諾基亞 (NOK) 2001 Q1 法說會逐字稿

Yes. Can we start now?

Okay. Great. One moment please for your introduction.

Thank you.

And, I'm sorry, is it Nokia or Nokia?

Nokia.

Nokia?

No, Nokia.

Nokia. Okay. Great. One moment please for your introduction.

Ladies and gentlemen thank you for standing by. Welcome to the Nokia 2001 first quarter conference call. At this time, all participants are in a listen only

mode. Later we will conduct a question and answer session. At that time, if you have a question, and have dialed a North American phone number, you'll need to press the 1 followed by the 4. If you have dialed a European phone number, you will need to press the star followed by the 1 on your telephone. As a reminder, this conference is being recorded today Friday April 20, 2001. Your speakers for today are Ms. Ulla James, Vice President of Investor Relations, and Mr. Jorma Ollila, Chairman and CEO of Nokia. Ms. James please go ahead ma'am.

Thank you. Ladies and gentlemen, good morning in the US, and good afternoon to you on the European side. My name is Ulla James, Vice President, Investor Relations, and with me in Finland today, Jorma Ollila, Chairman and CEO of Nokia, and Olli-Pekka Kallasvuo, CFO of Nokia. During this conference call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and the mobile communications 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 21 to 23 in Nokia's Form 20-F and also in our press release issued today. While this conference call has been made publicly available, the opportunity to ask questions has been reserved to the financial community, investors, and analysts only. In order to allow for as many as possible to present their questions, we encourage you to limit yourselves to one question only. Our aim is to finish this call in approximately one hour. For your convenience, we are running a supporting slide presentation of

the conference call on nokia.com. A replay, together with the slides, will be available on the web 2 hours after the call ends today. A telephone replay number will also be available until Monday. Nokia sales during the first quarter grew by 22%, to 8 billion euros, and pro forma operating profit increased by 8% to 1.4 billion euros, generating a pro forma operating margin of 18%. Diluted pro forma earnings per share increased to 22 eurocents compared to 19 eurocents a year ago. Sales in Nokia Networks grew by a very strong 35% to 2 billion euros with a pro forma operating margin of 18%. Nokia Mobile Phones grew by 20%, to 5.8 billion euros with an operating margin on a pro forma basis of 20.7%. Sales in Nokia Ventures Organization decreased by 20%, to 169 million euros, generating a pro forma operating loss of a 102 million euros. The Common Group Expenses consisting of Nokia Head Office and Research Center totaled to 29 million euros. During the first quarter, Nokia generated a positive net operating cash flow of 1.7 billion euros. Both receivables and inventories rotation improved by a couple of days in comparison to the fourth quarter last year. The net debt-to-equity ratio gearing improved to -36% in the end of the quarter. With this, it is my pleasure to hand over to Jorma Ollila. Jorma, please.

Ladies and gentlemen I am really extremely satisfied with the solid growth and excellent profitability Nokia achieved during the first quarter of 2001. As our strong sales growth demonstrates, we have continued to take market share as planned and strengthened our market position in both mobile phone and network businesses. The higher than expected operating margin in mobile phones is further evidence of the strength of our product portfolio and our excellent execution in these challenging market conditions. As I said a month ago in our mid March press release, difficult times like these, test your character as a company. I strongly believe that truly great companies emerge from challenging times much stronger. Our market position, together with an exceptionally strong product portfolio and trusted Nokia brand, has enabled us to succeed in today's business environment. Let me now briefly turn to the different business groups, starting with Nokia Mobile Phones. According to our preliminary estimates, the global mobile phone market in the first quarter 2001 was about 94 million units, representing approximately 10% growth over the previous year. Based on our calculations, we also believe there were approximately 770 million cellular subscribers at the end of the first quarter. As expected, the reductions of operator subsidies and other types of promotions are having an impact, both on new subscriber growth, as well as on replacement. This in addition to the economic weakness, particularly in the US, is

a key reason for limited visibility and the lower handset market volume forecast of 450-500 million units we made in mid March. During the first quarter of 2001, Nokia Mobile Phones' volume growth continued to outpace that of the market. We estimate that our first quarter year-on-year sales volume growth was more than twice the rate of the overall market growth. Demand for Nokia Mobile Phones was the strongest in Europe and Asia Pacific, while the Americas grew at a lower rate due to general weakness, especially in the Latin American countries. Nokia Mobile Phones saw the strongest year-over-year unit growth in GSM and CDMA. In GSM, our market share grew considerably, both on a sequential, as well as on year-over-year basis. In IS-95 CDMA, our market position improved in comparison to a year ago. I believe we have good opportunities to continue to improve our position in IS-95 CDMA with the help of our new products, the two Nokia 3280 series premium phones, as well as the two Nokia 8800 series phones, especially designed to facilitate our entry into the Korean market. All of these new CDMA products are expected to start shipping during the second quarter. In spite of focusing on wideband CDMA technology in Japan, we also see the importance of maintaining our presence in the current PDC market. In early April, we introduced, together with J-Phone, a new PDC phone to the Japanese market, the J-nmo1. This

