諾基亞 (NOK) 2003 Q4 法說會逐字稿

Thank you for participating in Nokia's 2003 fourth quarter and year-end results conference call.

My name is Judy, and I will be your conference facilitator today.

At this time I would like to welcome everyone to Nokia's 2003 fourth quarter and year-end results conference call with our host, Ms. Ulla James, Vice President of Investor Relations.

All lines have been placed on mute to prevent any background noise.

After the speakers remarks there will be a question and answer period.

If you would like to ask a question during this time, simply press star then the number one on your telephone keypad and questions will be taken in the order they are received.

If you would like to withdraw your question you may do so by pressing the pound key.

As a reminder if you are on a speakerphone please pick up your handset before presenting your question.

I would now like to turn the call over to our host, Miss Ulla James.

Thank you.

Ladies and gentlemen, welcome to Nokia's fourth quarter conference call.

I'm Ulla James, Vice President Investor Relations and with me today, Jorma Ollila, Chairman and CEO of Nokia and Rick Simonson CFO of Nokia.

During the conference call we will 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 11 to 18 in our 2002 Form 20-F and also in our press release issued today.

Our aim is to finish this call in approximately one hour.

For your convenience we are running a supporting slide presentation of the call on Nokia.com/investor.

A replay together with the slides will be available on the Web two hours after the call ends today.

A telephone replay number will also be available until Friday night.

Nokia 2003 net sales were at 29.5 billion euro, down by 2% but up by 7% at the constant currency.

Pro forma operating profit reached 5.1 billion euro and pro forma operating margin 17.3%.

Diluted pro forma earnings per share [represented 29] euro cents verses 82 euro cents a year ago.

Geographically sales growth was strongest in the Europe, Middle East, and Africa region while sales in euro terms in the Americas and Asia Pacific regions declined.

The Europe, Middle East, and Africa region accounted for 57% of net sales, up from 54% level a year ago.

The Americas region decreased its share by 1 percentage point to 21% and the Asia Pacific region by 2 percentage points to 22%.

Our top ten country markets which together represented 59% of our net sales were U.S., U.K., Germany, China, United Arab Emirates, India, Italy, France, Brazil and Spain.

Nokia fourth quarter 2003 net sales were 8.8 billion euro, down by 1% year-on-year but up by 8% at constant currency.

Pro forma operating profit was 1.9 billion euro and pro forma operating margin 21.1%.

Diluted pro forma EPS was 29 euro cents, up by 12% from 26 euro cents a year ago.

Geographically sales growth was strongest in the Americas region while sales in Europe, Middle East, and Africa and Asia Pacific declined compared to the fourth quarter 2002.

The Europe, Middle East Africa region accounted for 57% of net sales, the Americas region for 24 and the Asia Pacific region for 19% of net sales.

Fourth quarter sales in Nokia Mobile Phones grew by 4% to 7 billion euro generating pro forma operating profit of 1.7 billion and pro forma operating margin of 24.7%.

At constant currency Nokia Mobile Phones sales growth was 15%.

Nokia Networks sales at 1.7 billion euro were down 18% year-on-year and 12% at constant currency.

In the fourth quarter, Nokia Networks achieved pro forma operating margin of 12.1% resulting in pro forma operating profit of 205 million euro.

Nokia ventures organization sales of 108 million euro remained at last year's level and the business group met pro forma operating loss of 36 million euro.

The group's common expenses consisting of Nokia head office and research center [there] 43 million euro.

Today we have reported our 2003 performance based on the audited numbers and the old structure.

Our aim is to provide you with the 2003 numbers based on the new structure as soon as possible before we will announce our first quarter results.

Also, in order to improve the clarity of our disclosure going forward we have decided to discontinue the use of pro forma earnings and give guidance and commentary only on reported earnings.

Instead, we will identify any material run-up items and provide you with the details of goodwill amortization as well.

With this, it is my pleasure to hand over to Jorma Ollila.

Jorma, please go ahead.

Ladies and gentlemen, 2003 was a remarkable year for the mobile phone industry.

Growth accelerated quarter-by-quarter resulting in a record industry volume of 471 million units representing 16% annual growth.

Preliminary calculations also indicate that the cellular subscriber base exceeded 1.3 billion at the end of the year.

