Nokia Corporation (NOK)

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Nokia Corporation (NOK)

Q2 2013 Earnings Call

Jul 18, 2013, 8:00 am ET


Matt Shimao - Head of Investor Relations

Stephen Elop - President and Chief Executive Officer, Chairman of Nokia Leadership Team, Director

Timo Ihamuotila - Chief Financial Officer, Executive Vice President, Member of Nokia Leadership Team


Stuart Jeffrey - Nomura

Michael Walkley - Cannacord Genuity

Andrew Gardiner - Barclays

Gareth Jenkins -UBS

Pierre Ferragu - Bernstein

Mark McKechnie - Evercore Partners

Richard Kramer - Arete Research

Alexander Peterc - Exane BNP Paribas

Francois Meunier - Morgan Stanley

Mark Sue - RBC Capital Markets

Didier Scemama - Merrill Lynch



Good morning. My name is Carmen and I will be your conference operator today. At this time, I would like to welcome everyone for the Nokia Q2 earnings conference call. 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).

I would now like to turn the call over to Matt Shimao, Head of Investor Relations. Please go ahead.

Matt Shimao

Ladies and gentlemen, welcome to Nokia’s second quarter 2013 conference call. I am 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 will be making forward-looking statements regarding the future business and financial performance of Nokia and this 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 for joining us today. For Nokia and our industry, the second quarter of 2013 was dynamic. Thus, at the highest level, we are pleased to report that Nokia group achieved an underlying operating profit for the fourth consecutive quarter. Further, we are pleased that Nokia group ended Q2 2013 with a strong balance sheet and solid cash position with gross cash of €9.5 billion and net cash of €4.1 billion. In the second quarter, our Lumia volumes grew to 7.4 million, the highest for any quarter so far demonstrating momentum for the ecosystem.

Our mobile phones business units started to show signs of recovery in the latter part of the second quarter following a difficult start to the year. Our HERE business exceeded expectations and benefitted from its leadership in the automotive industry. And, most notably, we benefitted from another strong performance at Nokia Siemens Networks, which continue to deliver well against its focused strategy.

While the market conditions are well documented as challenging, we are focused on delivering differentiated products. In the last six months, we have introduced new hardware and software with the launch of the very affordable Asha 105, the highly social Asha 210, the competitively priced Lumia 520, a range of flagship Lumia smartphones including the 925 and 928. And, of course, the game-changing Lumia 1020.

Given the market conditions, we remain focused on executing our strategy, improving the competitiveness of our products, effectively managing our costs and moving with urgency. Today, I will take time to provide more insight into each of our key business areas and share my perspective on how we believe we can continue to drive more value for shareholders.

First, in devices and services, we achieved the Q2 non-IFRS operating margin of negative 1.2%, which was consistent with the earlier expectation for approximately negative 2% plus or minus four percentage points.

In our Smart Devices business unit, we continue to focus on delivering meaningful differentiation to consumers around the world. The Lumia 520, our most affordable Windows Phone 8 product has enjoyed a strong start in markets like China, France, India, Thailand, the U.K., the U.S. and Vietnam.

The Lumia 620 and 720, are capturing people attention in markets like Thailand and Vietnam. The Lumia 920, 925 and 928 are establishing a flagship position in key markets like the U.S. and the U.K., where operator exclusivity is important.

Last week, we were very proud to introduce the next generation of smartphone imaging with the Lumia 1020. The response from operators and developers has been very positive to the new software and hardware innovation. With the Lumia 1020, we will help people see things they've never seen before with the 41 megapixel sensor. People get closer than ever before, because we've reinvented zoom. People will discover and rediscover new stories with endless reframing. Plus, our new imaging innovation is attracting third-party developers and I was pleased to announce new applications from Hipstamatic Vyclone, Yelp, Flipboard Foursquare and others.

In short, we start shipping the Nokia Lumia 1020, which is planned for later this month, we believe it will change how people shoot, create and share pictures forever. We are glad to report a positive trajectory for Lumia quarterly volumes from 2.92 million to 4.4 million to 5.6 million to 7.4 million devices in Q2, showing momentum for the ecosystem.

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