3rd Quarter Results

Nokia Corporation 16 October 2003 PRESS RELEASE October 16, 2003 Strong volume growth and excellent profitability in mobile phones - Nokia meets third-quarter sales and EPS targets Highlights: 3Q 2003 (all comparisons are year on year) • Net sales declined 5% to EUR 6.9 billion (up 4% at constant currency). • Nokia Mobile Phones sales were flat at EUR 5.6 billion (up 9% at constant currency). • Nokia Networks sales declined 21% to EUR 1.2 billion. • Nokia gains market share with 23% volume growth; industry mobile phone volume growth accelerates to 15%. • Nokia third-quarter mobile phone market share grows to 39%. • Company doubles share of global CDMA handset market. • Excellent pro forma and reported operating margins in mobile phones at 22.4% and 22.0%. • Nokia Networks achieves breakeven. • Nokia announces new operating structure for 2004. • Pro forma EPS (diluted) was EUR 0.18. Reported EPS (diluted) was EUR 0.17. • Strong operating cash flow in the third quarter at EUR 1.2 billion. JORMA OLLILA, CHAIRMAN AND CEO: The third quarter brought a sharp increase in mobile phone volumes for Nokia. Mobile phone market volumes rose an impressive 15% year on year for the quarter to 118 million units, while Nokia's own volume growth accelerated even more sharply, rising by 23% to 45.5 million units. The mobile phone market has continued to strengthen throughout the year, and we now expect overall industry volume for 2003 to be about 460 million units. During the quarter, we saw our overall mobile phone market share rise to 39%, up from 36% in the same quarter last year. In addition to our ongoing strength in Europe, we established clear leadership in the US and the Americas markets. In China, we have now gained the leading position in the GSM market, and see ourselves strongly positioned to achieve overall market leadership there. Following an announced commitment two years ago to strengthen our position in the global CDMA handset market, I am very happy to see that we have now doubled our share to the mid teens from the same quarter last year. We expect to see continued momentum in CDMA going into the fourth quarter as we increase shipments to China, India and all major US CDMA operators. Recent months have marked our entry into a number of new and exciting areas of mobility. We have introduced several camera phones, begun shipments of games devices and announced half a dozen phones for new growth markets. The Nokia N-Gage has just gone on sale at 30,000 stores around the world to a very positive initial consumer response. Many outlets sold out of the device during the first day of release. Following on from this, we are seeing strong order intake from distributors and retailers. In September, we launched our second 3G model, the Nokia 7600. Aside from its radical and innovative design, the Nokia 7600 will be the smallest and lightest dual-mode WCDMA phone on the market when shipments begin in the fourth quarter. (Continued on page 3) NOKIA THIRD QUARTER 2003 / JANUARY TO SEPTEMBER 2003 FINANCIAL RESULTS 3Q 2003 PRO FORMA REPORTED (excludes goodwill amortization and non-recurring items) EUR (million) 3Q/2003 3Q/2002 Change (%) 3Q/2003 3Q/2002 Change (%) Net sales 6 874 7 224 -5 6 874 7 224 -5 Nokia Mobile Phones 5 620 5 633 5 620 5 633 Nokia Networks 1 217 1 545 -21 1 217 1 545 -21 Nokia Ventures Organization 82 89 -8 82 89 -8 Operating profit 1 192 1 219 -2 1 154 859 34 Nokia Mobile Phones 1 257 1 249 1 1 235 1 226 1 Nokia Networks 19 80 -76 4 -250 Nokia Ventures Organization -55 -25 -120 -56 -31 -81 Common Group Expenses -29 -85 -29 -86 Operating Margin (%) 17.3 16.9 16.8 11.9 Nokia Mobile Phones (%) 22.4 22.2 22.0 21.8 Nokia Networks (%) 1.6 5.2 0.3 -16.2 Nokia Ventures Organization (%) -67.1 -28.1 -68.3 -34.8 Financial income and expenses 70 30 133 70 30 133 Profit before tax and 1 260 1 245 1 1 222 885 38 minority interests Net profit 861 881 -2 823 610 35 EPS, EUR Basic 0.18 0.19 -5 0.17 0.13 31 Diluted 0.18 0.18 0.17 0.13 31 - All pro forma figures for the third quarter can be found in the tables on page 8. A reconciliation of the pro forma figures to our reported results can be found in the table on page 11. - Pro forma adjustments for the third quarter 2003 consisted of amortization of goodwill EUR 38 million. January - September, 2003 PRO FORMA REPORTED (excludes goodwill amortization and non-recurring items) EUR (million) Jan-Sep/ Jan-Sep/ Change (%) Jan-Sep/ Jan-Sep/ Change (%) 2003 2002 2003 2002 Net sales 20 666 21 173 -2 20 666 21 173 -2 Nokia Mobile Phones 16 609 16 469 1 16 609 16 469 1 Nokia Networks 3 914 4 455 -12 3 914 4 455 -12 Nokia Ventures Organization 258 352 -27 