Q3 2012 Earnings Call
October 18, 2012 8:00 am ET
Stephen A. Elop - Chairman of Nokia Leadership Team, Chief Executive Officer, President and Director
Timo Ihamuotila - Chief Financial Officer, Executive Vice President, Member of Nokia Leadership Team and Chairman of Disclosure Committee
T. Michael Walkley - Canaccord Genuity, Research Division
Jeffrey T. Kvaal - Barclays Capital, Research Division
Francois Meunier - Morgan Stanley, Research Division
Gareth Jenkins - UBS Investment Bank, Research Division
Jim Suva - Citigroup Inc, Research Division
Stuart Jeffrey - Nomura Securities Co. Ltd., Research Division
Mark Sue - RBC Capital Markets, LLC, Research Division
Didier Scemama - BofA Merrill Lynch, Research Division
Richard Kramer - Arete Research Services LLP
Timothy Long - BMO Capital Markets U.S.
Previous Statements by NOK
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Ladies and gentlemen, welcome to Nokia's third quarter 2012 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 13 through 47 of our 2011 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 A. Elop
Thank you, Matt, and thank you for joining us for the Q3 2012 earnings call. As we expected, Q3 was a difficult quarter in our Devices & Services business. However, we are pleased that Nokia Group achieved operating profitability on an underlying basis, with a Q3 non-IFRS operating margin of 1.1%. We are encouraged that we continue to make progress against the business strategy we have outlined for Nokia.
Q3 represented the tough transitional quarter for our Smart Devices business as we introduced consumers to the innovation ahead with the new line of Lumia products. In our Mobile Phones business, the positive consumer response to our new Asha full touch smartphones translated into strong sales. In the Location & Commerce business, we made progress establishing our platform offering, which is in line with our plan to expand our location offering to more customers. And Nokia Siemens Networks had a remarkable quarter, in which we achieved record profitability on a non-IFRS basis, and the Nokia Siemens Networks' cash balance increased for the fourth quarter in a row.
While we continue to focus on transitioning Nokia, cash management remains a priority for our team. We were pleased to complete the sale of Vertu since the end of Q3, and we will continue dispose of non-core assets. Additionally, we are moving our organization through our restructuring faster than we expected.
That said, Nokia Group net sales were down sequentially. Thus, we are determined to carefully manage our financial resources, improve our competitiveness, return our Devices & Services business to positive operating cash flow as quickly as possible and, ultimately, provide more value to our shareholders.
To achieve this, we are taking deliberate action across our 5 areas of revenue: Smart Devices, Mobile Phones, intellectual property rights, Location & Commerce and NSN. I will take a moment to provide insight into each area.
First, I will comment on Smart Devices, where we are continuing to invest during our transition to Windows Phone. Just 6 months after signing the deal with Microsoft, we launched Lumia 800 and 710. Then we added the Lumia 610 and 900. Jointly with Microsoft, we grew the number of Windows Phone applications from 7,000 to more than 100,000. We're pleased that we were able to shift our engineering and manufacturing operations to a new smartphone platform as quickly as we did. As I referenced just last month, we announced 2 new devices built on the Windows Phone 8 operating system, the Lumia 820 and the Lumia 920. Both devices are introducing experiences that are distinctly Nokia. And on this basis, we believe that Lumia 920 is the most innovative smartphone to date. Operators, retailers and most importantly, consumers are expressing strong interest in the new experiences Lumia will deliver. They are responding positively to a number of our innovations, such as PureView, which we believe allows people to capture great images and videos, particularly in low-light conditions or when image stability is important; City Lens, which accurately helps people navigate their lives using augmented reality; our Location & Commerce business is helping us to differentiate Lumia; wireless charging, which brings a new range of innovative gear like charging plates and speakers to Lumia; bold design and new colors; and the many new experiences in the Windows Phone 8 operating system.