to an alternative platform.

We also saw new attempts to disrupt existing business models, whether it is the new Facebook home forking the Android experience or Amazon providing a differentiated tablet that forks the Android stack, we see leading technology companies take deliberate steps to change Android and possibly disrupt our industry. There are some patterns of change that seem inevitable. For example, consumers are expecting their digital lives to be more and more mobile as evidenced by the recent statistics about the shift towards mobility at the expense of less mobile PC experiences. Consumers are also increasingly discerning about the capabilities and new experiences that attract their attention. They are less interested in counting cores and pixel density, and more interested in experiences that are truly innovative.

This constant pattern of change in our industry is an opportunity. We believe we can move through the industry fragmentation and churn within unrelenting focus on executing our strategy. Thus, we remain focused on improving the competitiveness of our products effectively managing our costs and moving with urgency.

In Q1, we continued that focus which resulted in us recognizing areas where we are very pleased with our progress and areas where we obviously need to turn up the focus. Thus today, I will provide a perspective on how we are developing each of our key businesses while highlighting the adjustments we are taking to ultimately increase the value we deliver to our shareholders.

First of all, we are pleased with the improvements in our Smart Devices business. And we’re optimistic about Lumia’s direction. In Q1, our Lumia volumes increased quarter-on-quarter to 5.6 million units, and approximately two-thirds of our Lumia volumes were our Windows Phone 8 based devices. With the broad portfolio of Lumia devices covering a wide range of price points, we are seeing our Lumia momentum accelerate as we exit Q1. Thus supported by the wider availability of recently announced Lumia products and the easing of supply constraints, we expect sequential volume growth in Q2 to be even higher than the 27% sequential growth we saw in Q1.

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