Capital Markets Day 2007 - Nokia · PDF file1 © 2007 Nokia Capital Markets Day 2007 ... Nokia. Motorola. Sony Ericsson. Samsung. LG. ... 31 © 2007 Nokia Capital Markets Day 2007
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1 © 2007 Nokia Capital Markets Day 2007
Capital Markets Day 2007Rick SimonsonChief Financial Officer
2 © 2007 Nokia Capital Markets Day 2007
Revenue growth – and strong margins
3 © 2007 Nokia Capital Markets Day 2007
EPS growth outpacing sales and volume growth
* Excludes special items and purchase price accounting related items
29%
10%
25%
44%
0%
10%
20%
30%
40%
50%
Mobile device net sales
Mobile device units
Diluted EPS*
Q1-Q3 2006Q1-Q3 2007
4 © 2007 Nokia Capital Markets Day 2007
Making money in all device segments –
In Nokia’s case, don’t equate low-end with poor profitability
EUR 82 ASP
EUR 93 ASP
22%36%
42%
EUR 0-30
EUR 31-75
EUR 76+
Product Mix (Unit Volumes)
21%
41%39%
Q3'06 Q3'07* Excludes special items
23 %
15 %
0%
10%
20%
30%TotalDeviceOperatingMargins*
5 © 2007 Nokia Capital Markets Day 2007
10%
20%
30%
40%
Q3'06 Q4'06 Q1'07 Q2'07 Q3'07
Margin improvement
Excludes special items and purchase price accounting related items
Device Gross Margin %
Nokia Operating Margin %
Nokia Gross Margin %
Device Operating Margin %
6 © 2007 Nokia Capital Markets Day 2007
Active portfolio management Actual product refresh example
EUR
16% spread*
37% spread*
* Not equivalent to gross margins
Product Revenue
Direct Product Cost
The final quartersof Product A’s life…
10
40
Q1’06 Q2’06 Q3’06 Q4’06 Q1’07
7 © 2007 Nokia Capital Markets Day 2007
Active portfolio management Actual product refresh example
EUR
10
40
Q1’06 Q2’06 Q3’06 Q4’06 Q1’07
42% spread*
…overlaps with thelaunch of Product B
36% spread*
Product Revenue
Direct Product Cost
The final quartersof Product A’s life…
* Not equivalent to gross margins
8 © 2007 Nokia Capital Markets Day 2007
25%
30%
35%
Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07
Mobile Phones gross margins
Nokia 5200/5300 XpressMusic
Nokia 6300
Nokia 8600 Luna
Nokia 2630 Barracuda
Nokia 5310
Nokia 6500 Classic
Nokia 6500 Slide
Nokia 1200
Nokia 1208
Nokia 7900
Nokia 7373
Nokia 1100
Nokia 1600
GrossMargin
9 © 2007 Nokia Capital Markets Day 2007
Multimedia gross margins
Nokia N70/N73 Music Editions; Nokia N91 8GB Nokia N95
Nokia N81
Nokia N95 8GB
Nokia N81035%
40%
45%
Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07
GrossMargin
10 © 2007 Nokia Capital Markets Day 2007
Enterprise Solutions gross margins
Nokia E90 Communicator
Nokia E51
Nokia E65
40%
45%
50%
Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 4Q'07
GrossMargin
11 © 2007 Nokia Capital Markets Day 2007
Sustainable core virtues
• Scale:
39% market share in Q3’07 vs. #2 at 15%
• Brand:
#5 worldwide and #1 in Asia
• Quality:
Low failure rates and warranty costs
• Manufacturing and logistics:
Leading the Fortune Global 500
• Distribution:
Substantial lead in China, India, and MEA
• IPR:
#1 share of WCDMA essential patents
Sources: Nokia estimates; Interbrand; AMR Research; Fairfield Resources International
12 © 2007 Nokia Capital Markets Day 2007
Core virtue – Scale
Sony EricssonNokia Motorola Samsung LG
0%
10%
20%
30%
40%
Q3’05 Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1'07 Q2’07 Q3’07-10%
10%
30%
50%
70%
Q3’05 Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1’07 Q2’07 Q3’07
Estimated Handset Market Share Percent of Top 5 Profits 39% 67%
Source: company reports
Our scale+
geographic diversity+
broad product portfolio
Tough for others to win byjust focusing on a particular
geography or product segment=
13 © 2007 Nokia Capital Markets Day 2007
Core virtue – Brand
Strength of preference – “will only buy this brand”
Source: Nokia Brand
Study, Q3 2007
25 %
0 %
5 %
10 %
15 %
20 %
25 %
30 %
Q3'06 Q4'06 Q1'07 Q2'07 Q3'07
Nokia Motorola Sony Ericsson Samsung LG
14 © 2007 Nokia Capital Markets Day 2007
Source: AMR Research, 2007
1
2
3
4
5
Core virtue – Supply Chain
#1 out of Fortune Global 500
15 © 2007 Nokia Capital Markets Day 2007
Core virtue – Distribution
China
Middle East
& AfricaNokia in ~100% of total ~120K points of sale
Nokia in ~80% of total ~80K points of sale
India
Nokia in ~100% of total ~100K points of sale
Source: Nokia estimates
16 © 2007 Nokia Capital Markets Day 2007
WCDMA essential patents**
Nokia30%
11%
Core virtue – IPR
*Source: company reports**Source: Fairfield Resources International, 2007
0
5
10
15
20
25
30
35
1991199219931994199519961997199819992000200120022003200420052006
Cumulative R&D* (EUR billions)
Nokia
Qualcomm
17 © 2007 Nokia Capital Markets Day 2007
Market share gain in 2008?