258 352 -27 Operating profit 3 237 3 765 -14 3 342 3 314 1 Nokia Mobile Phones 3 844 3 628 6 3 776 3 559 6 Nokia Networks -442 397 -260 33 Nokia Ventures Organization -123 -118 -4 -124 -135 8 Common Group Expenses -42 -142 -50 -143 Operating Margin (%) 15.7 17.8 16.2 15.7 Nokia Mobile Phones (%) 23.1 22.0 22.7 21.6 Nokia Networks (%) -11.3 8.9 -6.6 0.7 Nokia Ventures Organization (%) -47.7 -33.5 -48.1 -38.4 Financial income and expenses 281 104 170 281 104 170 Profit before tax and 3 509 3 850 -9 3 614 3 399 6 minority interests Net profit 2 385 2 701 -12 2 424 2 335 4 EPS, EUR Basic 0.50 0.57 -12 0.51 0.49 4 Diluted 0.50 0.56 -11 0.51 0.49 4 - All pro forma figures for the period January to September can be found in the tables on page 9. A reconciliation of the pro forma figures to our reported results can be found in the tables on page 11. (Continued from page 1) In our mobile networks business, we began seeing evidence of the market stabilizing. The financial situation among our operator customers also appears to be improving. During the quarter, for example, major global and Western European operators began reconfirming their commitment to WCDMA in terms of strengthening their network rollout capability. The 27,000 base stations we have cumulatively supplied now make us the market leader in WCDMA radio access networks. In a move to further align Nokia's structure with our strategy, we have made the decision to reconfigure Nokia into new highly interdependent parts from January 2004. Combined, our four business groups - Mobile Phones, Multimedia, Networks and Enterprise Solutions - will form an offering that we believe no other industry player can match. New horizontal entities will work very closely with all business groups. Under this new organization, we will be addressing emerging business areas in the world of mobility, while continuing to build on leadership in mobile voice communications. This will allow us to focus on each business segment with the right dynamics, while at the same time achieving economies of scale that we believe will go far beyond any levels previously seen in this industry. We are very excited about this change and feel confident that it will allow us to better serve our consumer, operator and enterprise customers. Mobility is one of the great mega-trends of our time. It is changing how we live our lives and how businesses are run. Under our new operational structure, we are poised to seize the opportunity of the next growth wave in this industry and bring the benefits of mobility to consumers, companies and communities across the board. BUSINESS DEVELOPMENT AND FORECASTS Third-quarter sales Nokia's third-quarter net sales of EUR 6.9 billion were down 5%, compared with the third quarter 2002. On a constant currency basis, group net sales would have been up 4% year on year. Mobile phone net sales in the third quarter were flat year on year, in line with guidance, reaching EUR 5.6 billion. Strong net sales growth in the Americas, including the US, was virtually offset by flat sales in the Europe/Middle East/ Africa region and lower sales in Asia Pacific. While mobile phone volumes grew by 23%, sales were adversely affected by a weak US dollar. On a constant currency basis, mobile phone net sales would have grown 9% year on year. Sales were also affected by an increased proportion of entry-level phone sales across all regions, with the Americas and emerging markets such as India and Russia, where entry-level phones predominate, accounting for an increased share of Nokia's sales volumes. Net sales in Nokia Networks were EUR 1.2 billion, down by 21%. On a constant currency basis, net sales would have decreased by 13% year on year. While sales grew slightly in the Americas, they were more than offset by lower sales in Europe and Asia Pacific, compared with the third quarter 2002. Nokia 3Q mobile phone volumes grow 23% Industry mobile phone volume growth accelerated during the quarter, rising 15% year on year. Nokia's own volume growth was significantly stronger at 23%, reaching 45.5 million units. This faster-than-market growth was driven by gains notably in the global CDMA market and in the Americas across all technologies. Nokia grew its overall mobile phone market share year on year from 36% to 39%, maintaining its share at the second quarter, 2003 level. Third-quarter profitability Third-quarter pro forma operating profit for the Nokia group declined by 2% year on year to EUR 1.1 billion. Pro forma net profit for the group also declined by 2% year on year to EUR 861 million. Pro forma EPS (diluted) for the Nokia group reached EUR 0.18, at the high end of guidance given in