The fourth quarter industry volume of 145 million units clearly exceeded the industry's expectations.

The market grew 23% year-on-year and 20% sequentially.

This resulted in healthy industry channel inventory at year-end and provides a good basis for our somewhat over 10% industry volume growth expectation for 2004.

The infrastructure market showed signs of stabilization towards the end of the year.

Our current view is that mobile infrastructure market in euro terms contracted by just over 15%.

In U.S. dollar terms we believe that 2003 mobile infrastructure market was flat.

The mobile infrastructure industry sentiment has improved over the recent month.

However, due to the much shortened operator investment cycles over the last years visibility remains low.

We currently expect the overall mobile infrastructure market in 2004 to be flat or slightly positive in euro terms.

I'd now like to move on to cover the two main business groups starting with Nokia Mobile Phones first.

For Nokia Mobile Phones 2003 was a great year.

Nokia Mobile Phones was able to deliver record volume and record sales and profit.

Pro forma operating margin read 23.6% and reported operating margin of 23.2%.

At constant currency, sales growth was an impressive 12%.

Nokia Mobile Phones record volume of 179.3 million phones marked a growth of 18%.

This was slightly faster than the market and solidified our 38% market share.

Our fourth quarter preliminary market estimate indicates a global sell-through mobile phone market of approximately 145 million units and year-on-year growth of 23%.

Sequentially, the market grew strongly by 20% from third quarter volume of 121 million units.

We have now revised the third quarter market volume estimate up from the preliminary 118 million units.

During the fourth quarter, mobile phone market growth was strong in all geographical regions.

Europe, Middle East, Africa region grew slightly faster by 26% while both the Americas and Asia Pacific regions grew by approximately 22%.

For the full year 2003, the Europe, Middle East, Africa region grew fastest at 20%, followed by 15% growth in the Asia Pacific region and 13% in the Americas region.

Of the various technologies, GSM grew fastest by 21%, followed by CDMA at 17%.

BDC reversed its decline and grew by 15% while declining CDMA market accelerated to 26%.

The higher than expected robust industry demand during the fourth quarter resulted in a very healthy level of channel inventories at year-end.

In spite of some tightness of supply in the market, we were able to deliver according to our plan but our ability to capitalize on the upside during the biggest sequential volume ramp-up in the history of mobile phone industry was limited.

Vendors with previously high channel inventories were able to benefit from the unexpected demand while the ones with lean channel inventories experienced occasional stock-outs.

I would now like to comment briefly on the importance and some of the issues relating to the mobile phone industry volume estimate and the relevance of that to us.

Nokia deploys internal bottom-up process in the market forecasting.

Our aim is to have a fact-based market understanding both globally and on country level in order to support our internal planning.

I believe our market estimates historically have been pretty accurate for several reasons.

We have exceptionally good visibility throughout the channel as we are present in most of the country markets.

Distribution channels as well as in most of the technologies, and in most of them we are also the market leader.

With our performance, we have demonstrated that we have been able to forecast demand with a high degree of accuracy and our view of the market side is also shared by the other leading mobile phone manufacturers.

I also believe that any attempt to measure a truly global market of several hundreds of millions is always an estimate, even at its best.

Several factors add into the complexity.

The market volumes vary depending on whether we talk about sell-in or sell-through volumes.

If second-hand and refurbished phones are included, how gray imports and black-market are tackled, and where the line is drawn between through seller and cordless technologies and how OEM volumes, co-branded and part-finished product are accounted for.

The fact that in an increasing portion of the volume, that an increasing portion of volume comes from the so-called emerging markets with often less accurate statistical information does certainly not help, either.

What is important for me as a manager is the long-term trend of our market share as I continue to task the organization to reach the 40% market share target.

Obviously, this is not an ultimatum, either, as the day we reach the target we will set ourselves a new one.

On an ongoing basis, what I watch the most is the sequential volume development between various vendors as it shows me who is gaining momentum and who is losing it.

This information is readily available as all the leading vendors disclose their quarterly delivery volumes.

The other factor of great importance is the gap between us and our biggest competitor.

This is a gap which I want to maximize as I believe it gives us a fair amount of strategic and operational freedom.

Since 1998 when we have achieved our global number one position, I have never seen this gap as wide as it is today.