#1: Mathematical benefit –
Nokia’s > 50%
entry-level share in Q3’07*
Assumption: Entry level devices grow approximately 2x
faster than the overall market in 2008
#2: Mathematical benefit –
Nokia’s ~50%
converged devices share in Q3’07*
Assumption: Converged devices grow approximately 3x
faster than the overall market in 2008
#3: Mathematical benefit –
Nokia’s ~50%
GSM, ~35%
WCDMA, & ~5%
CDMA share in Q3’07*
Assumption: GSM/WCDMA grows significantly faster than CDMA in 2008
* Nokia estimates
Combination of #1 - #3 could yield 1%+ share gain*
18 © 2007 Nokia Capital Markets Day 2007
Internet services
19 © 2007 Nokia Capital Markets Day 2007
Reinvesting in the business for growth
* NAVTEQ acquisition pending
Mobile Gaming
Location Based Services
*
Media Sharing
Navigation and Mapping
Digital Music Platform
Email and Device Management
Mobile Advertising
20 © 2007 Nokia Capital Markets Day 2007
Internet Services – 2010 Market Opportunity
EUR 100 billion* for core markets that Nokia focuses on
* Nokia and external analysts’
estimates
Digital Imaging
Communities
Video & TV
Navigation
Gaming
Music
Messaging
21 © 2007 Nokia Capital Markets Day 2007
Services and software revenue model – fee based
now…ad
driven
later
Ad revenues Recurring subscription and transactional revenues
Target opportunity:
All people Primarily higher- income people
# of expected customers:
Hundreds of millions Tens of millions
22 © 2007 Nokia Capital Markets Day 2007
> 4 billion people expected to use mobile devices in 2010*
Internet capabilities pervasive*•
Java devices: ~60%
• Web browser (XHTML or HTML): ~60%
• High speed connection (3G+): ~30%
Convergence trends continue*•
Camera: ~60%
• Music player: ~50%
• Email: ~50%
• Navigation/GPS: ~20%
• Smartphones: ~20%*Nokia estimates
23 © 2007 Nokia Capital Markets Day 2007
Financial targets
24 © 2007 Nokia Capital Markets Day 2007
Nokia financial targets
* Next 1 to 2 years; does not include pending acquisition of NAVTEQ** Excludes special items and purchase price accounting related items
2007 CMD TARGET*
Operating Margin** 16-17%
Devices & Services** 20% +/-
Nokia Siemens Networks** Increasing to 10%
2006 CMD TARGET*Operating Margin 15%Devices (MP & M) 17%Nokia Siemens Networks 10%+
1%***
Q1-Q3’07 ACTUAL
14%
19%
*** Includes Q2’07 and Q3’07 only; Nokia Siemens Networks began operations on April 1, 2007
25 © 2007 Nokia Capital Markets Day 2007
Other financial targets
2008E *
Tax Rate 26%Capex (m EUR) ~900Depr. and Amort. (m EUR) ~875Common Group Functions(m EUR expense)** ~200
* Approximate estimates for full year; does not include pending acquisition of NAVTEQ.** Excludes special items. Beginning 2008, Devices & Services will include approximately 2/3 of the expenses
previously reported under “Common Group Functions”.