conjunction with the company's mid-quarter update in September. Pro forma operating profit at Nokia Mobile Phones was virtually unchanged from the third quarter last year, at EUR 1.2 billion, while pro forma mobile phone operating margins continued at excellent levels of 22.4%. Profitability was largely driven by the company's continued strong product competitiveness and operational efficiency. Nokia Networks generated a small pro forma operating profit of EUR 19 million and a positive pro forma operating margin of 1.6% in the quarter, as the company began to see the benefits of increased efficiencies generated by recent restructuring measures. Nokia's cash position remained exceptional, with total available cash at EUR 10.8 billion by the end of the quarter. Outlook for the fourth quarter, 2003 Net sales of Nokia Mobile Phones in the fourth quarter are expected to be flat or slightly up year on year, muted by a major depreciation of the US dollar, compared with the same period in 2002. Profitability at Nokia Mobile Phones is expected to continue to be strong. In Nokia Networks, the company estimates fourth-quarter net sales of approximately EUR 1.4 billion, with pro forma operating profit expected to reach breakeven. Nokia expects fourth-quarter pro forma EPS (diluted) to be in the range of EUR 0.21 and EUR 0.23, while reported EPS (diluted) is expected to be between EUR 0.20 and EUR 0.22. In the overall mobile phone industry, Nokia estimates fourth-quarter, year-on-year industry volume growth to be in the mid teens, with Nokia's own volumes clearly growing faster than the market. For the full year 2003, Nokia now expects overall industry volume to be about 460 million units. The company's own full-year unit volume growth is estimated to outpace that of the market. Nokia continues to expect the overall network infrastructure market to decline by 15% or more for the full year 2003. Nokia announces new operating structure from January 2004 In a move to further align the company's overall structure with its strategy in an increasingly complex operating environment, from January 1, 2004, Nokia will be reconfigured into four business groups: Mobile Phones, Multimedia, Networks and Enterprise Solutions. Units focusing on strategy, research, venturing and business infrastructure will also contribute to both the strategic strengths and operational excellence of all businesses. Renewal has always been an important part of Nokia's identity and values. Under the new structure, each business group will be positioned to meet the dynamics of various specific market segments, while the introduction of companywide horizontal entities is designed to further increase Nokia's efficiency and competitiveness. NOKIA MOBILE PHONES IN THE THIRD QUARTER Nokia designs products that are easy to use and understand, focusing on personalization and consumer choice. The new Nokia 3200, the company's first general consumer camera phone, clearly illustrates this approach. Introduced in September, this EDGE-capable phone for wide audiences, features an integrated camera, color screen and do-it-yourself cutout covers. In August, Nokia introduced two GSM entry-level phones targeting new growth markets. The Nokia 1100 provides reliability and simplicity to first-time users and the Nokia 2300 is optimized for voice and messaging, as well as fun and personalization. In Latin America, the company announced the Nokia 6560 phone, the world's smallest and lightest TDMA (800/1900 MHz /AMPS) handset with color display and dual-band functionality. Nokia extends leadership in 3G WCDMA phones In September, Nokia launched its second 3G model, the Nokia 7600, which combines the latest mobile imaging features, enabling users to capture pictures and videos, send and receive multimedia messages and email, as well as listen to music. Aside from its radical and innovative design, the Nokia 7600 will be the smallest and lightest dual-mode WCDMA phone on the market when shipments begin in the fourth quarter. Nokia has, to date, also introduced three EDGE-capable phones, the Nokia 3200, Nokia 6200 and Nokia 6220. Nokia N-GageTM pre-sales momentum During August to early October, prior to the start of sales on October 7, gamers across Europe got their first opportunity to test-drive the N-Gage mobile game deck on the N-Gage Tour, which visited more than 50 cities in 16 European countries. In conjunction with N-Gage shipments, Nokia opened the N-Gage Arena service for online and mobile game play. The N-Gage Arena is a home for the worldwide virtual community of gamers to share their experiences as well as find other players for mobile online fun. In August, Nokia and