In the fourth quarter our volumes were 2.5 times as high that of the nearest competitor.

I have understood that the financial markets have generally appreciated our market volume estimates as they have usually been one of the first global volume numbers available and hence provided an insight to the market trends.

Therefore, I'm happy to continue give them out also in the future although the relevance will get more blurred as the new device category evolves when the new value [dominants] grow share.

In the fourth quarter Nokia delivered a record volume of 55.3 million phones representing a sequential volume increase of 10 million units, and a sequential growth of 22%.

A shift to color and to more feature-rich devices together with an increase in the newness of our product portfolio were the drivers for the positive 2% sequential ASP development in the fourth quarter.

As an example, Nokia 6100 was the number one product in value terms, and in total, color contributed to half of the volume and well over 60% of the value.

In 2003, Nokia Mobile Phones sales was driven by two parallel trends.

Growing importance of the emerging markets and the simultaneous consumer up-take of more feature-rich devices with color screens and cameras.

The three strategic goals of improving share in the U.S., China, and CDMA, were also achieved as we regained number one position in the U.S., became number one in GSM in China, and significantly improved our market share in CDMA.

The weakening dollar severely muted the otherwise healthy revenue growth of 12% to the reported growth of 2%.

Although the reported ASP declines for the year was 14%.

On a constant currency basis, the decline was only 5%.

In fact, the constant currency ASP decline of 5% last year was less than a year ago.

For the first time in Nokia Mobile Phones history, annual gross margins exceeded 40% driven by newness of the portfolio, improving quality, and continuing efficiency gains.

In spite of spending close to 9% in both marketing as well as R&D, the high gross margin yielded record pro forma margins.

It gives me great pleasure that Nokia Mobile Phones has achieved its best ever performance just as we are making the transition to the new structure.

This performance will give us a lot of momentum and a proper foundation as we align the company to go after growth in the new value domains.

Let me now shift over to Nokia Networks.

Nokia Networks fourth quarter sales of 1.7 billion euros were down 18% and down by 12% at constant currency from last year's level.

Sales declined in all geographic regions.

Excluding the 370 million euro 3G wideband CDMA dual mode revenue recognized in the fourth quarter last year, sales would have been virtually flat.

The fourth quarter performance of Nokia Networks clearly exceeded our expectations.

Sales were higher than estimated in all geographical regions as well as in India and in the U.S. in particular.

Due to high seasonal sales and favorable product mix driven by higher software content, Nokia Networks was able to produce exceptional pro forma operating margins of 12.1%. 3G wideband CDMA profitability has also improved as volumes have increased and as the initial quality issues have been successfully addressed.

Before closing I would like to mention a few words about Nokia balance sheet items, cash flow, and profit distribution.

Capital expenditure for the year remained at the very low, previous year's level of 432 million euros.

Looking at the capital expenditure going forward, we do not see any material changes from the current levels.

Inventories and accounts receivable developed positively during the year.

Our outstanding long-term customer loans declined to 352 million euros from 1.1 billion euros in 2002.

The guarantees given on behalf of customers totaled 33 million euros versus 91 million euros a year ago.

In addition, our undrawn financing commitments were 491 million euros, down slightly from 857 million euros a year ago.

We have also systematically reduced our capitalized development costs and goodwill.

The R&D capitalization balance has come down from 1.1 billion euros to 537 million euros during the year, and the goodwill balance has fallen from close to 500 million euros to 180 million euros.

The net operating cash flow for the year was 5.2 billion euros.

The overall debt position increased to 11.3 billion euros from 9.4 billion a year ago despite the 1.4 euro dividend payment and 1.4 billion euro share buy-back program.

The net debt to equity ratio [inaudible] reads a new record level of minus 71% in the end of December.

Today, Nokia board of directors has announced its proposal for the annual general meeting on March 25.

The board proposes dividend to be increased to 30 euro cents per share versus 28 euro cents a year ago.

The board also proposes a continuation of the share buy-back program.

As the last item for this conference call, I would like to discuss the first quarter 2004 guidance and the industry outlook.

For the first quarter, we currently do expect first of all that Nokia net sales will grow between 3 to 7%.

Secondly, that the diluted reported EPS will range between 17 and 19 euro cents.

