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Nokia Capital Market Days 2006

Nokia updates its targets and outlines its refined strategy

(PresseBox) (Amsterdam, The Netherlands, ) Today, at its annual Capital Market Days event, Nokia presented its forecasts for the industry and its financial targets for the next one to two years.

In his keynote presentation, Nokia President and CEO Olli-Pekka Kallasvuo said, "To enjoy the full benefits of the continuing growth of the global device market that Nokia expects, we've made a number of important strategic moves and organizational changes, and have put our marketing and design efforts into a sharper focus. With these changes, and more to come, we believe Nokia has the power to build a further improved portfolio of devices that raises industry standards to a whole new level."

Kallasvuo also described the unique opportunity he believes Nokia has to mobilize the internet for the mass market. "With an estimated 850 million Nokia device users out there, we are positioned to connect more people to the internet than any other company in the world. We are actively aligning our strategy in pursuit of this major business opportunity."

Nokia forecasts for the industry:

- Nokia expects industry mobile device volumes in 2007 to grow by up to 10% from the approximately 970 million units Nokia estimates for 2006. We expect the volume growth in 2007 to be above 15% in Asia Pacific, China, and Middle East & Africa, and below 10% in Europe, Latin America and North America.

- Nokia expects the device industry to experience value growth in 2007, but expects some decline in industry ASPs, primarily reflecting the increasing impact of the emerging markets and competitive factors in general.

- Nokia now forecasts that the three billion mobile subscriptions mark will be reached in 2007, instead of in 2008 as Nokia forecasted previously.

- Nokia expects slight growth in the mobile and fixed infrastructure and related services market in euro terms in 2007.

Nokia financial targets:

- Nokia operating margin target of 15% during the next one to two years. This target is revised from the one to two year 17% operating margin target Nokia set in December 2005, primarily due to Nokia's increased exposure to the infrastructure market following the expected start of operations of Nokia Siemens Networks.

- Device (Mobile Phones and Multimedia combined) operating margin target of 17% during the next one to two years. This target is revised from the one to two year 17%-18% device operating margin target Nokia set in December 2005.

- Nokia Siemens Networks operating margin target of 10% plus during the next one to two years. Nokia Siemens Networks maintains its target to achieve a double digit operating margin by year end 2007, before restructuring charges.

- Nokia targets an improvement in the ratio of Nokia gross margin to R&D expenses and an improvement in the ratio of Nokia gross margin to sales and marketing expenses in 2007, compared to 2006.

- Nokia expects to meet its previously stated target to reduce overall R&D expenditure to 9%-10% of net sales by the end of 2006.

Other Nokia targets:

- Share gains in devices in 2007.


Mobile Phones

Nokia outlined the leading position of its entry-level devices in the world's emerging markets and presented its new strategic priorities for device development. The company said that in its development efforts it will pay special attention to certain selected devices, a move that comes together with a number of other changes. By refreshing its design approach, introducing a consumer-category driven strategy to its product portfolio, and focusing its marketing spend, Nokia aims to reinforce its device market leadership and continue to further refine its mid-range portfolio.

Multimedia

Nokia described its objective to capitalize on digital convergence by capturing value from traditional single-purposed product categories - such as music players, cameras and pocketable computers - with its Nokia Nseries multimedia computers. Nokia has an estimated market share of approximately 50% of the converged device segment* into which its multimedia computers fall. This makes Nokia the clear leader of the converged device market, which is expected to reach almost 100 million units in 2006**.

Enterprise Solutions

Nokia outlined its competitive position and opportunities in the nascent enterprise market. To date, the Nokia Eseries of business devices have been ranged by more than 160 operators globally and over 1.6 million units have been shipped. Nokia has also sold more than one million licenses for its Intellisync Mobile Suite email solution to date. With its growing portfolio of Nokia Eseries devices, as well as its open and extensible mobileware, multi-channel distribution system and scale benefits, Nokia believes it has all the building blocks for success in this market.

Networks

Nokia said that progress towards forming Nokia Siemens Networks is proceeding, with operations currently expected to commence in January 2007. The transaction has been given US and EU anti-trust approvals; the new company's governance model, global mode of operation and organizational structure have all been defined; and the estimated cost synergies of EUR 1.5 billion annually by 2010 have been identified.

*Source: Gartner, September 2006
**Source: Gartner, August 2006

The first day of presentations at Nokia Capital Market Days will be webcast live at: www.nokia.com/press/cmd2006