model, which is our first imaging phone with an integrated digital camera, is also expected to be available during this second quarter. We are progressing as planned with our GPRS phones. The deliveries for the Nokia 8310 and Nokia 6310 are scheduled to start in the third and fourth quarters respectively. We expect the volume market conditions to GPRS to emerge during the second half of 2001 and our GPRS volumes to reach millions in the fourth quarter, as previously stated. The lower level of subsidies is expected to continue to impact the demand picture in the coming few months. However, we do believe new technologies such as GPRS will motivate both operators and consumers to become more active towards the end of the year. As we have stated earlier, Nokia's internal inventory situation has been very healthy, and our products have been moving well through the sales channels. We are also seeing some improvement for the industry as well. We expect the channel inventory levels to normalize at around mid-year. However, the second quarter industry demand will still be somewhat affected by the inventories in some country markets. In spite of the limited visibility, due to the overall economic development, we expect the annual market volume to reach 450-500 million units, with the strongest demand coming from Asia Pacific and Americas, with Europe experiencing more modest growth. We also reiterate our earlier prediction that the wireless industry will reach 1 billion subscriber landmark in the first half of next year. On top of the market share gains, we

continue to target high profitability by focusing our efforts on strong actions to further improve operational efficiency, increase the competitiveness of our product portfolio, and build on the Nokia brand. A good evidence of this is our success in the first quarter in terms of NMP profitability, which clearly exceeded even our own earlier expectations. Our strong mobile phone product portfolio together with the Nokia brand, have continued to enable us to have lower than industry average selling price decline. Despite the industry situation and our market share aspirations, during the first quarter, we experienced only a limited decline in ASP's, and even on a year-over-year basis, our ASP decline remained in the mid single digits. The ASP development is perhaps the strongest argument that mobile phones are not a commodity product. Consumers are not only driven by price, but also put great emphasis on product features and brand in their purchasing criterions. This is particularly true in the replacement market. During the first quarter, the replacement rate reached 50% of the total market volumes. We anticipate also the full year replacement rate to be approximately 50%. Looking at the future, with 11 new product announcements already this year, and more to come, we see ourselves well positioned to progress towards our 40% global market share target. And then moving on to the Nokia Networks where we have equally high, if not even higher, ambition levels in terms of our future market position. During the first quarter, Nokia Networks' growth was very strong

in the Asia Pacific region. There, we are experiencing a significant improvement in our market share, which is contributing to the strong overall growth. Also, China showed very healthy development, growing clearly higher than the global average. In the America's, we also saw healthy growth. In spite of slowing subscriber growth, Nokia Networks continued to grow, also, in Europe. For the balance of the year, we expect a slower growth in the infrastructure business in all geographic regions. This is especially evident in Europe where subscriber growth is slowing and simultaneously operators are postponing needed capacity investments in order to strengthen their financial positions. However, we expect an acceleration in the European mobile infrastructure investments in 2002. This will be driven by capacity increases to ensure quality of service for voice services, increased capacity investments for GPRS based data traffic, as well as the full force rollout of 3G networks in Europe. We also expect the US, the Latin American infrastructure market to pick up in 2002 after the operators have made their technology decisions, and they will rollout packet-based network to offer full mobile Internet services. During the quarter, we signed a number of significant network expansion agreements. Our new GSM customers take our current GSM customer base up to 105 network operators. We see further growth opportunities for GSM technology in the Americas. On top of our GSM 1900 product offering, we have recently introduced products for GSM 800 technology. This

will enable TDMA and GSM operators to launch GSM services on 800 MHz frequencies. I have an evolution path towards future 3G services with EDGE and Wideband CDMA. We also signed several mobile data related deals including deliveries to 3 new GPRS customers. We expect the early market for GPRS services to start during the second half of this year and the mass market at the beginning of 2001, 2002 excuse me. The key to commercial success of GPRS lies in the industry's ability to understand consumers, their lifestyles, and attitudes in creating the next generation of applications and services. We see person-to-person multimedia messaging as one of the main drivers for GPRS, and eventually 3G. Person-to-person communication, voice, rich call, and mobile multimedia messaging, consisting of text, picture, and video messaging, as well as e-mail and chat, could account for as much as 75% of mobile communication revenues by 2006. Based on our recent success in 3G networks, we are moving closer to our targeted 35% market share. This development would more than double our market share from high teens in 2G mobile infrastructure, enabling us to move closer to our targeted #1 position in 3G infrastructure. As there has been a fair amount of discussion about network sharing and the timing and magnitude of 3G investments, I would like to touch on this