SEGA Corporation announced an agreement in which Nokia would acquire the assets of Sega.com Inc., a subsidiary of SEGA. This agreement further enhances online games and service offerings for the N-Gage game deck, as Sega.com's leading multi-player technology becomes an integral part of the N-Gage experience. The company also announced an agreement with Electronic Arts (EA), the world's leading interactive entertainment software company, to deliver select EA titles for the N-Gage platform. Nokia continues to build mobility architecture Nokia, ARM, STMicroelectonics and Texas Instruments announced in July the Mobile Industry Processor Interface (MIPI) Alliance, a new industry initiative that will define and promote open standards for interfaces for mobile application processors. The alliance expects to ease implementation and design of related hardware and software, promoting reuse and compatibility in mobile devices to accelerate time-to-market. Nokia, Psion plc and Motorola Inc. transferred shares of Symbian Ltd. from Motorola's U.K. subsidiary, Motorola Ltd., to Nokia and Psion. The transfer was completed in October. New CDMA phone launches and increased CDMA market share In August, the company completed the world's first CDMA2000 1xEV-DV high-speed packet data phone call at Nokia's CDMA product creation center in San Diego. Nokia further strengthened its CDMA product portfolio globally. In the US, Nokia introduced the Nokia 3588i, a dual-band/tri-mode CDMA phone with large color display, adjustable fonts and a selection of polyphonic ring tones, all giving consumers numerous ways to personalize their phone. Also in the US, the company introduced the Nokia 6225 phone, which features a built-in VGA camera and GPS support for carriers implementing E911 systems. In Asia Pacific, the company introduced the Nokia 3105, a new compact-sized CDMA 1X phone offering multimedia messaging, a WAP 2.0 browser and JavaTM games. In China, Nokia launched the Nokia 2280, its first CDMA 1X mobile phone specifically designed for China Unicom. NOKIA NETWORKS IN THE THIRD QUARTER Nokia now supplies equipment for half of the world's WCDMA networks During the third quarter, Orange Group chose Nokia to continue as its global 3G supplier. Nokia also signed a USD 100 million WCDMA 3G network agreement with StarHub in Singapore. The company won a 3G core-network deal with Sunrise in Switzerland. Under a framework agreement from February 2002, Nokia started rolling out WCDMA 3G networks for O2 in Ireland, Germany and the UK. By the end of the quarter, Nokia was supplying equipment, services and solutions for half of the world's launched 3G networks. Cost-optimized GSM solution for new growth markets As part of the Nokia Mobile Entry solution, Nokia launched the Nokia Connect GSM Solution for new growth markets. This integrated solution includes infrastructure, network management and services, all aimed at halving the total cost of ownership in network investment and operations. By the end of the quarter, Nokia had contracts to supply the Nokia Connect GSM Solution to Oi in Brazil and SMART Communications in the Philippines. In addition to the Nokia Connect GSM Solution, the company launched its TETRA Neat solution for Professional Mobile Radio start up, and the Nokia D500 Release 3 for IP multi-service broadband DSL. The Nokia D500 Release 3 can handle IP, ATM and Ethernet traffic simultaneously, unlike any other DSLAM on the market today. During the third quarter, Nokia announced GSM contracts in China with the China Unicom Shanghai branch and Jiangxi MCC, in Peru with TIM, and with Viaero Wireless and Westlink Communications in the United States. In Hong Kong, the company won an EDGE network contract with CSL. Nokia also won GSM/GPRS/EDGE network deals with AIS and DTAC in Thailand as well as announcing an MMS and GPRS contract with MobiNil in Egypt. NOKIA VENTURES ORGANIZATION IN THE THIRD QUARTER During the quarter, Nokia Internet Communications sustained its sound performance and introduced new mobile connectivity and secure content management products. Sales for the third quarter of 2003 were flat both sequentially and year on year, reflecting continued weakness in the US dollar, as well as slow general IT spending. Nokia Home Communications launched several new digital television receivers for the European market, including products supporting interactive Multimedia Home Platform (MHP) services and interoperability with imaging mobile phones. NOKIA IN THE THIRD QUARTER 2003 (REPORTED) (International Accounting Standards (IAS) comparisons given to the third quarter 2002 results unless otherwise indicated) Nokia's net sales