諾基亞 (NOK) 2004 Q1 法說會逐字稿

Thank you for participating in Nokia's first quarter 2004 conference call.

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

At this time, I would like to welcome everyone to Nokia's first quarter 2004 conference call with our host, 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, Ms. Ulla James.

Thank you.

Ladies and gentlemen, welcome to Nokia's first quarter 2004 conference call.

I'm Ulla James, Vice President of Investor Relations.

Jorma Ollila, Chairman and CEO of Nokia and Rick Simonson, CFO of Nokia are with me here today.

During the 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 12 to 21 in our 2003 Form 20-F and also in our press release issued today.

We aim 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/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 Monday night.

Nokia's first quarter net sales were 6.6 billion euro, down by 2% compared to first quarter 2003.

At constant currency sales were up by 7%.

Operating profit was 1.1 billion euro and operating margin 17.2%.

Diluted EPS was 17 euro cents compared with 20 euro cents a year ago.

It is important to note that the reported EPS of 20 euro cents from first quarter last year included a gain of 4 euro cents from the revaluation of accounts receivables and a gain on the sales or shares in Nokia tires.

Geographically Nokia sales growth was strongest in Latin America and China, while sales in rest of Asia were stable and declined in the U.S. and Europe/Africa area.

The Europe/Africa area accounted for 54% of net sales, Asia including China 26%, and the Americas 20%.

Mobile phone sales of 4.3 billion euro declined 15% year on year, generating operating profit of 1.1 billion euro and reaching an operating margin of 25.6%.

Multimedia sales of 0.8 billion euro grew 60% year on year and reached break-even during the first quarter.

Network sales of 1.4 billion euro grew 16% year on year.

Operating margin for Networks was 12.9%, i.e. 182 million euro.

I would like to point out at this point in time that these operating margin number is a clean number for Nokia Networks, it didn't include any restructuring charges, but the reference in our press release that we make to 6 euro cents and restructuring of Nokia Networks is really in reference to the second quarter, 2003 comparison number, so it doesn't relate to the guidance for this year, either.

Sales in Enterprise Solutions increased by 95% year on year to 189 million euro.

Enterprise Solutions made an operating loss of 31 million euro which is 16.4% loss.

The group common functions consisting of Nokia head office, research center and some unallocated costs had expenses of 104 million euro.

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

Jorma, please go ahead.

Ladies and gentlemen, today I will first cover some of the typical areas of market dynamics, the performance of our business groups, the financials, and guidance, then I would like to spend more time discussing our short-term strategy and then in more detail demonstrate how we are addressing the issues surrounding our product portfolio.

During the first quarter the overall mobile device industry growth has continued on two parallel tracts.

Color and camera phones enjoy an increasing popularity and there's clear evidence that the imaging business system is gaining traction.

At the same time, incremental volume growth is coming from emerging markets.

The installed base exceeded 1.4 billion subscriptions corresponding to a global penetration of 23% in the end of our first quarter.

Our preliminary first quarter market estimate indicates a global sell-through mobile device market of approximately 128 million units and year-on-year growth of 29%.

The sequential market decline of 13% was slightly less than a year ago.

We have now also revised the fourth quarter 2003 market volume estimate up by 3 million units to 148 million units.

During the first quarter the Latin America mobile phone market more than doubled from first quarter last year, reaching close to ten million units.

The Asia/North American market growing by 25% to 25 million units.

The Europe/Africa area was 44 million units, grew by approximately 22%.

CDMA grew by 57% to 27 million units in the first quarter, which was to some extent driven by the introduction of wireless number portability in Korea.

GSM grew by 30% to 84 million units while PDC declined by 4% to 8 million units and CDMA declined by 34% to 5 million units.

Nokia's total handset volume during the first quarter reached 44.7 million phones, resulting in a year-on-year growth of 19%.

Based on our preliminary market estimate of 128 million unit, this represents a market share of 35%, a decline from fourth quarter market share of 37%.

