Financial Review Rick Simonson Chief Financial Officer

Transcription

1 Financial Review Rick Simonson Chief Financial Officer Nokia

2 Growth - more to come Nokia

3 Year on year growth rates for 2005 and 2006 (1 st 9 months of year) 40% 30% 20% 2005* 2006* 23% 20% 34% 28% 28% 29% 10% 0% Net Sales Units EPS** * 1 st 9 months of 2005 and 1 st 9 months of 2006 ** Excluding special items Nokia

4 Not a commodity - Winners need to master. Scale Brand Manufacturing and logistic challenges Technology Great and broad product portfolio Cost structure Quality IPR Nokia

5 Mobile device industry consolidation continues Global Handset Market Share 90% 80% 70% 60% 50% 40% 30% 20% Top 5 ROW 10% Q Nokia estimates Nokia

6 Acceleration in consolidation: Share of the Top 2 60% 55% 50% 45% 40% 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Nokia estimates Nokia

7 Nokia vs. Motorola: global device unit share 40% 35% Nokia 30% 25% 20% 15% Motorola 10% 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Nokia estimates Nokia

8 How could Nokia gain unit market share in 2007? Combination of #1 - #3 Could Yield 1%+ Share Gain #1: Mathematical Benefit Nokia s Strong Position in Emerging Markets Assumption: Emerging markets growth again double the developed markets in 2007 Nokia s share stable in 2007 in both emerging markets and developed markets from Q306 levels #2: Mathematical Benefit - GSM/WCDMA vs. CDMA Assumption: GSM/WCDMA grows significantly faster than CDMA in 2007 Nokia s share stable in 2007 in GSM/WCMDA from Q306 levels and mid-single digit share in CDMA in 2007 #3: Smaller Vendors Losing Share Assumptions BenQ/Siemens have 2-3% global share (predominately in Latin America and Europe) The share of the non-top 5 global vendors is approximately 15% and is highly fragmented Nokia

9 Why are we in the emerging markets? Percentage of Total Nokia Device Gross Profit, 1Q-3Q06 India and China: ~ 20% Rest of World: ~ 80% Nokia

10 Market value of adjacent markets $ (M) 50,000 Audio Players Cameras Navigation 40,000 30,000 20,000 10, E 2007E 2008E Nokia Source: IDC Audio Players: portable digital music players and CD players Cameras: digital still cameras, digital and analog camcorders Navigation: portable GPS device (non-pda)

11 Financial targets Nokia

12 Nokia financial targets Operating Margin Devices (MP & M) Nokia Siemens Networks TARGET** 15% 17% 10%+ Tax Rate Capex (m EUR) Depr. and Amort. (m EUR) 2006E* 26% ~700 ~ E * 26% ~700 ~ Nokia * Approx. estimates for full year ** Next 1 to 2 years Does not include full impact of Nokia Siemens Networks

13 Nokia R&D and efficiency targets R&D targets (% of sales) Existing target: by end of 2006 Report card: Estimated end of 2006 Nokia 13% 11% 9-10% YES Devices 11% 8% 8% YES Infrastructure 19% 18% 14% NO Efficiency targets Ratios: Gross Margin to R&D and Gross Margin to Sales & Marketing targeted to improve in 2007 vs Nokia

14 Nokia aligned with shareholder interests Nokia

15 Return on Equity: Nokia vs. Tech Peers 40% 35% 30% 25% 20% 15% 10% 5% 0% Nokia Motorola Ericsson Broader Tech Index* *15 largest members of S&P Global 1200 Information Technology Sector Index Calculation: last reported 12 months, ROE = Pro forma net income / Total Equity Source: Company reports and Bloomberg Nokia

16 Operating efficiency Cash flow Operating Cash Flow Free Cash Flow Euro (M) Q1 Q Operating Cash Flow = Net cash from operating activities Free cash flow = Operating cash flow - CAPEX Nokia

17 Distribution of excess cash to shareholders Net Cash (Euro billions) Cash level Share count* Down 14% Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q Diluted share count (millions) * Diluted Nokia

18 Dividends: What are Nokia s peers doing? 50% 40% Dividend payout ratio (5-year average) Yield: ~2.5% Growth: 10%* 30% 20% 10% 0% Nokia HP Siemens Ericsson Motorola Intel Qualcomm Microsoft Cisco Dell Lucent Dividend/Net Income ratio for Nokia s peer group has traditionally been around 20% Nortel Source: Bloomberg (last 5 fiscal years) * Last two years Nokia

19 Distributions to net income 250% 200% Distributions to net income in 2005 Dividends 2005 Share buybacks % 100% 50% 0% Dell HP Microsoft Nokia Cisco Source: Bloomberg and company reports, latest reported fiscal year end Intel Qualcomm Siemens Motorola Ericsson Lucent Nortel Nokia

20 Stock option dilution 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Ericsson Siemens Nokia HP Nortel Microsoft Lucent Motorola Qualcomm Dell IBM Intel Cisco Source: Nokia as per June 2006, other company reports latest reported fiscal year end Dilution assuming all outstanding options are exercised Dilution = Options outstanding / (Options outstanding + shares outstanding) Nokia

21 Reinvesting in the business and Device Management Digital Music Platform Navigation and Mapping Nokia

22 Summary Nokia is Growing More to Come Financial Targets Clear, Ambitious and Achievable Nokia is Aligned with Shareholder Interests Nokia

23 Nokia