decreased by 5% to EUR 6 874 million (EUR 7 224 million). Sales of Nokia Mobile Phones were flat at EUR 5 620 million (EUR 5 633 million). Sales of Nokia Networks decreased by 21% to EUR 1 217 million (EUR 1 545 million). Sales of Nokia Ventures Organization decreased by 8% and totaled EUR 82 million (EUR 89 million). Operating profit increased by 34% to EUR 1 154 million (EUR 859 million), representing an operating margin of 16.8% (11.9%). Operating profit in Nokia Mobile Phones increased by 1% to EUR 1 235 million (EUR 1 226 million), representing an operating margin of 22.0% (21.8%). Operating results in Nokia Networks increased to an operating profit of EUR 4 million (operating loss of EUR 250 million), representing an operating margin of 0.3% (-16.2%). Nokia Ventures Organization reported an operating loss of EUR 56 million (operating loss of EUR 31 million). Common Group Expenses, which comprises Nokia Head Office and Nokia Research Center, totaled EUR 29 million (EUR 86 million). Financial income totaled EUR 70 million (EUR 30 million). Profit before tax and minority interests was EUR 1 222 million (EUR 885 million). Net profit totaled EUR 823 million (EUR 610 million). Earnings per share increased to EUR 0.17 (basic) and to EUR 0.17 (diluted), compared with EUR 0.13 (basic) and EUR 0.13 (diluted) in the third quarter 2002. NOKIA IN JANUARY - September 2003 (REPORTED) (IAS comparisons given to January - September 2002 results, unless otherwise indicated) Nokia's net sales decreased by 2% to EUR 20 666 million (EUR 21 173 million). Sales of Nokia Mobile Phones increased by 1% to EUR 16 609 million (EUR 16 469 million). Sales of Nokia Networks decreased by 12% to EUR 3 914 million (EUR 4 455 million). Sales of Nokia Ventures Organization decreased by 27% and totaled EUR 258 million (EUR 352 million). Operating profit increased by 1% to EUR 3 342 million (EUR 3 314 million), representing an operating margin of 16.2% (15.7%). Operating profit in Nokia Mobile Phones increased by 6% to EUR 3 776 million (EUR 3 559 million), representing an operating margin of 22.7% (21.6%). Operating results in Nokia Networks decreased to an operating loss of EUR 260 million (operating profit of EUR 33 million), representing an operating margin of -6.6% (0.7%). Nokia Ventures Organization reported an operating loss of EUR 124 million (operating loss of EUR 135 million). Common Group Expenses, which comprises Nokia Head Office and Nokia Research Center, totaled EUR 50 million (EUR 143 million). Financial income totaled EUR 281 million (EUR 104 million). Profit before tax and minority interests was EUR 3 614 million (EUR 3 399 million). Net profit totaled EUR 2 424 million (EUR 2 335 million). Earnings per share increased to EUR 0.51 (basic) and to EUR 0.51 (diluted), compared with EUR 0.49 (basic) and EUR 0.49 (diluted) in January to September 2002. The average number of employees during January to September was 51 682. At September 30, Nokia employed a total of 51 124 people (51 748 people at December 31, 2002). At September 30, 2003, net debt-to-equity ratio (gearing) was -70% (-61% at December 31, 2002). During January to September, 2003, capital expenditure amounted to EUR 314 million (EUR 348 million). Nokia repurchased a total of 33 784 450 shares over the Helsinki Exchanges at an aggregate purchase price of EUR 449 801 008.99 during the period between July 18 and August 29. The shares were repurchased as part of the stock repurchase plan of the company. The aggregate par value of the shares repurchased is EUR 2 027 067 and they represent 0.70% of the share capital and total voting rights at the company. The repurchases did not have any significant effect on the relative holdings of the other shareholders of the company or on the voting powers among them. At September 30, the Group companies owned 55 467 571 Nokia shares. The shares had an aggregate par value of EUR 3 328 054.26, representing 1.16% of the share capital and total voting rights at the company. The number of issued shares at September 30 was 4 796 292 460 and the share capital was EUR 287 777 547.60. CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited) Pro forma Pro forma Reported Reported 7-9/03 7-9/02 7-9/03 7-9/02 Net sales 6 874 7 224 6 874 7 224 Cost of sales 1) -4 104 -4 517 -4 104 -4 531 Research and development expenses -855 -718 -855 -718 Selling, general and administrative expenses -723 -770 -723 -770 Customer finance impairment charges 2) - - - -292 Adjustment to customer finance impairment - - - - Amortization of goodwill - - -38 -54 Operating profit 1 192 1 219 1 154 859 Share of results of associated companies -2 -4 -2 -4 Financial income and expenses 70 30 70 30 Profit before tax and minority interests 1 260 1 245 1 222 885 Tax -390 -354 -390 -265 Minority interests -9 -10 -9 -10 Net profit 861 881 823 610 Earnings per share, EUR Basic 0.18 0.19 0.17 0.13 Diluted 0.18 0.18 0.17 0.13 Average number of shares (1,000 shares) Basic 4 755 656 4 754 155 4 755 656 4 754 155 Diluted 4 755 678 4 784 404 4 755 678 4 784 404 Depreciation and amortization, total 270 330 Non-recurring items 1) Non-recurring charges of EUR 14 million (MobilCom) in 2002. 