subject. We believe that there will be some limited network sharing in the initial 3G rollout phase in certain markets. We do not see that this will have a significant impact on the 3G market size as such, as long term growth of the market is driven by traffic, not by number of networks. Overall, we see the network sharing as a positive phenomenon, as it will reduce the service cost for the end users and thus stimulate the 3G market in the early phase. Based on detailed discussions with our customers and on our product ability schedules, we do not see any reason to change our estimates on either the timing or the size of the 3G market. We see the 3G rollout, we see that the 3G rollout will have a significant impact on Nokia Networks topline growth from mid 2002 onwards. A couple of recent 3G announcements have involved significant vendor financing. This is not the reflection of a change in our financing policy, which continues to be prudent and conservative. Our aim, as we have said in the past, is to provide financing only in certain important transactions with long-term strategic significance and to customers with a solid business case. To give some perspective on the magnitude of the expected exposure, let me summarize our current understanding of the situation. At the end of 2000, Nokia had vendor financing related items, both on and off balance sheet, worth of some 1.2 billion euros. In recent months, we have committed to providing 3G related bridge financing to roughly 3 billion euros. As

mentioned earlier, we consider these announcements to cover bulk of our 3G related vendor financing and expect our exposures to spread across the next few years. Although these figures may sound significant, let me point out that when compared to Nokia's overall business volumes, operational cash flow, and strength of our balance sheet, they are still relatively small. In order to further improve our competitiveness, we have decided to outsource manufacturing of second-generation radio equipment in Camberley, U.K., and Haukipudas, Finland, to SCI Systems Inc. This move is intended to step up the degree of flexibility in production in these two key locations. In response to the intensifying competition in the DSL markets, we have streamlined our operation and sharpened our business focus in broadband systems. This division will concentrate on broadband access and narrowband access business units and restructure the operations accordingly. The shift in focus, combined with the positive benefits from the use of common Nokia technology platforms, is designed to enhance the competitiveness of the broadband systems divisions in the long run. And as the last item, let me discuss the Nokia guidance in more detail. Reflecting the more difficult market conditions, we currently anticipate revenue growth of about 20% for the second quarter, as well as for the full year 2001. Both of the main businesses are expected to grow roughly at the same rate. For the second quarter, we expect diluted pro forma EPS to be 20 eurocents. For the full year 2001, we anticipate the pro forma operating margins for

the Nokia Group, Nokia Networks and Nokia Mobile Phones, to remain in the high teens. For Nokia Ventures Organization, 2001 will continue to be an investment year. The revenues are expected to remain on last year's level, and pro forma operating losses to be around 350 million euros. The Common Group Expenses will run approximately on a level of 40 million euros per quarter. In the remaining quarters of this year, associated income is expected to remain on the quarter one level, financial income is expected to be 20 million euros per quarter, minority interests are expected to grow in line with net sales, and pro forma based tax rate is expected to be in the region of 30%. Year 2001 will clearly be a bridge year in terms of industry growth and technology advancements. Based on strong underlying industry fundamentals and Nokia's strengthening position, I have confidence at this stage to predict 25%-35% revenue growth for the full year 2002. Ladies and gentlemen, in closing, I would like to emphasize how fortunate we are to be involved in such a dynamic and exciting businesses. While the industry is experiencing difficult and challenging times, these circumstances have allowed Nokia to showcase its exceptional focus and worldclass execution. I am extremely proud of the accomplishments of the entire personnel and the management team. In the volatile environment, the stability and experience of the top team has enabled us to consolidate our leadership position, and today, Nokia is stronger than ever

before. Today, Nokia is the #1 player in the handset arena, and we are aiming for the pole position in the wireless infrastructure as well. Significant challenges lay ahead for all of us, but I have absolute confidence on Nokia's ability to capitalize on the enormous opportunities ahead of us. The leaders in this industry will reap huge rewards, and we at Nokia are determined to carry our winning position into the future. Thank you very much.

Thank you Jorma. Before the operator repeats the instructions for the conference call, let me remind you to limit yourselves to 1 question each. Please go ahead.

Ready for your questions ma'am?

Questions please.

Thank you. Ladies and gentlemen we will now begin the question and answer session. If you have a question, you have to dial, if you have dialed a North American phone number, you'll need to press the 1 followed by the 4. If you have dialed a European phone number, you will need to press the star followed by the 1 on your telephone. You will hear a 3-tone prompt acknowledging your request. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing the 1 followed by the 3. If you are on a speakerphone, please pick up your handset before entering your request. One moment please, for your first question. Ladies and gentlemen, if you are dialing in from a North American phone number, you will need to press the 1 followed by the 4, and if you are dialing in from the European phone number, you'll need to press the star followed by the 1. One moment please for your first question.