I would like to add a couple of [inaudible] implications to the first quarter EPS guidance for reconciliation purposes.

Because the new EPS guidance is based on reported figures, goodwill amortization will now be included as an expense.

The impact of goodwill previously excluded from the pro forma EPS is 1 euro cent.

Secondly, in 2003, our first quarter reported EPS was 20 euro cents, and it included a total gain of 4 euro cents from sale of Nokia Tires and the mobile [inaudible] impairment adjustments.

Therefore, with the current guidance we see good underlying profit development in addition to some healthy growth.

As indicated in the capital markets space, mobile phones is expected to represent approximately 65% of Nokia net sales with gross margins similar but operating margins slightly higher than the former Nokia Mobile Phones.

Multimedia Business Group is expected to represent slightly over 10% of Nokia net sales with gross margins similar to the former Nokia Mobile Phones.

The unit is currently making an operating loss due to the initial low sales and high investment levels and is expected to break even by the end of this year.

Networks is expected to be slightly below 20% of Nokia's current sales mix.

Gross margins slightly below Nokia Group levels, and making a slight operating profit based on the current sales levels.

Enterprise Solutions is expected to be close to 5% of Nokia net sales with higher gross margins than the former Nokia Mobile Phones.

The unit is expected to break even sometime during 2005.

The good momentum of the handset industry is expected to continue also in the first quarter.

We project the market volumes to grow somewhat over 20% year-on-year versus 11% market growth a year ago in the first quarter.

With our current product lineup gaining momentum we expect to grow volumes faster than the market.

I also feel very encouraged by our product pipeline for the rest of the year.

These new products and product concepts will enable us to further strengthen our overall competitiveness.

Seeing the new organizational structure in place and sensing the enthusiasm of all my Nokia colleagues I'm really looking forward to an exciting new year.

Thank you, Jorma, and now we are to continue with the Q and A session.

In order for us to be able to remember and answer the questions properly, please limit yourself to one question only.

Operator, please go ahead.

Thank you, Miss James.

I would now like to remind everyone in order to ask a question please press star then the number one on your telephone keypad at this time.

If your question has already been asked and answered, you may withdraw your question by pressing the pound key.

As a reminder, if you're on a speakerphone please pick up your handset before presenting your question.

We'll pause for just a moment to compile the Q and A roster.

Your first question comes from Wojtek Uzdelewicz of Bear Stearns.

Thank you.

Good afternoon and good morning.

Jorma, you mentioned you gained market share in CDMA in Q4.

Could you give us a little bit more color what your sense is in terms of where do you gain the market share, where you had the biggest success?

Also, related to that, with the Verizon decision to go with EVDO, how do you see participating in this market?

How is this market, how l your market share likely to evolve or what's the strategy how do you see this playing out from a Nokia perspective?

Thanks, Wojtek.

I think the answer really to that one is that it is across the board.

We saw the opening for us of the CDMA market in China during the third quarter, beginning of the third quarter, and our share, though not what we want it to be going forward, continued to go up in the fourth quarter.

So China, on a global scene, certainly [inaudible].

Similarly, Reliance in India was a new customer for us and the third major emerging market.

Brazil, and overall Latin America continues to be strong, and we did strengthen our share with the major customer being Vivo in Brazil.

Also, in the U.S., we saw improvement in our share.

And if you look at globally going forward, we expect our market share to continue to go up.

On the EVDO and how we are tackling that market, that's work in progress, [Voitek].

So watch this space.

We will get back on that.

We are working on this because obviously EBDU is an important development even if longer term everybody quite rationally says that EBDV is the way to go, and that's even the operators who have now started with their EBDO rollout or have decided to do that.

So, yes, we are looking into that, but we do not have anything to announce at this point.

Thank you.

We'll take the next question, please.

Your next question is from Richard Kramer of Arete.

Thank you very much.

Could you just clarify on the gross margins whether the new level that we've seen is one you feel is a structurally higher or new level for the company and whether you'll be able to increase or squeeze working capital down again this year or whether again those metrics have reached a structural limit?

And also could you comment at all on when 3G infrastructure might be profitable in and of itself?

I think you mentioned that the profitability was improving, but when would that in itself be expected to turn an operating profit?

Thank you.

I think on the, there was quite a number of questions there, but I'm trying to keep up, Richard, with your pace.