2) One-time customer finance charges (MobilCom) in 2002. CONSOLIDATED PROFIT AND LOSS ACCOUNT, IAS, EUR million (unaudited) Pro forma Pro forma Reported Reported 1-9/03 1-9/02 1-9/03 1-9/02 Net sales 20 666 21 173 20 666 21 173 Cost of sales 1) -12 293 -12 813 -12 293 -12 827 Research and development expenses -2 773 -2 200 -2 773 -2 200 Selling, general and administrative expenses -2 363 -2 395 -2 363 -2 395 Customer finance impairment charges 2) - - - -292 Adjustment to customer finance impairment 3) - - 226 13 Amortization of goodwill - - -121 -158 Operating profit 3 237 3 765 3 342 3 314 Share of results of associated companies -9 -19 -9 -19 Financial income and expenses 281 104 281 104 Profit before tax and minority interests 3 509 3 850 3 614 3 399 Tax -1 091 -1 109 -1 157 -1 024 Minority interests -33 -40 -33 -40 Net profit 2 385 2 701 2 424 2 335 Earnings per share, EUR Basic 0.50 0.57 0.51 0.49 Diluted 0.50 0.56 0.51 0.49 Average number of shares (1,000 shares) Basic 4 775 731 4 745 586 4 775 731 4 745 586 Diluted 4 776 341 4 787 994 4 776 341 4 787 994 Depreciation and amortization, total 860 965 Non-recurring items 1) Non-recurring charges of EUR 14 million in 3Q 2002. 2) Customer finance charges (MobilCom) in 3Q 2002. 3) In 2003, positive adjustment in 1Q to 3Q 2002 customer finance impairment charge related to MobilCom. In 2Q 2002, positive adjustment of EUR 13 million related to the earlier Dolphin write-off in 3Q 2001. CONSOLIDATED PROFIT AND LOSS ACCOUNT, EUR million (pro forma unaudited / reported audited) Pro forma Reported, IAS 1-12/02 1-12/02 Net sales 30 016 30 016 Cost of sales 1) -18 305 -18 278 Research and development expenses -3 052 -3 052 Selling, general and administrative expenses -3 239 -3 239 Customer finance impairment charges, net 2) - -279 Impairment of goodwill - -182 Amortization of goodwill - -206 Operating profit 5 420 4 780 Share of results of associated companies -19 -19 Financial income and expenses 156 156 Profit before tax and minority interests 5 557 4 917 Tax -1 557 -1 484 Minority interests -52 -52 Net profit 3 948 3 381 Earnings per share, EUR Basic 0.83 0.71 Diluted 0.82 0.71 Average number of shares (1,000 shares) Basic 4 751 110 4 751 110 Diluted 4 788 042 4 788 042 Depreciation and amortization, total 1 311 Non-recurring items 1) In 2002, non-recurring charges of EUR 14 million (MobilCom) in 3Q and positive adjustment of EUR 41 million related to MobilCom write-off in 4Q. 2) In 2002, customer finance impairment charges of EUR 292 million related to MobilCom in 3Q and a positive adjustment of EUR 13 million in 2Q related to the earlier Dolphin write-off in 3Q 2001. NET SALES BY BUSINESS GROUP, EUR million (unaudited) 7-9/2003 7-9/2002 1-9/2003 1-9/2002 1-12/2002 Nokia Mobile Phones 5 620 5 633 16 609 16 469 23 211 Nokia Networks 1 217 1 545 3 914 4 455 6 539 Nokia Ventures Organization 82 89 258 352 459 Inter-business group eliminations -45 -43 -115 -103 -193 Nokia Group 6 874 7 224 20 666 21 173 30 016 OPERATING PROFIT BY BUSINESS GROUP, IAS, EUR million (unaudited) Pro forma 7-9/2003 7-9/2002 1-9/2003 1-9/2002 1-12/2002 Nokia Mobile Phones 1 257 1 249 3 844 3 628 5 293 Nokia Networks 19 80 -442 397 416 Nokia Ventures Organization -55 -25 -123 -118 -59 Common Group Expenses -29 -85 -42 -142 -230 Nokia Group 1 192 1 219 3 237 3 765 5 420 Goodwill amortization 7-9/2003 7-9/2002 1-9/2003 1-9/2002 1-12/2002 Nokia Mobile Phones -22 -23 -68 -69 -92 Nokia Networks -15 -24 -44 -71 -92 Nokia Ventures Organization -1 -6 -1 -17 -21 Common Group Expenses - -1 -8 -1 -1 Nokia Group -38 -54 -121 -158 -206 Non-recurring items 7-9/2003 7-9/2002 1-9/2003 1-9/2002 1-12/2002 Nokia Mobile Phones - - - - - Nokia Networks - -306 226 -293 -373 Nokia Ventures Organization - - - - -61 Common Group Expenses - - - - - Nokia Group - -306 226 -293 -434 Reported 7-9/2003 7-9/2002 1-9/2003 1-9/2002 1-12/2002 Nokia Mobile Phones 1 235 1 226 3 776 3 559 5 201 Nokia Networks 4 -250 -260 33 -49 Nokia Ventures Organization -56 -31 -124 -135 -141 Common Group Expenses -29 -86 -50 -143 -231 Nokia Group 1 154 859 3 342 3 314 4 780 CONSOLIDATED BALANCE SHEET, IAS, EUR million (unaudited) ASSETS 