諾基亞 (NOK) 2008 Q4 法說會逐字稿

Good morning.

My name is Regina and I will be your conference operator today.

At this time I would like to welcome everyone to the Nokia fourth quarter 2008 earnings call.

(Operator Instructions)

I would now like to turn the call over to Kristian Pullola, Vice President of Treasury and Investor Relations.

Please go ahead.

Ladies and gentlemen, welcome to Nokia's fourth quarter 2008 conference call.

I am Kristian Pullola, head of Nokia Investor Relations.

Olli-Pekka Kallasvuo, President and CEO of Nokia and Rick Simonson, CFO of Nokia are with me today.

During this briefing and call, we will be making forward-looking statements regarding the future business and financial performance of Nokia and its industry.

These statements are predictions that involve risks and uncertainties.

Actual results may therefore differ materially from the results 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 10 to 25 in our 2007 20-F and in our press release issued today.

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

To view the supporting slides while listening to the call, please go to the IR website.

Also, please note that today's press release and this presentation includes non-IFRS results information in addition to the reported results information.

A reconciliation between the two can also be found in the press release.

With that, Olli-Pekka, please go ahead.

Thanks, Kristian.

So good morning and good afternoon.

It is well understood that in the fourth quarter the overall global macro economic environment deteriorated and negatively impacted our business.

The drivers we once identified during our capital market stay in December, a global pullback in consumer spending, currency volatility, and credit tightness.

The reality we all face is that visibility access global markets remains extremely limited.

In the midst of all of this, one highlight is Nokia's cash flow performance in Q4.

Excluding the lump sum payments related to the Qualcomm agreement, our cash flow from operations was a positive EUR1.4 billion, a good performance during a tough quarter.

The macro environment is challenging and we believe we will remain so in 2009 clearly.

However, Nokia's longer term strategy remains valid and intact.

Nokia has a tremendous opportunity to capture value as to internet services market growth and evolves.

Nokia is transforming the way people connect by adding a social location, (inaudible) to the internet and making the experience as personal and instinctive as possible.

We will transform the internet into your internet.

So at this point, the current environment it is very clear we must continue to invest in our future crowd, invest at the slower more appropriate pace but invest to innovate and grow.

At the same time, we are taking action to reduce our overall costs.

Nokia must proceed in this direction and it seems unavailable that there will be a reduction in our employee base.

In addition to the Nokia Siemens Networks restructuring, we have commenced numerous actions to date including selling our enterprise firewall business, reducing our enterprise (inaudible), discontinuing our devices activities in Vancouver, stepping back from the Japan market and reducing employees in our market unit, Nokia Research Center and [update].

As a result of these actions, approximately 1000 employees are expected to depart Nokia, approximately half via divestures.

Of course in the economic reality requires us to do significantly more and we will take further action.

In order to help the capital to invest prudently in areas that are truly strategic to our future, we must make tough decisions to reduce or eliminate investment in other areas.

As a management team, reducing costs is our priority and we are firmly committed to reducing operating expense.

Rick will take you through the targets we are setting today.

Already, over the course of 2008, we have focused our services investment to five consumer oriented services - - maps, music, messaging, media and games.

This substance of streamlining is about (inaudible) growth areas and Nokia has advantages and can lead the market.

It is important to note we aim to not only build five independent services, we aim to build five interconnected services linked by a common source location dimension.

This is ambitious, but achievable, requiring a proper level of sustained investment.

In summary, as we navigate through this downturn, we will continuously access our cost structure and take action so that we maintain the finals of strength that allows us to sustain investments that will drive our future revenues and margins.

Now, let's take a closer look at the overall device market and our market share in the fourth quarter.

According to our estimates, the mobile device market lost 305 million units in the quarter, down 2% sequentially and 9% year-on-year.

The decline was primarily attributable to weaker consumer confidence, unprecedented consumer volatility, and credit tightness.

Channel inventory destocking by distributors, retailers, and, to a lesser extent, operators began in Q4.

However, we expect destocking to continue in a more significant way in Q1.

According to our estimates, our device market sale was 37% in Q4, down slightly on a sequential basis.

Emerging markets, where Nokia markets stay stronger, saw more weakness than developed markets.

Also in Q4 there were some lots fluctuations up and down in our traffic market numbers which calculated using Nokia sales in versus market sales out.

These fluctuations reflect in our view some distortions caused by traders who saw arbitrage opportunities because of currency fluctuations.

Essentially what happened is some products best sold in the European distributors made their way into retail channels in dollar denominated countries or regions.

On a sales out basis, our data Nokia market share in the various traffic regions were relatively more stable.

Price competition was robust in the industry in Q4.

This has had an impact on our market share in Q4.