So first of all, on the structural nature, if any, of the operating margin level, sorry, the gross margin level, I think we have given a view to you on the net business.

It is really the gross margin level as well as the healthy volumes which do represent the recovery situation of the infrastructure market, but because of the seasonality, they should be called exceptional, so you cannot say that that will continue through the first and second quarter, but there will be closer to a normalized level, even if they'll still be influenced by the healthier overall market development.

So on the gross margin, yes, there was an exceptional element from that through the networks.

On the mobile phones, I think the gross margin is really something that we feel very happy with because it reached a new level, really a strong level.

It just shows how managing well your business, you can get this level of gross margin levels in a business which some people say is doomed to maturity.

You know, this is a level that can be reached.

Things really going well, and volumes picking up the way they did on the fourth quarter.

So that's the way I would describe it.

And then you asked a couple of other questions.

First of all, on the networking capital and the supply chain efficiency things, have we reached a limit.

Surely there's some point we sort of tangentially approach something where it's difficult to improve we still have some scope for improvement, yes, but obviously much less than we used to three or four years ago when we were in the heyday of quarterly improvements.

Then you asked us, Richard, about 3G profitability.

Yeah, that is a contributing factor to the improved margins in the networks.

The 3G margins have improved, and it is fair to say that the business is now profitable.

We're very pleased with that.

The margins will improve when the volumes will go up over time.

So I think we, it's really, if I sound quite pleased with the overall picture, it is because also in the networks it came from, the improvement came from so many sources, and that's really something that makes one to be pleased.

Thank you.

Thank you.

We'll take the next question.

Your next question is from Jeffrey Schlesinger of UBS.

Thank you.

Jorma, 2003 was a fairly significant year from an investment standpoint for Nokia if you look at the R&D and SG&A.

Given the surprise if you go on the volumes the slightly more positive outlook for '04 on a volume basis what should we expect from an investment year this year?

Similar growth in the operating expense as you enjoy this scale advantage or do you think it will taper off a bit as you redeploy some of the resources into new areas and, therefore, don't have to spend as much incrementally?

Can you give us a sense, please?

Let's first of all look at the numbers in the R&D, then form the picture on what was going on, because what you basically see is that the R&D seems to be up from 3 billion to 3.7 billion.

When, in fact, what you have is that in the 3.7 billion you have around 400 million of write offs or capitalization.

We simply speed it up because of the status of the projects.

We felt that was prudent and so that was done as part of the R&D expense.

So the run rate for 2003 R&D expenditure really is represented by 3.3 billion, and that compares with the 3 billion run rate the year before.

And going forward, we look at increasing R&D somewhat but not certainly more than what we would be looking at hopefully seeing the revenue increase.

So that's the kind of pace we are looking at, and that means investment, because we are getting volume advantage already from this good volumes that we are getting in both of the businesses, both of the main businesses, so that, together with R&D productivity, which we are putting a lot of emphasis, I think represents a prudent management of that investment item.

Then the marketing investment, that's obviously something where if you look at the Multimedia and Enterprise, you know, building the Enterprise channel and building the consumer traction demand presence in the Multimedia area obviously is more costly than running the run-of-the-mill operation of Mobile Phones during the last five years or so.

So there will be the kind of expenditures that we had in the fourth quarter which was quite heavy spend for N-Gage.

So N-Gage is really a two-year effort in the first phase, and it will continue not quite in the same level as in the first quarter than it was in the sprint in the fourth quarter but still up on the run rate level that we had before.

So there will be some increase in the marketing side, and that's really building for the future, and that, perhaps, explains some of the, say, caution that we have in our guidance for the EPS which you might be wondering.

So that's a natural explanation.

Thank you.

Thank you.

We'll take the next question, please.

Your next question is from Kulbinder Carcha of CSFB.

Yes.

Just related to the last point, actually, your first quarter guidance would suggest that your handset margins on the old structure are probably going to fall over 3 percentage points which is slightly higher seasonality than normal.

I guess the question that we have is, is that conservatism or is there increased op ex investments related to the new structure which you'll take in Q1 which are somewhat depressing them?

Thanks.

I think simply the answer is a bit of both, so that's -- I think the finger on the right place there.

And just one very quick follow-up.