Nokia's sequential market share decline was driven by the relative weakness in Europe/Africa area and North America while the market share strengthened in the fast-growing Latin-American market and in China in comparison to the previous quarter.

I'd now like to cover the four business groups somewhat in more detail.

Mobile phones sales in the first quarter reached 4.3 billion euros, declining 15% year on year and generating operating margin of 25.6%.

Slightly over 50% of mobile phone sales came from Europe/Africa area, 25% from Asia including China, 13% from North America, and 8% from Latin America.

Mobile phone's year-on-year sales growth was strong in Latin America, stable in North America, while declining in Asia, including China and Europe/Africa area.

Sales in Latin America was driven by strong volume growth as the volumes more than doubled from the year-ago level.

In spite of positive volume growth in North America the 19% depreciation in the U.S. dollar caused the sales to remain on previous year's level.

Sales in Asia, including China, declined due to U.S. depreciation and product mix weighted more towards the low end.

Sales development was weakest in Europe and associated with certain weakness in the current mid-range product offering.

Multimedia sales grew by 60% to 776 million euros, excuse me, and the business group generated a small operating profit of 2 million euros.

Slightly over 70% of multimedia sales came from Europe, 25% from Asia including China and the rest from the Americas.

Multimedia profitability exceeded our plans.

Sales of Nokia, 6600, were higher than expected while the N-Gage sales fell short of expectations.

Two days ago we strengthened our N-Gage portfolio by announcing the next-generation game deck, N-Gage QD.

The N-Gage QD is expected to be available in European and Asian markets in May, and in the Americas in June.

Looking at Multimedia, as well as Enterprise Solutions Business Groups.

At this point of time it is quite obvious that given the still limited product portfolio in each of these developing businesses, the short-term performance will be driven largely by individual product life cycles.

Therefore, I do expect the quarterly sales and profitability in these business groups will fluctuate until we achieve higher sales volumes and a broader product offering.

Networks area, some comments on that.

The Networks first quarter sales of 1.4 billion euros increased by 16% from last year's level.

Networks achieved operating profit of 182 million euros and operating margin of 12.9%.

The Europe/Africa area accounted for close to 50% of the network sales while close to 30% came from Asia, including China and the rest of the Americas.

Networks reached healthy profitability where the gross margin above Nokia Group average of 40.5% and with operating margin of 12.9%.

The positive margin development was driven by higher than expected sales and the successful restructuring measures taken in Nokia Networks last year.

I'm very pleased with the progress of Networks Business Group, both in terms of the results of the restructuring measures, as well as its success in building the long-term market position.

We believe that our cumulative wide band CDMA infrastructure sales of 2.2 billion euros makes us a joint leader in 3G wide band CDMA.

As of now, we're a supplier to 9 of the 21 commercially launched wide band CDMA networks and are rolling out networks to 26 customers.

Enterprise Solutions net sales grew by 95% to 189 million euros during the first quarter.

The business group generated an operating loss of 31 million euros.

Close to 50% of the revenue comes from Europe/Africa area and the balance being split between Asia, including China and the Americas.

The slightly better than planned performance of Enterprise Solutions was driven by the success of the Nokia 6820 messaging device, particularly in Europe.

Now a few words about some balance sheet items, cash flow and profit distribution.

Capital expenditure during the first quarter was 80 million euros, slightly less than first quarter last year.

In 2004 we expect the capital expenditures to remain approximately on last year's level of 432 million euros.

Depreciation of fixed assets was 191 million euros and amortization of goodwill 24 million euros in the first quarter.

We expect these items to remain on the same level for the balance of the year.

Capitalized R&D declined from year-end balance of 537 million to 501 million euros, and as we amortized 63 million euros and capitalized only 27 million euros.

At the end of March our outstanding long-term customer loans totaled 365 million euros, while guarantees issued on behalf of the third parties totaled 33 million euros.

In addition, we had financing commitments totaling 394 million euros.