26 © 2007 Nokia Capital Markets Day 2007
Decreasing the volatility of OPEX (as a percent of net sales) Sequential Percentage Point Change in OPEX*
-10 %-8 %-6 %-4 %-2 %0 %2 %4 %6 %8 %
10 %Q1
'03
Q3'0
3
Q1'0
4
Q3'0
4
Q1'0
5
Q3'0
5
Q1'0
6
Q3'0
6
Q1'0
7
Q3'0
7
* Excludes special items and purchase price accounting related items
27 © 2007 Nokia Capital Markets Day 2007
New organizational structure – strategic
and financial
benefits
Opportunities for synergies and savings
•
Harmonization of product roadmaps
•
Elimination of overlaps in R&D
•
Elimination of overlaps in sales and marketing
Devices &Services
CommonGroup
Functions
MobilePhones
Multimedia EnterpriseSolutions
CommonGroup
Functions
Old
New
28 © 2007 Nokia Capital Markets Day 2007
Nokia aligned with shareholders’
interests
29 © 2007 Nokia Capital Markets Day 2007
Quarterly Cash Flow
* Excludes special items and purchase price accounting related items
0
500
1,000
1,500
2,000
2,500
Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07
EURmillions Net cash from operating activities
Operating profit*
30 © 2007 Nokia Capital Markets Day 2007
Distribution of excess cash to shareholders
Cash level
Diluted share countDown 18%
456789
10111213
Q1'04Q2'04Q3'04Q4'04Q1'05Q2'05Q3'05Q4'05Q1'06Q2'06Q3'06Q4'06Q1'07Q2'07Q3'07
Cash
(EU
R bi
llion
s)
3 500
3 700
3 900
4 100
4 300
4 500
4 700
4 900 Diluted share count (m
illions)
31 © 2007 Nokia Capital Markets Day 2007
Return on Equity – latest reported fiscal year
Source: Company reports
36%
0%10%
20%30%40%50%
60%70%
DELL
NOK IBM
RIM
M
AAPL
CSCO
ERIC
QCOM MOT GE
GOOG HP
Q PG
INTC
32 © 2007 Nokia Capital Markets Day 2007
Distributions to Net Income – latest reported
fiscal year
Source: Company reports
135%
0 %
50 %
100 %
150 %HP
Q
INTC
NOK
MOT
DELL
CSCO IBM PG GE
QCOM
RIM
M
ERIC
AAPL
GOOG
Share Repurchases/Net Income
Dividends/Net Income
33 © 2007 Nokia Capital Markets Day 2007
Stock option dilution – latest reported fiscal year
Source: Company reports Dilution = exercisable options / (exercisable options + basic shares outstanding)
2%
0%
2%
4%
6%
8%
10%
12%
14%ER
IC
NOK GE
RIM
M
GOOG
AAPL
MOT
QCOM PG
INTC
HPQ
IBM
DELL
CSCO
34 © 2007 Nokia Capital Markets Day 2007
Quarterly Disclosure – beginning Q1 2008
Press release will include:•
Net sales, gross margins, operating expenses, and operating margins for our reportable segments:
•
Devices & Services•
Nokia Siemens Networks•
NAVTEQ’s
mapping business (post closing of the pending acquisition)•
Nokia device ASPs•
Estimated industry device volumes and Nokia estimated device market share•
Nokia mobile device volume by geographic area•
Nokia converged device volumes•
Nokia Siemens Networks net sales by geographic area•
Special items and Nokia Siemens Networks Purchase Price Accounting related items
•
Industry and Nokia Outlook section
35 © 2007 Nokia Capital Markets Day 2007
Quarterly Disclosure – beginning Q1 2008
Changes in presentation:•
ASPs will exclude services•
Common Group Functions –
Devices & Services will include approximately 2/3 of the expenses previously reported under “Common Group Functions”; historical amounts will be provided on an adjusted basis for comparison
In addition, we will provide commentary on:•
Factors that impact our business performance•
Industry device volumes by region•
Industry device volumes by technology (i.e. GSM/CDMA/WCDMA/Other)•
Product highlights•
Nokia Siemens Networks integration•
Share buybacks•
Impact of currency fluctuations
We are always trying to improve and we welcome your feedback
36 © 2007 Nokia Capital Markets Day 2007
Summary
• Strategic focus on Internet services
• Nokia Siemens Networks integration and synergies on track
• Nokia is growing
• Strong margins and good product portfolio execution
• Nokia is aligned
with shareholders’
interests
37 © 2007 Nokia Capital Markets Day 2007
Thank you.
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