On your share it doesn't seem to have risen last year significantly on the last six months although you reach your strategic objectives in China and CDMA, in America you're reaching them.

Do you feel there's a chance you're perhaps hitting a ceiling on your market share now that, or what really has to happen for that share to hit 40% in 2004, do you think?

Well, I think that we wouldn't have had any problem in getting more share had we wanted to go down in price going in the low end.

So that's the general statement.

And then, obviously, we have a situation where we, as I noted in my opening comments, we, in the fourth quarter, we were constrained in shipping more than what we actually did, so I don't think, so we are very relaxed about the 40% and the target, and the 38% that we achieved, because we know that we are in that ballpark, can be reached.

It's not, it would not have been beyond our reach had we planned a little bit better the volumes in the low end, so we certainly have not reached the ceiling.

That's really the conclusion from that.

Thank you.

We'll take a next question.

Your next question is from Paul Sagawa of Bernstein.

I'm wondering, in the fourth quarter you had a very pleasant development in the ASPs.

Looking forward into 2004, sort of blending the three handset-based units together, you know, what kind of developments might we expect given you've got the counter-veiling impact of growing emerging market sales but also the mix shift and the rise of media, you know, WCDMA, business-oriented phones.

You were down 5%.

Is that a similar kind of trend we expect in '04, or should it get better?

Yeah, I think there are good chances for us to get better there, but I would like to hasten to add that as I've said in my previous comments, you know, we don't run the business based on ASP's, and I really want to underline that, Paul.

We manage this based on revenue, market share to drive profits.

So this is how we want to optimize it, and when we look at how the earnings, the margin level and the overall earnings developed, it was just tremendous in the fourth quarter.

So ASP was not something that we would follow or that I would get reports weekly or something, but I do get reports weekly on revenue and on how we feel we are doing against our competition and how our share is evolving.

So those are the parameters which then drive the profits which we have in mind.

So the ASP is something which is a little bit of an end product of all that, and all I can say is that, yes, there's a good chance of doing better than the constant currency 5%, but I don't have a figure that I would be working against, because it's not a parameter in my model which I have in my head and in front of me.

The new growth markets as well as the upgrades in developed markets, both have their impact.

We don't really know the mix.

We are prepared for the eventuality, although it is possible, very different circumstances in each of them, and that will then have an impact on the ASP.

But we drive it based on different parameters.

And that's how it will be.

Thank you.

Thank you.

We'll move on it the next question.

Your next question is from Keith Westhead of Deutsche Bank.

Yes, thanks very much.

Good afternoon.

First of all, could you clarify the exchange rate assumption, the first quarter revenue guidance?

My second question relates to your cash position in light of the share buy-back.

What do you consider to be an optimal level of net cash?

Do you plan to further increase the pay-out ratio moving forwards?

And can you comment on your strategy with respect to possible acquisition and some comments on the price with respect to Multimedia net to profit?

So three questions.

First of all, the currency assumption, 1.23 is the currency assumption that we're working on.

You have to stick to something, so this is what it was on the day when we worked on this, and since we are not in the forecasting business, so we weren't any wiser than that, so that's how it is.

And as you know, our revenue will take a, obviously will move because it's simply mathematics.

If it's something else than 1-2-3, then on the bottom line, I think we have managed to demonstrate in the last couple of years that our business managers don't come with excuses relating to the bottom line, with excuses relating to the currency, so don't expect a major impact, major impact on the bottom line.

Then the question on cash, what's our model on the buy-back, what's our optimal cash.

Yes, we do have a model.

We have 11 point something in our cash line in the bank today.

It is clearly higher than we would like it to be, and, therefore, the program, the distribution program that we have in mind, i.e. the share buy-back plus the dividend that was proposed.

It's a pretty aggressive package.

Obviously taking into account the fact that we will have healthy cash flow as we have had in the recent years.

We will also have healthy cash flow in 2004 which we have forecasted, and we have to take into account any discussion that we are constantly having with the rating agencies.

They obviously would only like us to distribute the cash flow that we generate on any particular year, but we will obviously look at our optimal model and, you know, try to get into the cash level, which is reasonable.

Finally, you asked about acquisitions, what sort of plans we might have.

We don't have any specific plans.