After the end of the quarter, our system 3G U.K. prepaid all its outstanding loans, 365 million euros, and cancelled all of its commitments, 309 million euros.

So as of today we have no outstanding long-term customer loans, only 33 million euros in third-party guarantees and 85 million euros in financing commitments.

The net operating cash flow for the quarter was 1 billion euros and the overall cash position increased to 11.4 billion euros bringing our gearing net debt-to-equity ratio to minus 77%.

We believe our strong balance sheet is a key factor in sustaining the value of Nokia's intangible asset portfolio.

Our opinion also is that an equity financed balance sheet is the right way to guarantee our ability to sustain value-adding investments, across diverse and dynamic market conditions.

Based on a quarterly basis we approximate our optimum cash level and according to our practice distribute excess cash to shareholders in the form of dividends and share buybacks.

Our profit distribution for shareholders increased substantially last year as we used 2 billion euros for buybacks in addition to the dividend payment of 1.3 billion euros.

The total payout ratio was very close to our 2003 net profit, and it's a good illustration of our active profit distribution policy.

Our current intention is to use up to 3 billion euros for buybacks between now and the 2005 AGM in addition to the dividend of 1.4 billion euros paid out today.

I would now like to discuss the second quarter 2004 guidance and the industry outlook.

For the second quarter we currently expect Nokia net sales to be flat or slightly below the second quarter 2003 sales of 7 billion euros, and diluted reported EPS to range between 13 to 15 euro cents.

For reconciliation purposes, it is important to note that in the second quarter last year we took a restructuring charge of 399 million euros in Nokia Networks.

The impact of this charge is 6 euro cents and was included in the diluted reported EPS of 13 euro cents.

On the handset side, we expect a healthy device market momentum to continue also in this quarter, and the second quarter market volumes to be slightly above the first quarter level of 128 million units.

We have also raised our projection for the full-year mobile device market and we currently expect the overall market volume to grow in the high teens from the 474 million units sold last year.

The mobile infrastructure market has also stabilized and we estimate the market to be slightly up in euro terms from last year's levels.

I believe the overall mobile industry conditions will provide a good basis for us to build our market position.

It is clear from the EPS guidance that we expect the margins to decline sequentially in the second quarter.

The decline is expected to come from the Mobile Phones Business Group as the improving product portfolio alone might not be enough for to us reach our short-term market share targets.

Market share is absolutely critical in the mobile device market and today we are over two times bigger than our nearest competitor.

This market share gap gives us tremendous advantage in terms of brands, scale economies, purchasing, global market presence, and, of course, cost.

Therefore, we are prepared to use the tactics that are at our disposal in the short term to achieve our desired market share levels.

Given this, we expect Mobile Phones Business Group margins to be impacted until we see improvement in the overall competitiveness of our portfolio.

I would now like to end by making a few comments regarding our handset portfolio.

As mentioned, we have made many changes over the last year to improve our product portfolio.

Over the coming months you will see the results of this work in a number of new products, but more importantly, in the variety of features and phone factors.

We are not satisfied where we are today, but we are seeing steady improvement in our product road map and expect to again have the leading portfolio in the months ahead.

In very broad terms, out of our current portfolio of close to 100 product, 40% can be allocated to entry-level, and the rest is split evenly between mid-tier and high-end.

We have already started to ship six new products this year, and we have also announced another nine products, with shipments estimated to commence mostly during the second and third quarter.

We intend to launch a total of approximately 40 products this year.

Nine products have already been launched and the coming launches will be more or less evenly spread in the coming quarters with shipments weighted towards the second half of the year.

We expect half of the new products to be in the high price point, higher functionality categories, while the balance will be evenly split between mid-tier and entry-level.

By the end of the year we expect to have around half a dozen clamshell handsets together with other phone factors shipping, and, of course, the vast majority of these will have color screens and cameras.

With the enhanced product portfolio gradually coming into play, with our new organization focused on customer and market operations, as well as global operations ensuring the timely delivery, we should be in a position to see the benefits of this improved portfolio in sales, market share, and margin towards the end of the year.

