Nokia Corp. Q2 2010 Earnings Call Transcript

Nokia Corp. Q2 2010 Earnings Call Transcript
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Nokia Corp. (NOK)

Q2 2010 Earnings Conference Call

July 22, 2010 8:00 AM ET


Kristian Pullola – VP, Head of Treasury and IR

Olli-Pekka Kallasvuo – President and CEO

Timo Ihamuotila – EVP and CFO


Rod Hall – JP Morgan

Andrew Griffin – Bank of America

Mark Sue – RBC Capital Market

Gareth Jenkin – UBS

Ittai Kidron – Oppenheimer

Stuart Jeffrey – Nomura

Tim Boddy – Goldman Sachs

Tim Long – Bank of Montreal

Pierre Ferragu – Bernstein

Andrew Gardiner


Kristian Pullola

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Ladies and gentlemen, welcome to Nokia's Second Quarter 2010 conference call. I am Kristian Pullola, the Head of Investor Relations. Olli-Pekka, CEO of Nokia and Timo Ihamuotila, CFO of Nokia here in Espoo with me today.

During this briefing and call, we will 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 currently expected. 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 11 to 32 in our 2009 20-F and in our press release issued today.

Our aim is to finish this call in approximately one hour. To view the supporting slides while listening to the call, please go to the IR website. Please note that today's press release and this presentation includes non-IFRS results information in addition to the reported results information. Our quarterly results release includes a detailed explanation of the content of the non-IFRS information as well as a reconciliation between the two.

With that, Olli-Pekka, please go ahead.

Olli-Pekka Kallasvuo

Thank you, Kristian. Good morning and good afternoon. Considering our mid quarter update and the competitive challenges we faced in the quarter, our Q2 ended on a relatively solid note. As I noted in today's press release, there are several reasons for us to be optimistic about the future.

I'll start my comments by taking you through my thought process, why I am confident that Nokia will make a comeback at the higher end of the smartphone market. Then I will review our highlights for Q2.

First of all, we have been taking action to improve our execution. In Q2, we reorganized our Devices & Services business. Now, each of our product making units are vertically integrated. Each unit has its own dedicative resources including R&D, product portfolio management, and software assets. They [inaudible] direct control. This should improve both the speed and quality of execution, enabling us to deliver more innovative mobile solutions to the market and helping us to expand our leadership in mobile phones.

Looking at our current Devices portfolio, it is clear that the current situation is very tough at the high end. And I don't expect it to get easier in Q2 – sorry Q3. But towards the end of Q3, we expect to start shipping the Nokia N8, our first device that runs on the new Symbian 3 operating system.

There has been quite a lot of speculation on the N8 and Symbian 3, and I want to set the record straight on four key points. First, there will be a family of Symbian 3 devices. In fact, over the coming years, we aim to ship over 50 million Symbian based devices, 5-0 conservatively. We expect consumer demand for Symbian 3 devices to continue for quite sometime.

Second, we have made a lot of changes in how we approach development in the last 24 months. With Symbian 3, we are leveraging a software-centric platform approach, which provides distinct benefits for internal and external developers. This is really important.

For internal development teams after the first Symbian 3 device starts shipping, we can strive to deliver a more steady cadence of mid-to-high end device launches. This is because the Symbian 3 software will be uniform across the range of devices. This will also make application development more scalable for external developers. It will be much easier to make an application work across our Symbian 3 family of devices.

Third, it has to be clear on the distinct roles that Symbian and MeeGo play in our mid-to-high end portfolio. Symbian is about leveraging scale and expanding the smartphone category to cover a broad mass market footprint. In contrast, MeeGo is about leveraging speed and innovation to create industry leading flagship solutions. Symbian and MeeGo have different sweet spots. We intend to capitalize on the unique strengths of each platform.

And fourth, the feedback from operators on the N8 and Symbian 3 has been very good. The Nokia N8 will have a user experience superior to that of any smartphone Nokia has produced. Therefore, I am optimistic that the N8 will be an important step towards overcoming the challenges we face at the high end of our portfolio.

It's also worthwhile to highlight that it takes more than a good product to succeed. Many other elements can be crucial factors including customer loyalty, distribution channel and the strategic alignment with operators. We excel in all of these areas because of the expertise and efforts of each individual in our market's organization. Improving our smartphone competitiveness will enable us to once again leverage these assets to the fullest.

I am also optimistic about our future for four additional reasons. The overall handset industry remains healthy. We have continued to deliver solid performance in our mobile phones category supported by continuous product renewal. We have made good progress broadening the reach of our location services and we have continued to generate healthy cash flow. I will cover these topics in my review of Q2.

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