In some cases, the pricing actions appeared to be an effort to clear excess stock.

In other cases, the pricing moves were supported by favorable currency fluctuations that a couple of our competitors are currently benefitting from.

We consider our scale and distribution to be a key competitive advantage and we are responding in a tactical manner to pricing activities of our competitors.

Our SmartPhone volume sped down in the fourth quarter and we estimated it decline to 32%.

While some of our Smart Phones deliver global volumes than we expected in Q4, we are confident that our Smart Phone portfolio is headed in the right direction.

The Nokia 5800 XpressMusic with Symbian 5.0 software the progress we have made with that screen and user interface and the recently announced N97 will take us another significant step forward making the user experience even more personal and instinctive.

SmartPhones are not high-end only.

We can leverage our scale, trusted brand, global reach and consumer understanding as we bring internet services to a number of attractive price points.

And that is what you will see from Nokia in 2009.

For the industry, we expect 2009 mobile device volumes to decline approximately 10% from 2008 levels.

We expect the decline to be greater during the first half than second half.

Although we expect our Q1 markets to be approximately the same level sequentially, we are targeting gains in 2009.

As I said last quarter, in this time of continuing economic uncertainty, I like our relative process.

Historically, Nokia's competitive process has solidified in times of turmoil.

As always, the test is not what happens in a particular quarter, but whether our investments allow us to build new sustainable competitive advantages.

Now onto product and services highlights for the fourth quarter of 2008 and the first quarter of 2009.

The Nokia E71, our top selling QWERTY device continued to be an impressive performer in the fourth quarter.

Unit sales were over one million, up on a sequential basis and helping to drive easier shipments over the 10 million mark for the full year 2008.

The success of the E71 shows that we have taken great strides for what when it comes to QWERTY and consumer messaging.

On November 27 we began shipping the Nokia 5800 in select markets.

The Nokia 5800 is Nokia's first mass market touch phone and response to this device and our new touch use interface has been beyond our expectations.

Although distribution was limited, the Nokia 5800 XpressMusic shipped slightly more than 0.5 million units in the last 30 days of Q4.

We will continue an aggressive roll-out and marketing plan throughout the first quarter.

The Nokia 5800 has the potential to become our highest revenue and gross margin device in fairly short order.

At Nokia World, we announced a new benchmark for our industry, the Nokia N97 mobile computer which received an enthusiastic reception from media, customers, and analysts.

The Nokia N97 tightly integrates our other services and boasts unrivaled features including a high resolution 3.5 dot screen, QWERTY keyboard, fully customizable home screen, and 32 gigabytes of built-in storage.

The N97 is scheduled to start shipping in the first half of 2009.

So while there's still a lot of work to do, we have some momentum in touch and QWERTY that we can build upon as we enter 2009.

These are important high crowd device categories.

Soft band services had EUR 158 million of net sales, up 37% sequentially.

Our services business continues to show good momentum.

At this early stage, it is important to get our services in the hands of consumers quickly and we are doing this through product combos.

Nokia more than any other company has the opportunity to put the power of the internet into the hands of more people in more places around the world.

We substantially enhanced our speed of services in Q4.

It's really starting to come together.

We launched a new release of Nokia Maps and we extended the Nokia Maps experience from the device to the desktop through maps on Ovi.

Now people can plan the Nokia maps journey at home on their PC and then synchronize seamlessly to their mobile device.

In Q4 we combined our 5.5 million map licenses in our devices, a sequential increase of approximately 15%.

In Q4 we also started shipping our innovative all-you-can-eat music offer, Nokia Comes with Music in the United Kingdom.

We will soon launch Comes With Music in Singapore and Australia.

In messaging, we launched the Nokia messaging service which gives Nokia users easy and affordable access to their e-mail and instant messaging accounts.

Nokia messaging is about making it easy as one, two, three for people to set up their existing e-mail accounts on a very broad range of Nokia devices.

At Nokia we believe e-mail should be available for everybody.

We also launched mail on Ovi,, the free e-mail service primarily aimed at the billions of first time e-mail users - - 75% of world's population.

For many of these people, their first e-mail experience will be on mobile phone, not on a PC.

We will give them an Ovi.com email address that they can set up and use from their handset.

Games continue to show momentum.

In Q4, our Engate portfolio reads 27 titles compared to 21 titles in Q3.

We also expanded our Engate Combos to more device and saw an increase in Engate's transaction volumes, both were up significantly on a sequential basis.

So a lot of activity in Q4 and I'm relatively happy with the progress we made in services but there is more work to do.

Focusing on five interconnected services, maps, music, messaging and gaming and offering people an outstanding Nokia device experience is how we can and will differentiate our solutions.

Onto Nokia Siemens Networks.