Thank you, Jorma.

Now we will now continue with the Q&A session.

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

Operator, please go ahead.

Thank you, Ms. James.

I would 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 will pause for just a moment to compile the Q&A roster.

Your first question is from Wojtek Uzdelewicz with Bear Stearns.

Thank you.

Good afternoon and good morning.

Jorma, just sort of strategically, obviously you guys after big market share, you really understand and recognize the market dynamics, early on you mentioned earlier in the last year that you guys need clamshells.

So any thoughts on what happened between -- that accounts for a little bit of a pause in the product lineup right now?

Are there some unforeseen software development issues that you're finding out it's taking longer for some of the people to bring out the new products or how do you sort of -- what do you see that the mistake maybe we made in terms of the product portfolio currently?

Is it sort of more of a short term?

Is it more of a strategic decision because clam shells tend to have lower margins?

Can you kind of walk us through, so it helps us to understand a little bit kind of going forward what will change and why will it change?

Okay.

I don't think there is anything which either would have been a sort of big mistake in terms of addressing the technologies or such, or that there would have been a big problem in either one software area or one hardware or whatever.

I think the transition that the industry is technologically going underway means that there are a lot of architecture issues which we have had, which one would call legacy issues, which we have addressed but which has taken a little bit more time to then implement in products.

And this includes phone factors, this includes a number of other things.

So there are architecture issues which have led into some execution delays so that we would have liked to be sort of six months ahead ideally with some of our product lines.

Some of our product introductions.

But, it's not that there was a glitch which put a brake on everything.

It's just a transition that is very much underway and which I suppose could have been that for somebody who is there without a legacy could have addressed somewhat differently.

So I think that's, perhaps, sort of a general comment that I would make.

I think that's the best I can do, Wojtek.

That's fine.

Thank you.

Thank you.

We'll take the next question, please.

Your next question is from Angela Dean with Morgan Stanley.

Angela, your line is open.

Please go ahead.

Let's take the next one, and we'll queue up for Angela later.

Okay.

We'll take our next question from Kulbinder Garcha from CSFB.

Kulbinder, your line is open, please go ahead with your question.

Can you hear me?

Yes, sir, go ahead.

Okay.

Could you please elaborate on the operating margin pressure, what the drivers behind that you're talking about in the Mobile Phone Business.

Is that just raising OPEX?

Are you pricing more aggressively?

How long do you think that would last?

When I look at your Mobile Phones margins it does seem -- they didn't go up in Q4 of last year despite higher sales and now they're going down in Q1 and probably going down further in the second quarter.

Could you explain some of the dynamics behind that, why they are going down so much in the second quarter and how long that margin pressure may last for you?

Thanks.

Yeah, I think really the answer is embedded in my introductory comments, because if we look at our focus, clearly there are in this situation different roads you can choose, and different trade-offs one has to make, so when going ahead towards the year-end, sort of late third quarter and fourth quarter when we have a product lineup which I think in every respect, can beat anybody, when we move towards there, then we obviously have to have a look at what's the emphasis we put on the market share and what's the emphasis we put on retaining certain level of profitability.

And this is not a digital position, and that's knots how we are handling that, as I'm sure you know and appreciate, but I think the way we have looked at our guidance is based on the fact that, yes, we are putting a lot of weight on the share.

The share is important here, and we want to make sure that we would reach stability of market share sooner rather than later.

And obviously then that means that one has to take a little bit of a conservative look in terms of the margin your short term, shooting for, or allowing yourself to settle into.

So that's the kind of thinking that goes into there.

It's not that we would be under a tremendous price pressure, but we need to look at the share and make sure that that will be sustained at the level which will put us in good shape in the quarters following when we expect to go forward.

How long that is going to last?

I think I already gave a little bit of an indication of what might be happening there in terms of the time line.

Okay.

Thanks.

That's very clear.

Just one follow-up.

