Nokia Corporation's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Nokia Corporation ( NOK)

Q3 2011 Earnings Conference Call

October 20, 2011 08:00 ET

Executives

Matt Shimao – Head, Investor Relations

Stephen Elop – President and Chief Executive Officer

Timo Ihamuotila – Chief Financial Officer

Analysts

Kulbinder Garcha – Credit Suisse

Jeff Kvaal – Barclays

Gareth Jenkins – UBS

Tim Long – Bank of Montreal

Tim Boddy – Goldman Sachs

Stuart Jeffrey – Nomura

Mike Walkley – Canaccord Genuity

Alexander Peterc – Exane BNP Paribas

Mark Sue – RBC Capital Markets

Ittai Kidron – Oppenheimer

Zahid Hussein – Citi

Richard Kramer – Arete Research

Kai Korschelt – Deutsche Bank

Presentation

Operator

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Nokia Third Quarter 2011 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 Mr. Matt Shimao, Head of Investor Relations. Sir, you may begin.

Matt Shimao – Head, Investor Relations

Ladies and gentlemen, welcome to Nokia’s third quarter 2011 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 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 12 through 39 of our 2010 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 the reconciliation between the non-IFRS and the reported information.

With that, Stephen, over to you?

Stephen Elop – President and Chief Executive Officer

Welcome, ladies and gentleman, and thank you for joining us on today’s earnings call. Overall, I am pleased with Nokia’s results this quarter. That being said, it is important to emphasize that we are on a journey during which we are systematically transforming our company for long-term success and improved financial performance. With each step of that journey, you will see us methodically implement our strategy pursuing steady improvement through a period that has known transition risks while also dealing with the various unexpected ups and downs that typify the dynamic nature of our industry.

Let me remind you about what the nature of this journey is. On February 11, we announced a new strategy for Nokia with the fundamental intent of creating great mobile products. This strategy comprises, first, the transition of our primary smartphone platform to Windows Phone; second, increased investment in our lower price mobile phone products as we seek to connect the next billion people to the Internet; and third, investments and areas of potential future disruption. Additionally across these three pillars, we will use our iconic design capabilities, location and commerce assets, and various unpolished gems as sources of competitive differentiation. And finally, we will change the way we work to better adapt to the disruptive forces around us. As a result of this strategy, we intend to grow longer term Devices & Services net sales faster than the market while delivering our Devices & Services non-IFRS operating margin of 10% or more.

During this very busy quarter, I have focused my attention on operative improvements meeting with teams around the company and around the world to gauge the progress we are making to identify areas, where we need additional concentration and to assess our early results. Most notably this quarter, I visited China to review the business status of the region. To meet with the operators and to engage with the number of our go-to-market partners, it is evident that the team in China has made significant progress in correcting the situation that led to the problems in Q2.

Channel inventories are at normal levels. Channel structure has been streamlined and we believe our channel partners are seeing increased profits from the resulting normalized pricing and from the sales support provided by the Nokia team. In parallel, the operators are looking forward to bringing their consumers our new Smart Devices and Mobile Phones. Yes, there is still a lot of work to do in China, but there are very clear signs of progress.

I also have the opportunity to visit India, where we continue to see a positive trend after the launch of our dual SIM devices earlier this year. In the dual SIM price bands in which we launched these products, we have gone from essentially a standing start to 18 million devices in Q3. Additionally, our internal estimates indicate continued momentum.

In addition to capturing share with our dual SIM devices, we also are seeing a halo effect, whereby the success of our dual SIM devices is driving increased traffic around and correspondingly higher sales for our other devices in India. For example, shipments of the Nokia 1616, a €15 device that we first shipped in Q2 of last year grew 24% sequentially and had its highest volume performance since Q4 of last year. This may suggest that the power of the Nokia brand in our traditional strongholds combined with great new products and execution by our team can have an immediate impact on our business results. The results in India may also begin to tell another story somewhat contrary to conventional wisdom.

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