NSN continued to show good progress in the fourth quarter.

NSN delivered final results giving the challenging telecommunications market and tough economic conditions.

NSN also drove strong cash collection, improving its overall networking process.

Importantly, NSN has now delivered on its commitment to achieve substantially all of the EUR2 billion in annual cost entities by the end of 2008.

That is EUR500 million more and a year faster than originally planned at the time of the transaction.

This achievement is reflected in NSN's improved gross margins.

It can also be seen in NSN's operating (inaudible) which are now best in class.

Consistent with the guidance given at CMD, we continue to expect the overall telecom infrastructure marketed to contract in Euro terms by 5% or more in 2009.

We expected it to be a difficult year but we think NSN has the right focus and is executing well.

Now I will pass it over to Rick for more on the financials.

Thanks, Olli-Pekka.

Upfront I'd like to comment on the dividend and then move to our actions to reduce cost.

The Nokia Board is recommending that shareholders approve a dividend of EUR0.40 per share.

This is down from last year as distributable earnings were down in 2008.

The Board and management believe that this dividend payout strikes the proper balance.

At EUR1.5 billion in total, the dividend will remain substantial and equates to approximately 30% of 2008 non-IFRS earnings.

We have a realistic view of the macro economic downturn and we do not expect a quick snapback.

Relative to some other competitors, we believe Nokia's better prepared for this environment because our capital structure is solid.

Reducing the dividend in line with reduced earnings in 2008 when combined with our continuous and ongoing focus on financial discipline, this allows us to preserve our strong capital structure.

As we said at Capital Markets Day, we have stopped share buybacks and you should not expect resumption in 2009.

For maximum operational flexibility, the Nokia Board is asking from shareholders a share buyback authorization in 2009.

However, the board has not at this time allocated any funds for share repurchases.

During the downturn we will continue to operate in a way that keeps the heat on our competitors, while managing for total profitability and cash flow.

We will not overreach or stretch our balance sheet imprudently in an attempt to gain unsustainable market share.

Instead, we will continue to invest appropriately to create longer term competitive advantages in key strategic areas.

Now turning to reducing costs.

As we said at CMD, a relatively small portion of our devices and services, cost of goods sold are fixed and our focus on efficiency is continuous always.

In this environment taking cost action in a meaningful and definable way is about reducing operating expenses in addition to gaining those variable costs of goods sold reductions.

Beginning 2009, based on growth investments and hiring during 2008, our annual operating expense run rate in our devices and services business is approximately EUR6.7 billion.

As stated at Capital Markets Day, we will continue to adjust our cost structure through 2009 and 2010.

We are targeting devices and services operating expense run rate of less than EUR6 billion by the end of 2010.

And we were targeting that a majority of the reduction will happen in 2009.

Turning these targeted reductions into plans and actions, unavoidably means a reduction in the numbers of employees at Nokia.

We do not have specific reduction announcements to make today, however, the targeted reductions will encompass the areas mentioned during Capital Markets Day.

In R&D we will continue to sharpen our focus on portfolio pruning and prioritization.

We will invest in services at a slower pace in an increasingly focused way.

In sales and marketing, we will cut some product program spending and we will leverage the theme-based marketing to a much greater extent.

And in general and administrative, every shared unit has already identified and is acting on expense reductions of at least 10% in the first half of 2009.

Now, let's look at devices and services in Q4.

On a reported basis, Devices and Services net sales were down 5% sequentially and 27% year-over-year.

On a constant currency basis, net sales were down 8% sequentially and 25% year-over-year.

The decline was attributable to weaker consumer sentiment, unprecedented currency volatility and credit tightness as we have mentioned previously.

In quarter four, Services and Software net sales were EUR158 million, up 37% sequentially.

At the present time, our strategy is to sell our services, combined with device sales.

This is the fastest way for us to get our services in the hands of consumers and allows us to leverage the strong position we have in the device market.

Product combos, however, are not the same thing as giving the services away for free.

We are making consumer experience better and we are generating revenue based on the additional value we provide.

Also related to services we announced in quarter four that we will sell our enterprise firewall business to Check Point Softwares Technologies.

This transaction is expected to close in quarter one.

We report enterprise firewall sales as services and software revenue.

Therefore, upon completion of the transaction, our services and software revenue is expected to decrease.

But remember, all of our services and software growth has been driven by the five core services.

Throughout 2008 our enterprise firewall net sales were below EUR50 million per quarter.

Nokia's device average selling price in the fourth quarter was EUR71, down from EUR72 in the third quarter.

Devices and Services gross margin in quarter four was 33.8%, down 270 basis points from quarter three.

Our gross margins were impacted by the lower volumes, the pricing pressures mentioned, and some cost pressures.