You mentioned last week in the press release the new organizational structure had slowed down your responsiveness.

Could you just elaborate on what's happened there and how easy that is to fix?

I don't think there's much that needs fixing, to be quite honest, because we get a tremendous amount of good feedback from our own organization and certainly from our key people, that this is what we needed to do, this is what we had to do with the size of our company, global reach, and the different kind of businesses that the market dynamics leads this business to have.

We are well placed during the next five years now with this organization.

And what it then means is that it might have in one or two quarters a little bit of, let's see how we do this thing in a new way, and that takes a little bit of time.

There's nothing more to it.

And that, you might say, the slowing -- I think we were quite blunt in saying that it slowed us down, but I suppose that's an honest way of saying it.

All of this will speed us up in the future, but the transition takes a little bit of energy and time, so that's what's in our minds.

I think the organization feels good about the step-up we have, we just need a few months to get into it.

And I think by the end of the first quarter we already saw the little bits and pieces falling in place.

So I'm not talking about November of this year, this being in shape, I'm talking about weeks.

Okay.

Thank you very much.

Thank you.

We'll go for the next question.

Your next question is from Angela Dean of Morgan Stanley.

Okay.

I'll try again.

Hope you can hear me this time.

My question was similar to Kulbinder's.

And actually I would like to go back over this, just in terms of your expectation of a lower margin for the second quarter for the Mobile Phone Business, it sounds as if you're obviously going to prioritize market share.

How will we see that working through the income statement?

Is this higher SG&A, or is it a lower gross margin because of some effective price cutting, or is it a mix issue that you will be going for market share so you'll see a higher percentage of lower inference, perhaps?

And maybe you could talk a little bit about why the market seems to have been more low-end anyway than you thought.

I know it's boring to have a similar question again, but maybe you could just clarify that some more.

I don't think there's one thing.

It will be a multitude of things in a measured way that we will be looking at making sure that we will be not making an extra exorbitant compromise to where's the margin, but rather it will be a series of measured actions, which we already have worked on, clearly.

So it relates to product positioning, it relates to price, it relates to promotion, and things like that.

So you will see that there will be different ways in which we do it, and obviously, the Multimedia and the Enterprise Solutions will be very different, because if you want, they're high-end product, and will be very different from the dynamics of the Mobile Phones.

We will not be talking about dramatically low margins, as some analysts I understand have sort of flagged that we would significantly go below, and then seek to -- MP, and then seek to compensate from the other areas.

No, no, it will be very measured and coming from all of these channels that you did mention, Angela.

Perfect.

And the reason why you're having to do it, obviously, we know you've got a bit of a mid-range product gap at the moment, but are you finding that either the competition is just tougher than it was, which I guess there are some signs of, or that the overall market, which I think you've mentioned, is just lower end and, therefore, you have to fight harder with pricing and things like that?

Are there some changes that have maybe been happening for awhile and that are not just about one of a slight miss in your mid-product range?

Are there some fundamental changes here?

I don't think it is that fundamental, Angela, and this is partly why one sort of has to -- when we look at the fourth quarter, and look at the margin, the position we were in in the fourth quarter, both in margins, as well as pretty healthy growth and now capability to deliver, so there is some change in how our products fared against the mid-tier offering.

So if you have four competitors, and when we have a bit of a hole here and there, and each of them fills in one hole, then we're against certainly all of them and not against one competitor, and this is the picture more than anything else.

And there is a major mid-tier market which is kind of, since we have those holes, not enabled us to move from low-end to mid-end in the upgrade market and that then hits the ASP and the total revenue line.

So I think that's the picture I would see there.

Okay.

Thanks.

Thank you.

We'll take the next question, please.

Your next question is from Tim Bodie with Goldman Sachs.

Yes, thank you very much.

I had a question regarding the time line you see for the share and margin recovery and the assumptions that's based on, if we read the press release it indicates you expect really towards the end of the year for these things to pick up.

Is it fair to conclude from what you're saying that a margin recovery is dependent upon a market share recovery in the second part of the year?