30.9.2003 30.9.2002 31.12.2002 Fixed assets and other non-current assets Capitalized development costs 698 1 047 1 072 Goodwill 376 706 476 Other intangible assets 172 210 192 Property, plant and equipment 1 639 2 015 1 874 Investments in associated companies 33 64 49 Available-for-sale investments 947 378 238 Deferred tax assets 737 868 731 Long-term loans receivable 561 1 334 1 056 Other non-current assets 69 26 54 5 232 6 648 5 742 Current assets Inventories 1 274 1 725 1 277 Accounts receivable 4 672 4 593 5 385 Prepaid expenses and accrued income 1 085 1 229 1 156 Short-term loans receivable 298 508 416 Available-for-sale investments 9 396 6 345 7 855 Bank and cash 1 393 1 689 1 496 18 118 16 089 17 585 Total assets 23 350 22 737 23 327 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Share capital 288 286 287 Share issue premium 2 262 2 141 2 225 Treasury shares -777 -16 -20 Translation differences 21 200 135 Fair value and other reserves 45 106 -7 Retained earnings 12 766 10 599 11 661 14 605 13 316 14 281 Minority interests 166 197 173 Long-term liabilities Long-term interest-bearing liabilities 54 224 187 Deferred tax liabilities 232 219 207 Other long-term liabilities 66 70 67 352 513 461 Current liabilities Short-term borrowings 409 731 377 Current portion of long-term debt 57 1 - Accounts payable 2 761 2 968 2 954 Accrued expenses 2 511 2 571 2 611 Provisions 2 489 2 440 2 470 8 227 8 711 8 412 Total shareholders' equity and liabilities 23 350 22 737 23 327 Interest-bearing liabilities 520 956 564 Shareholders' equity per share, EUR 3.08 2.80 2.98 Number of shares (1000 shares - excludes shares owned by Group companies) 4 740 825 4 759 825 4 786 762 CONSOLIDATED CASH FLOW STATEMENT, IAS, EUR million (unaudited) 1-9/2003 1-9/2002 1-12/2002 Cash flow from operating activities Net profit 2 424 2 335 3 381 Adjustments, total 1 851 2 312 3 151 Net profit before change in net working capital 4 275 4 647 6 532 Change in net working capital 274 1 465 955 Cash generated from operations 4 549 6 112 7 487 Interest received 208 170 229 Interest paid -33 -34 -94 Other financial income and expenses 211 75 139 Income taxes paid -976 -1 842 -1 947 Net cash from operating activities 3 959 4 481 5 814 Cash flow from investing activities Acquisition of Group companies, net of acquired cash -2 8 -10 Purchase of non-current available-for-sale investments -270 -104 -99 Additions in capitalized development costs -200 -321 -418 Long-term loans made to customers -97 -497 -563 Proceeds from repayments and sale of long-term loans receivable 107 - 314 Proceeds from (+), payment (-) of other long-term receivables -18 1 -32 Proceeds from (+), payment (-) of short-term loan receivables 77 -161 -85 Capital expenditures -315 -349 -432 Proceeds from disposal of Group companies, net of disposed cash - 102 93 Proceeds from sale of non-current available-for-sale investments 354 43 162 Proceeds from sale of fixed assets 23 147 177 Dividends received 24 25 25 Net cash used in investing activities -317 -1 106 -868 Cash flow from financing activities Proceeds from share issue 23 75 163 Purchase of treasury shares -757 -12 -17 Capital investment by minority shareholders - 26 26 Proceeds from long-term borrowings 8 40 100 Repayment of long-term borrowings -50 -39 -98 Proceeds from (+), payment of (-) short-term borrowings 24 -143 -406 Dividends paid -1 380 -1 336 -1 348 Net cash used in financing activities -2 132 -1 389 -1 580 Foreign exchange impact on cash -94 -90 -163 Net increase in cash and cash equivalents 1 416 1 896 3 203 Cash and cash equivalents at beginning of period 9 351 6 125 6 125 Cash and cash equivalents at end of period 10 767 8 021 9 328 Change in net fair value of current available-for-sale investments 22 13 23 As reported on balance sheet 10 789 8 034 9 351 NB: The figures in the consolidated cash flow statement cannot be directly traced from the balance sheet without additional information as a result of acquisitions and disposals of subsidiaries and net foreign exchange differences arising on consolidation. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, EUR million (unaudited) Share Share Treasury Translation Fair value Retained Total capital issue shares differences and other earnings premium reserves Balance at December 31, 284 2 060 -21 326 20 9 536 12 205 2001 Stock options exercised 2 73 75 Stock options exercised related to acquisitions -15 -15 Tax benefit on stock 23 23 options exercised Acquisition of treasury -12 -12 shares Reissuance of treasury 17 17 shares Dividend -1 279 -1 279 Translation differences -106 -106 Net investment hedge -20 -20 losses Cash flow hedges 46 46 Available-for-sale 40 40 investments Other increase, net 7 7 Net profit 2 335 2 335 Balance at September 30, 286 2 141 -16 200 106 10 599 13 316 2002 Balance at December 31, 287 2 225 -20 135 -7 11 661 14 281 2002 Stock options exercised 1 23 24 Share issue related to 18 18 acquisitions Stock options exercised related to acquisitions -4 -4 Acquisition of treasury -763 -763 shares Reissuance of treasury 6 6 shares Dividend -1 340 -1 340 Translation differences -183 -183 Net investment hedge 69 69 gains Cash flow hedges -19 -19 Available-for-sale 71 71 investments Other increase, net 21 21 Net profit 2 424 2 424 Balance at September 30, 288 2 262 -777 21 45 12 766 14 605 2003 COMMITMENTS AND CONTINGENCIES, EUR million (unaudited) Group 30.9.2003 30.9.2002 31.12.2002 Collateral for own commitments Property under mortgages 18 18 18 Assets pledged 13 13 13 Collateral given on behalf of other companies Securities pledged 31 36 34 Contingent liabilities on behalf of Group companies Other guarantees 226 393 339 Contingent liabilities on behalf of other companies Guarantees for loans 51 82 57 Leasing obligations 830 776 704 Financial commitments Customer financing 631 1127 857 NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS, EUR million 1) (unaudited) 30.9.2003 30.9.2002 31.12.2002 Foreign exchange forward contracts 2) 11 243 14 492 11 118 Currency options bought 2) 1 278 958 1 408 Currency options sold 2) 952 610 1 206 Cash settled equity options 3) 228 - 209 Cash settled equity swaps 3) - 131 12 1) Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts. 2) Notional amounts include contracts used to hedge the shareholders' equity of foreign subsidiaries. 3) Cash settled equity swaps and options can be used to hedge risks relating to incentive programs and investment activities. Closing rate, 1 EUR = 1.123 USD It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding A) the timing of product deliveries; B) our ability to develop and implement new products and technologies; C) expectations regarding market growth and developments; D) expectations for growth and profitability; and E) statements preceded by 'believe,' 'expect,' 'anticipate,' 'foresee' or similar expressions, are forward-looking statements. Because these statements involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors that could cause these differences include, but are not limited to: 1) developments in the mobile communications market including the continued development of the mobile phone replacement market and the timing and success of the roll-out of new products and solutions based on 3G and subsequent new technologies; 2) demand for our products and solutions; 3) the development of the mobile software and services market in general; 4) the availability of new products and services by network operators; 5) market acceptance of new products and service introductions; 6) the intensity of competition in the mobile communications market and changes in the competitive landscape; 7) the impact of changes in technology; 8) general economic conditions globally and in our most important markets; 9) pricing pressures; 10) consolidation or other structural changes in the mobile communications market; 11) the success and financial condition of the Company's partners, suppliers and customers; 12) the management of the Company's customer financing exposure; 13) the success of our product development; 14) our success in maintaining efficient manufacturing and logistics as well as high product quality; 15) the ability of the Company to source quality components and research and development without interruption and at acceptable prices; 16) our ability to have access to the complex technology involving patents and other intellectual property rights included in our products and solutions; 17) inventory management risks resulting from shifts in market demand; 18) fluctuations in exchange rates, including, in particular, the fluctuations between the euro, which is our reporting currency, and the US dollar and the Japanese yen; 19) the impact of changes in government policies, laws or regulations; as well as 20) the risk factors specified on pages 11 to 18 of the Company's Form 20-F for the year ended December 31, 2002. NOKIA Helsinki - October 16, 2003 Media and Investor Contacts: Corporate Communications, tel. +358 7180 34495 or +358 7180 34900 Investor Relations Europe, tel. +358 7180 34289 Investor Relations US, tel. +1 972 894 4880 www.nokia.com - The Annual General Meeting is scheduled to be held on March 25, 2004. This information is provided by RNS The company news service from the London Stock Exchange

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