Our Korean based competitors are benefitting from the 26% depreciation of the Korean Won versus the US dollar and the 25% depreciation versus the Euro.

Those are for 2008.

In many emerging market countries local currencies have substantially devalued.

This has reduced the purchasing power of those consumers in those countries for goods and services priced in US dollars or Euros so that puts pressure on prices and margins.

In addition, foreign currency fluctuations are impacting us on the cost side making it more difficult to achieve our overall component cost reductions in Euro terms even as commodity input prices are coming down.

We source approximately 25% of our cost of goods sold in Japanese Yen.

The Yen has appreciated approximately 32% against the Euro and 17% against the US dollar in the last six months of 2008.

Hedging has mostly offset this in the past.

Our current Yen hedges begin to roll off in mid 2009.

We are taking action to reduce sourcing costs, including negotiation with our suppliers and shifting nonjapanese suppliers for certain components where possible.

On a sequential basis in quarter four, Devices and Services non-IFRS OpEx was up 10% in absolute terms and 290 basis points as a percentage of sales.

We had committed to a higher level of spending in Q4 and we emphasize during Capital Markets Day that our earnings would suffer.

We expected a seasonal uptick in sales that did not come and it was not possible to reduce costs fast enough given how quickly the macro environment deteriorated.

Devices and Services non-IFRS operating margin decreased 650 basis points sequentially to 12.1% in quarter four driven by lower gross margins and higher operating expenses.

In addition, our bad debt provisions increased somewhat by EUR85 million in the quarter.

For the first half of 2009 we are now targeting non-IFRS operating margins our Devices and Services business to be more than 10%.

For the second half, we continue to target non-IFRS operating margins in the teens for our Devices and Services business.

Regarding NAVTEQ, this business typically has strong fourth quarter seasonality, resulting in higher sales and operating margins.

This held true in 2008.

Reported net sales in quarter four were EUR206 million, an increase of 31% sequentially.

Non-IFRS operating margins were 25.6%, up 720 basis points sequentially.

A few more comments on Nokia Siemens Networks.

NSN's reported net sales were up 24% sequentially and down 5% year-over-year.

On a constant currency basis, net sales were up 23% sequentially and down 4% year- over-year.

The sequential increase was due to typical seasonality in this business.

The year-over-year decline was driven somewhat by NSN's ongoing focus on deal discipline, profit and cash first.

It also reflects the impact of some portfolio streamlining and growing market challenges as operators tighten their spending.

NSN's non-IFRS gross margin was 30.4%, down 1% sequentially due to increased provisioning and write-downs.

NSN's non-IFRS operating margin was 5.2%, a slight sequential increase.

Working capital management improved sequentially in quarter four and this remains an area of considerable focus.

On a year-over-year basis, we have seen continued progress and structural changes that have helped drive the margins higher despite somewhat lower revenues.

NSN has shown good discipline and execution in network implementation and services, also higher margin software sales have grown as a proportion of NSN's overall business.

NSN is focused on deal discipline, margin expansion, cash generation.

That focus is showing good results and as Olli-Pekka mentioned, reaching the merger synergy goal was an important achievement.

Actions to further increase efficiency of course continue.

Nokia's financial income and expenses in quarter four was an expense of EUR16 million compared to an expense of EUR57 million in quarter three.

The sequential improvement is a result of lowering hedge costs and lower foreign exchange losses.

On this slide we show both the Q4 reported and non-IFRS P&L.

We also lay out the items that are excluded from the reported to get to these non-IFRS numbers.

Next let's move and look at some of Nokia's balance sheet and cash flow items.

As Olli-Pekka noted, our cash flow performance was the highlight for quarter four.

Over the past five years our philosophy on capital structure has been conservative and as a result our liquidity position today is solid.

We are good at turning operating profits into cash and we delivered so in quarter four.

Our cash and other liquid assets totaled EUR6.8 billion at the end of the fourth quarter.

The sequential decline was driven by the EUR1.7 billion lump sum cash payment related to the Qualcomm licensing agreement.

Excluding this, our cash flow from operations was a positive EUR1.4 billion, reflecting solid working capital management.

Again, I'll remind you of the Qualcomm payment.

It was related to the license agreement we entered into Q3.

The bulk of the Q4 cash payment is essentially a prepayment of cost of goods sold and therefore will be expensed in the subsequent quarters until the end of the contract period in the year 2022.

As a result, our future cash payments to Qualcomm will be lower than what is expensed in the P&L.

In quarter four overall working capital management improved on a sequential basis.

Accounts receivable and inventory were both down sequentially partially offsetting this accounts payable was also down on a sequential basis.

In total, the improvement was approximately EUR1 billion sequentially.