Thanks very much.

I think the margin is always dependent in this business on volume.

That is the first point.

So you need a healthy volume pick up in terms for the healthy margin development, and that, in this business, basically comes from two sources.

A healthy product rollout, product renewal, and product rollout plan well executed, and then market share being, obviously, part of that.

So I think it works slightly more differently.

It's not one-off market share or not.

It's a little bit more complicated but, yes, the market share does play a role.

And in terms of the time line for that recovery, it is fair to say it's fourth quarter, which was the implication in the release.

Towards the end of the year, I think that's working towards the fourth quarter, yes.

Thank you.

Thank you.

And we'll take the next question, please.

Your next question is from Tim Luke with Lehman Brothers.

Thank you.

Jorma, it would seem that your guidance for the second quarter would infer some sequential improvement in the overall revenue picture.

Should we assume for our models that that comes both from the phones and from the Networks, also seeing revenue up, and would we infer that the current margins that you're seeing in the Networks would be replicable, or sustainable through the year, is this a new level that we should continue to model and, therefore, the delta would be exclusively in the handset area?

Yeah.

I mean, if we look at the revenue, the pickup that we are really indicating is from the 6.6 level to 6.8 level, in the billions of euros, and if we then look at the margin evolution, I think we have a situation in the networks where, obviously, there's a pickup in the market, and I think we're going to see not dramatic euro terms growth, but there will be growth in euro terms for the networks business.

And, obviously, the product mix is a key variable in Nokia Networks, which does impact the margin, so there can be fluctuations, but basically we have come into a good healthy level in the margins, and with the variation around that depending on the product mix on a particular quarter.

So don't expect a straight line, but a rather, variation around the trend which is a good and healthy one.

And I think, obviously, the question mark is then on the three device businesses and how those will -- both in terms of revenue, as well as the margin evolve.

I was wondering if you could give some color in that area, just in the North American market where I think you signaled that it was somewhat softer than you had anticipated.

On the devices area?

Yes.

In terms of your positioning in North America and --.

Yeah.

I think the North American market is a tricky one because there's an ongoing transition underway, and so market, the acquisitions, the technology transition, market shares, number portability, market shares are shifting, so this is not an easy one for anybody, and you see big market share shift between different vendors within each operator between quarters, literally.

And so it is a very complicated and difficult market to put your finger on, and I don't think it was the best of quarters in the first quarter of this year, even if CDMA continued well, and even if our mix actually strengthened, our product mix was not a bad one at all in the U.S., and in the U.S. dollar terms we were happy, but then if you translate it into sales in euros, it's much less spectacular.

But, yes, we have a good opportunity to improve on the quarter that we had in Q1 in the U.S. market.

Thank you.

Thank you, and we'll take the next question, please.

Your next question is from Richard Kramer of Arete.

Yeah, thanks.

A couple quick questions.

First, given the weakness came in Europe and the U.S. where we've seen increasingly operators controlling the value chain, can you maybe reflect a little bit on what's happened with the relationship in operators, how it is that what we've been led to believe was a fairly visible process for Nokia in terms of planning and allocation, fell so short at the end of this first quarter and seems to be continuing in the second quarter?

And then maybe if you could clarify a little bit the constant currency sales growth and maybe comment on, now that you have 20% of your market cap in cash, if there's any thought or implication that you might increase or up the share buyback and dividend-type programs, it's certainly at a cash level that's unseen across large-cap technology companies.

Thank you.

Thanks, Richard, for the questions.

I think the role of the operators is obviously a crucial one, and has evolved during the last 20 years from year to year, and a bit in cycles, and I'm sure third generation will again have its impact and will bring in some new elements into this situation, and that does apply both to U.S. as well as Europe.

I think the relationships that we are enjoying with the operators are continuing to improve in terms of how we are working with them on a practical level, but obviously, that is not immediately or short-term necessarily reflected in the purchasing position, so there will be a lot of fluctuation.