Obviously when we are looking at building the businesses and Enterprise Solutions and in Multimedia, we will be looking at smallish acquisitions, small or smallish acquisitions, which will compliment the technology and product offering that we have.

Technology capabilities and product offering that we have, but it is nothing major.

There's nothing major on the table today or in the works, and otherwise in the corporate or in the line management, but it's not ruled out that we would do something like that.

Thanks.

Thank you.

And we'll take a next question, please.

Your next question is from Tim Luke of Lehman Brothers.

Thank you.

Jorma, it looked as you clearly have a strong performance in China with the share moving, or the position moving to the number one slot.

Could you talk about how you see the positioning there, your positioning versus some of the local vendors and how you see channel inventory levels in general, not so much for Nokia, but for the market in that region?

I was also wondering with respect to the European market whether you would expect your share to start moving upwards in the first quarter of the year?

Thank you very much.

Yeah.

Thanks, Tim.

That sort of covers two-thirds of the world, so --.

That's right.

Let's try.

China really was good in the sense that we made a lot of progress share-wise, based on the localized product portfolio as well as the improved distribution, so both the traction of our products as well as the delivery and how we were able to reach and use our recognized brand effectively improved.

So with all of that in place and only sort of starting to buy from August to the year end I see a lot of good potential there.

So that is something where I see upside in2004 going forward.

How are the local manufacturers operating?

I think we're moving to a healthier environment where increasingly they're starting looking at the business fundamentals on how they manage their business, clear signs of that.

Secondly, their concern, some concern of the higher than normal inventory levels seems to be disappearing.

I haven't got exact figures, but this is what our people are clearly reporting from different parts of the country, and that has clearly led into much more healthy behavior in terms of how they operate.

And clearly we are approaching a situation where you can expect consolidation and some of the key players emerging from the pack of [17]-odd players.

And I think speaks well for the long-term evolution of the markets, and we are very, very committed to make sure that we continue to be number one in GSM going forward as we are now.

1On Europe, we expect to gain share in Q in Europe.

It's a major market for us.

Our product positioning worked really well in the fourth quarter, particularly in the high end, and our, some limited availability in the low end and also unwillingness then to move price meant that share was not what we had in mind in the fourth quarter, but we did very well there.

Now there is scope to do a bit better and when I commented earlier on the momentum of the final quarter of last year continuing to the first quarter, I think that's really Europe, which one can refer to more than to any other region.

Thank you, Tim.

And we'll take one more question, please.

Your final question comes from Richard Windsor of Nomura.

Hi.

Good afternoon.

Just a question about your buy-back program.

If I do the calculations just roughly, as far as I work out, you bought back about 100 million shares, but as far as I can tell, the number of shares has only gone down by about 30, so I was just wondering what your plans are in general for share buy-backs because I would have thought that you're not really returning cash to shareholders unless you actually cancel that shares and reduce the number.

Could you explain that to me?

Thanks.

I don't think there's much to be explained, Rick.

I'm sure it's prepared to a very long presentation here, but what is the -- or a short one, but simply we are proposing, you know, it's a very complex procedure in Finland.

We have to go to the AGM to do the cancellation.

So now the board has today proposed to cancel their shares in the AGM on the 25th of March.

So we are not here sitting on a fence.

We are actually about to cancel and so I'm sure our IR will be happy to help you out in explaining on how those will work out unless Rick -- you want to add something?

I think we were going to keep this to an hour, and maybe that isn't possible on [inaudible] of the buy-backs on the Hex exchange but, yes we are recommending, the board will ask the shareholders for continuation of the program and we acknowledge the points you've made here and we're prepared to deal with that accordingly.

The shareholders willing.

Thank you.

So just in general, then, you would aim to cancel, [inaudible] you're going to cancel the shares you bought back?

That would be the take-home message?

That is the take-home message, yes.

Thank you very much.

Okay.

And thank you everybody.

Ladies and gentlemen, this now concludes our conference call today.

I would just like to remind you that during the conference call we have made a number of forward-looking statements that involve risks and uncertainties.

Actual results may, therefore, differ materially from the results currently expected.

Factors that could cause such differences have been identified in more detail on pages 11 to 18 in Nokia's Form 20-F and also in our press release issued today.

Thank you, and have a very nice day.

This concludes today's conference call.

You may disconnect at this time.