Again, I think a good performance in quarter four.

In connection with the NAVTEQ acquisition, we introduced a moderate amount of leverage to our capital structure through the issuance of US commercial paper.

At the end of quarter four, the outstandings were $3.5 billion.

Since mid-September, despite extremely challenging market conditions, we have been successfully refinancing our maturing commercial paper.

Even though the credit market is tight, it continues to be open for Nokia.

Here this slide covers the currency situation and the constant currencies reconciliations.

With that, I'd like to hand it back to Olli-Pekka.

Thanks very much, Rick.

So these are challenging times.

We are seeing a truly global downturn, one that crosses all geographies and industry segments.

Visibility remains very limited.

In this environment, Nokia's solid capital structure is a key asset.

We are secure in our financial position and Nokia's stability is reassuring to our partners, operators, distributors and suppliers.

Also, we have systematically aligned Nokia with best-in-class partners which in our view have better sustaining power than smaller, less stable players.

We will continue to take appropriate actions in this uncertain environment in order to preserve our financial strength and our ability to invest prudently in strategic areas.

It is clear there is a tremendous opportunity to extend the value of the handset market through the integration of device hardware and internet services.

This will drive the next wave of industry growth and innovation will not stand still.

Thanks very much.

(Operator instructions) Your first question comes from the line of Kulbinder Garcha with Credit Suisse.

I have a question that relates significantly to gross margin on OpEx reduction, on the gross margin side, Rick, if I understood you correctly, the hedging is rolling off in the first half so that's going to be a negative delta for gross margin from where we are now, and also the competition sounds like can afford to be more aggressive.

What is the positives there improving product portfolio and could you give us insight, especially on the smartphone side given what your share is.

What needs to happen to that to meaningfully start to recover.

And then on the EUR 700 million or more of tax reduction, year-over-year in 2009 versus '08 can you talk about the speed in which that will happen.

Are we going to see half of that impact in a full year basis?

Less than half?

Just some ideas to what plans are being put in place to the speed of which that EUR 700 leads to a 2009 versus a 2008 OpEx reduction in services.

Thanks very much.

Kulbinder, yes, this is Rick.

I'll take that in three parts, that question.

If I may - - in terms of the gross margins clearly as we said and everybody is quite aware of the yen appreciation we have laid out to you before and wanted to elaborate here as I did, what percentage we source in yen.

First and foremost, the actions that we already have taken is to drive reductions with those suppliers.

And remember not all of what they supply to us themselves is actually sourced in yen and we certainly aren't going to take a markup on those things that come that they bring together that come from outside of the yen zone.

That's very clear.

We are also working in negotiating with them to assure that they help share in this.

We are hedged.

And then further we are moving where we are able to and working to continuously fine alternative sources.

Again, our guys are more experienced than others so those are the three points of action that we have to offset what clearly on an unhedged basis is negative for gross margins.

I agree with you there.

In terms of the product portfolio and it really is, in fact, that - - for instance, the 5800 as Olli-Pekka mentioned is fast becoming and likely to be our top gross margin product.

The E71 continues strong combined with the services that it delivers and we have shown you some of the other devices and services combined like the preview of the N97 but I'm sure there will be other questions and Olli-Pekka will address those.

In terms of the OpEx and the pacing of that.

As I said, entering in Devices and Services at 6.7 billion run rate end of 2010 below 6 so that's more than 700 million reduction in the OpEx and the majority of that, in other words, over 50% we would expect to come in 2009.

You can kind of draw your glide path there.

Did I cover it all?

Yes, thanks very much.

Okay.

Your next question comes from the line of Mike Walkley with Piper Jaffray.

Mr.

Walkly, your line is open.

Can you hear me?

We can hear you now.

Thank you.

With carriers lowering their SKU and liquidity impacting distributors we are expecting weaker sell-in and sell through.

Can you update us on the view of global inventory levels?

How much they might have been lowered in Q4 and how much lower you think they will be become in terms of weeks in the first half of '09?

And are there any regions where you're seeing higher inventory levels than others.

Yes, Mike, this is Rick.

In Q4, as we said, the destocking and the reduction of the inventory in the total chain has impacted.

That is underway.

We believe what we see now is that Q1 we will see more of that.

But we also see that it looks as if it should be substantially over in Q1.

And, of course, this relates to what we talked about, the seasonality of Q1 being stronger down than in the past, but it also says that there is significant inventory that has come out as destocked here in fourth quarter that will continue in Q1.

And so we think the whole chain can be in a little better shape going into quarter 2 if it works that way.

And, again, Olli-Pekka commented that in terms of the regional view that we have, this somewhat movement caused by the gray market makes it look as if our market shares in different regions have been more volatile than what we think it is if you adjust for that.