It is very difficult to forecast what is happening there.

I think the philosophy that we have always followed is that if you have good product which the customers and users will want to buy, you will be successful in the relationship with the operators.

That's how we always worked, that's how we gained traction, and that's how we will want to work in the future with the operators.

And clearly doing more customization because that is the way the technology dynamics leads the operators to work on, and when we get the technology platforms ready and sharp, and 3G-driven services will more and more take hold, I think our product range will be in great shape to respond to that customization, which naturally has been the selling point for some of the smaller vendors to get in their share by being, not responsive, but actually bowing to the requests.

So those are dynamics which I think with time we feel will improve our position.

On the cash side, I don't think I, Richard, have anything more to report to you.

We will continue on the profit distribution program that we have outlined, and at the same time, obviously, we will look at it strategically, how we can best improve our position in the market, technology-wise and otherwise, but we do not have a big change in our thinking in terms of how to react to the pile of cash which certainly continues to evolve.

Okay.

And constant currency growth rates, for the U.S.or Asia?

To be quite honest, I don't have the figures in my head, Richard.

Yeah, I think the first quarter was 7% up in constant currency and clearly, I think we gave some indication on the U.S. rate.

Asia is similarly very healthy in the first quarter, as well as going forward.

Okay, thanks.

Thank you.

And we'll have the last question, please.

Okay.

Our final question comes from Paul Sagawa with Sanford Bernstein.

Hi.

It seems as though in the mid-range the problem really relates to the Series 40 platform introduced in 2002 competing against newer products introduced by essentially all of your competitors with new platforms for the second half of 2003.

My question comes in, one, why did it take so long for those products to have this impact on you?

It's been a couple quarters since we first saw these introductions, yet, really in the numbers I've seen, in terms of European sales, we aren't really getting an inkling of it until really February.

So why did it take so long?

Second of all, given that the new products came out in the second half of last year, wouldn't it have -- why weren't the aggressive actions that you're going to be taken in the second quarter begun sort of earlier in sort of anticipation of this, some thinking about that, or at least the ability to sort of prepare us for what might have happened.

Then a quick other question is, in your guidance for second quarter, what assumption are you using for the exchange rate between dollar and euro?

Because, obviously, we've had a significant improvement in the dollar/euro relationship, at least from Nokia's perspective, in the last month or two, and if we look at the year-over-year compare, the second quarter 2003, the comparison is a lot better than it was for you in the first quarter.

So if you could address those two things, I'd appreciate it.

Thanks.

I think, Paul, obviously, we are working on a continuous basis and not one-off in terms of our shaping up our portfolio, so you can be assured that we're working hard, so not resting and waiting for problems to occur.

And I think the comment on why did it take so long, until February or so, sort of six months, or whatever, I mean, I think, one of the things that really does come to mind, and this is not at all encompassing answer, I don't think there's a right or wrong answer here, by the way, but if I venture an answer here, it must come around delivery capability.

If you see an excellent product, as we have seen for ten years from so many people, then they haven't been able to ship, in terms of millions, and we have had a very good delivery capability with our product which have put us in a good position, as it did in the fourth quarter, and then you might say that this was different towards the end of the first quarter, and, I'm just offering this as one alternative and one possible explanation.

I don't think there's a right or wrong answer in this respect.

Do you see a different pricing from competitors in that time frame as well?

Well, I think it's kind of two weeks gone, so analysis is underway.

It's one of those things, Paul, and because we are really talking about the end of the first quarter here.

Then you asked about the currencies on what our currency assumption is as we are working towards the second quarter and the guidance, et cetera.

We don't speculate on currencies.

It's roughly 120 that we are looking at, so we are not playing around on any expectation either way here, but expect it to be somewhere around where it's been in the last week or so.

Okay.

Thank you.

Thank you.

And, ladies and gentlemen, this concludes our conference call today.

I would just like to remind you that during the call we've been making a number of forward-looking statements that involve risks and uncertainties and 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 12 to 21 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.