But in terms of the overall industry volumes, we had talked before about that coming down in the order of weeks or somewhere 20% or more and that's what we are still targeting.

We talked about that at Capital Markets Day, I hold that same view but it still has to work through in quarter 1.

Thanks.

Thank you.

Your next question comes from the line of Rod Hall with JPMorgan.

Thanks for taking my question.

The first one is for Rick.

Rick, I see that the inventory levels have come down quite a lot in Q4.

Normally we would see some seasonal reduction inventories but the turns are up quite a bit.

Do you think that's a sustainable situation or do you think we may revert to a little bit lower inventory turns as we move forward?

Yes, Rod.

Rick here and then I'll turn you over.

It sounds like you had a question for Olli-Pekka as well.

In terms of the inventory and the receivables which contributed to lower sequential networking capital, two drivers there.

In Devices and Services that was primarily the seasonality and volume related.

In NSN, we believe that was just improvement and wasn't primarily driven by seasonality.

And so as I said on the NSN side, we have to work to hold that improvement and then continue in the devices and services.

Overall on the year, as you know, the inventory has been up slightly, the receivables have gone up.

But, again, as we work through this destocking, we have seen that trend start to improve as reflected in the fourth quarter.

So we are going to work to try to make that sustainable and not a one time event.

Okay.

Thanks, Rick.

And I had a - - Rick, while I'm talking to you, I had another question for you, which is I think I heard you say earlier that part of the gross margin problem was some component pricing changes and I wasn't clear on whether those were all currency related or whether there were some underlying increases in component prices.

Could you just comment on that?

I wasn't referring to any underlying component increases.

That was just a small bit that I said wasn't 100% covered by currency.

Rod, it's the opposite.

We are getting our declines in constant components in a better way than when we had the little bit of slowdown last year, early in the year.

And we flagged that in Q3 and that continued well in Q4.

Okay.

And then I guess the last thing, it doesn't sound like there's a whole lot of visibility at all.

Are you seeing any evidence of stabilization in any of the regional markets?

I mean, it looks like the emerging markets are clearly accelerating in the decline.

Any evidence in the developed markets that maybe the slowdown is slowing, if that's a way I could put it?

Yes, of course the visibility is quite short and of course -- it's difficult to read this and there are items that we have repeated many times - -currency volatility, consumer confidence, fear of inflation in some developing markets and that all has come to play.

It's quite clear that in many markets the oil price, the inflation being in check has a positive impact, but to what extent it can compensate the lower consumer confidence and the currencies, time will tell.

But that's positive factors having an impact in the right direction.

Then in the developed markets it's quite interesting that, or even paradoxical that the market that from the mobile device point of view seems to be the strongest is the US.

And where this all started one might claim so in that way it speaks to the volatility and interesting dynamics here.

I will also take this opportunity to return to Kulbinder's question.

So, in fact, sometimes many of you take the liberty of asking two questions, so and I'll take the liberty of giving two answers at the same time.

So Kulbinder spoke about the smartphones and our process there.

And I think it's important to emphasize here that we are expanding the Symbian series 60 investment here in terms of it throughout the process to series 40.

Meaning that they are expanding smartphones to categories and form factors that have not yet been covered.

And in that way since the smartphone market seems to have traction indeed, so we are changing our investments here also to be aligned with that fact, and I think this will give us further possibility in this area.

Okay.

Thanks, guys.

And thanks, Olli-Pekka, for the extra answer.

You are welcome.

Okay.

Next question.

Your next question comes from the line of Sherief Bakr with Citi.

Thank you very much.

Just had a question following on your comments about smartphones.

Do you think that your smartphone share has now troughed or possibly seen it decline now for a number of quarters and I guess relating to that in which regions do you see the greatest opportunity to regain share?

And should we be thinking about your Smart phones getting to at the very least your overall average device market share in 2009?

Thanks.

Yes, a couple of comments there.

I think we have had here some impact also from the more like developing markets.

You have to remember that the developing markets are not low end only.

Smartphones are sold there as well and I think we had some impact from people downgrading in their repurchases and hence my previous comment.

We will expand smartphones to cover more areas and that's completing line with this one.

Then, I'm extremely optimistic with the 5800 and I want to single that out because I think the product deserves that.

It has gotten a flying start.

We are ramping up that as fast as we can.

We have, in fact, increased our supply of components there quite a lot because we see the demand.

At the moment, we are in a situation with the 5800 when the demand is well above the supply.

And we are meeting those demands as quickly as we can and we can ramp up also quite quickly.

So that one product deserves to be singled out here and overall investment continuously.

I am quite optimistic on our smartphone portfolio overall.

Okay.

Next question.

Your next question comes from the line of Jeff Kvaal with Barclay's Capital.

Rick, a clarification for you, you mentioned a 20% down figure.

Was that in reference to weeks in inventory or was that in reference to the first quarter?

No, Jeff, what I was talking about was the question at CMD was overall in terms of inventory level in the channel that - - in the industry would you expect that kind of decline and had said, yes.

And so, again what we are looking for is that to play out in quarter 1.

Okay.

Thank you.

And then Olli-Pekka, would you be able to give us an early update to how the music store is going particularly Comes With Music in the UK?

Thank you.

Yes.

We have, like you are indicating, the Music Store, we have expanded in many markets now and it's getting traction.

But even more importantly the Comes With Music now it has gotten a good start in the UK, but it's quite clear having said that that we need to expand the product portfolio, I mean, the hardware portfolio that is available when it comes to Comes With Music.

And that's what we are doing here.

And, obviously, the 5800 Comes With Music will be extremely important here.

And Singapore and Australia are next and we will continue to expand.

So the plan is now in the near future to do 13 more markets and 7 or more devices where Comes With Music will be available.

In that way we can meet different price points, different consumer segments.

I remain quite confident that the consumers really will understand the beauty of the offering and we are making music legal here as well and that's a value as such.

Is it particularly tricky to bring up a new device with Comes With Music?

No, it is not.

No, it's not at all.

Once you've got the platform work done in series 60 or Symbian and you've got the music platform ready, so we can multiply easily.

So then it's very straightforward thereafter.

Okay.

Thank you.

Next question.

Your next question comes from the line of Mark Sue with RBC Capital Markets.

Thank you.

Olli-Pekka do you see this year as an opportunity to consolidate market share, let's say, back to 40% so that your positioning is better for next year?

And subsequently, how do you gain share in a shrinking market without pricing action or increasing operating expenses from new products?

It seems like something has to give this year more so than some of the metrics you've outlined.

Yes, I think the answer is, yes, I think the opportunity must be there looking at the year as a whole.

Looking at our possibility to continue to invest, of course, prudently and in the right way but nevertheless.

This basically comes down to the point we do have better possibility to have that ability than the competition.

It's quite clear to me.

In fact, we are seeing some of the competition now, in fact, withdrawing from certain market.

It's quite clear, I think that's a further opportunity to do this, but in the right ways.

Of course, even here in this situation we will continue to balance the margin and the markets in the right way.

But definitely the opportunity is there as some of the competitors are either withdrawing or exiting certain markets.

Next question, please.

Your next question comes from the line of Andrew Griffin with Merrill Lynch.

Hi there.

I just wanted to talk about your gross and net cash position.

How much is the gross and net cash available within NSN?

Also, do you have any significant amounts that are, for instance, locked up in particular countries and therefore not available for transfer to the rest of the group?

Yes, we don't break that out at NSN so I won't start here today.

Then, we have given the numbers then for the group total, of course.

In terms of what you're referring to as trap cash.

We don't have a significant issue around trap cash.

We are not like a US based pharmaceutical company, for example, who, as I understand that industry, has most of their cash trapped outside of the US.

And many other US companies that had to use the amnesty that the US tax authorities gave some time ago and are talking about again because many tech and pharma companies in the US have the majority of their balance sheet cash offshore and differing degrees trapped.

We are quite the opposite, quite the opposite of that.

We have relatively very little trapped cash.

Are you able to give an approximate level indication of NSN as in it has a reasonable level of net cash or similar to the competition, that kind of thing?

No.

Let me - - won't be able to give you that granularity right now.

Okay.

Thank you.

Next question, please.

Your next question comes from Gareth Jenkins with UBS.

Yes hi, if I could.

I just wondered on the smartphone market issue again.

I just wondered you were talking about dropping down through the price points and driving into the lower range.

I just wondered whether you can give us a timetable for different ASP categories you expect the smartphone markets to address during the course of 2009.

Second one is just on NSN.

I just wondered you're losing market share in Q4 with China growing and the Chinese growing so quickly you could well lose market share in 2009.

I just wondered whether its a stage where it becomes subscale and that you have to focus on revenue again rather than free cash flow.

And then the last one just on dividend payout, I think you said payout ratio is 30% on adjusted.

Is that the payout issue we should assume for modeling next year as well this?

Thank you.

Okay.

I'll take this smartphone response again in fact here.

It seems to be - - and rightly so - - quite topical.

So when I was referring to expanse, I was not referring to expanse when it comes to price points only.

I was talking about different categories and different consumer segments, but also price points.

You have to remember here that the software is not decisive when it comes to your cost of goods sold.

So in that way we can do series 60 even at the lower price points looking at the hardware only, putting in the right feature set at the right price point.

It is possible and the right thing to do to expanding Symbian also lower in the price point.

Giving the feature set of course from the cost point of view, you might want to look at that in the right way.

But the software, of course, as such is not prohibitive.

It's neutral.

In that way I see this as tremendous opportunity to increase efficiency, to get more scale on Symbian, and gain share through that one.

And then, this is Rick, onto the - -

But, you I cannot give you here exact numbers when it comes to 2009.

We have clearly made a decision and we are implementing accordingly in our R&D and product (inaudible) activity and then Rick.

To NSN and again welcome any insights here, but in terms of the market share - - NSN's market share has only lost a little bit.

And, again, we have seen them in market shares change quite slowly here.

I think they have done a fantastic job of balancing profitability and deal discipline with market share.

We are going to continue to do that.

NSN is one of the leaders and will be one of the leaders here.

They know how to play this game.

It's too early to talk about what market shares are going to be in China, but rest assured the team is very focused and I think our product portfolio and services and solutions offering has improved.

It's a sharp focus.

We are getting excellent feedback from our operator customers and we will see how that goes in China.

And elaborating also on the point in terms of NSN's cash position - - the better way to answer that question is they have the ability to invest where they need to invest, where it's going to add value.

We have assured that both Nokia and our partner Siemens, total unanimity there and as evidenced by what they are pushing ahead, they have done a number of acquisitions.

They aren't large acquisitions but they were sizable in terms of using cash.

And I think that's a proof point of that statement.

And then I think the third question was related to the dividend and then we will move to one final question from another questioner.

We provided - - the fact is the dividend that the board has asked the shareholders to approve is EUR 0.40 and that's approximately EUR 1.5 billion.

We provided that calculation just as indicative, it's 30% of the non-IFRS '08 earnings.

That is not a policy.

We don't operate that way.

We don't lock that in.

But, rather, as stated, we feel that this is a very good balance and a very healthy dividend.

So one final question please.

Your last question will come from James Dawson with Morgan Stanley.

Hi, guys, maybe I'll have a couple.

Can you talk about China?

Obviously there is a lot of moving parts there but the decline is kind of eye watering.

I wonder if you can just talk about what happened and what we should expect through this year.

And just secondly because everybody is asking about smartphones there, on the share there you're not expecting to gain share like you did the capital markets.

Are you still - - and within that what should we expect from smartphones in the US?

Okay China.

Yes, indeed the numbers you are referring to saw some volatility here, hence the question.

And it's quite clear that looking at overall the situation in Q4 and China is probably the best possible example of that.

You saw quite a lot of dynamics that relate to that channel.

And, in fact, in the many markets the sell-out market shares differ quite a lot from sell-in market shares.

And when we are talking about market share, we are talking about our sell-in markets as opposed to the sell-out.

Looking at China in Q4, our sell-out market share for - - was, in fact, even more stable than the sell-in and I would say it's definitely within the limits of normal volatility when it comes to your markets in a given market.

This time, once again, we were not included in the China mobile (inaudible) deal.

That's a decision that we take on a case by case basis.

This time we were not and that low and low is in fact or the lack thereof seems shows in the numbers as it has shown many times before and I've gotten the question every time.

So in that way, I would not elevate China here about any other markets when it comes to the market dynamics.

Normal competitive situation in a very, very difficult overall market.

Can you talk about it was down 36% on the sell-in basis.

What would it have been on the sell-out?

Relatively more stable, yes.

Yes but --

And then, James, to the smartphone question, which, Olli-Pekka, I think his enthusiasm for that should answer that question.

But let me just put a point on it.

I think focus also on what we are looking at here is really expanding the definition of smartphones.

This relative shift to more series 60 versus series 40.

The combo of bringing services so you're selling solutions and like is just indicative but tip of the iceberg indicative at 5800 which is a mass market internet solution device, touch screen.

So that's why I think you should hear the enthusiasm in the voice.

We need to work that through as we go through 2009.

But we have these five services and increasingly combining those with a larger portfolio devices.

So I think by the end of 2009, we'd like to prove that you can look at the definition of the smartphone market in a kind of new and enhanced way.

We have to deliver on that.

And in a US market I always leave the product launches for the marketing people rather than the CFO.

Yes, but what Rick is saying is absolutely correct, of course.

Devices only from a hardware point of view, that's not enough anymore.

It's definitely clear that our strategy including services, solutions on top of the hardware platform will change the definition of the smartphone and this will happen in the US as well.

Thank you.

Ladies and gentlemen, this concludes our conference call.

I would like to remind you that during the conference call today, 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 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 10 to 25 in our 2007 20-F and in our press release today.

Thank you and have a nice day.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.