Nokia 2003 Annual Report Download - page 54

Segment Results
Nokia Mobile Phones—Net sales of Nokia Mobile Phones reached their highest level ever at
EUR 23 618 million in 2003, representing an increase of 2%, compared to EUR 23 211 million in
2002, driven by the consumer uptake of color-screen and camera phones, Nokia’s growing
presence in growth markets, and Nokia’s increased share of the US, China and CDMA markets.
While Nokia Mobile Phones volumes grew by 18%, net sales were adversely affected by the weak
US dollar. At constant currency, Nokia Mobile Phones net sales would have grown 12% year on
year. Sales growth in Europe, Middle-East & Africa was to a large extent offset by lower sales in
the Americas and Asia-Pacific. In 2003, entry-level phones represented a somewhat higher portion
of our sales volumes across all regions in comparison to 2002, and our sales volumes developed
positively in the Americas and high growth markets such as India, Brazil and Russia where entry
level phones predominated. This development together with the weakening US dollar impacted
negatively on our average selling price per phone and net sales.
For 2003, Nokia’s total mobile phone sales volumes grew by 18%, faster than market, to
179.3 million units, compared with 152 million units in 2002. Based on the estimated global
sell-through market for mobile phones, Nokia’s global market share was slightly above 38% for
2003, compared to 38% in 2002. According to Nokia’s preliminary estimates, overall market
volumes in 2003 reached about 471 million units, representing growth of 16% compared with the
405 million units sold in 2002. Regionally, mobile phone market volumes growth was 20% in
Europe, Middle-East & Africa, 15% in Asia-Pacific and 13% in the Americas, compared to 2002.
Nokia Mobile Phones launched 40 new products during 2003 with an emphasis on more advanced
devices, CDMA technology, entry-level phones and market localization. Of the new products
launched, 31 models had color-screens, 14 models had cameras and 24 models were MMS-enabled.
There were 12 Nokia camera phone models on the market by year-end.
We strengthened our position in three strategic areas by attaining the number one market
position in the United States and the number one position in GSM in China, as well as significantly
increasing global CDMA market share.
Nokia Mobile Phones continued to invest in research and development. Nokia Mobile Phones R&D
costs totaled EUR 2 064 million (8.7% of Nokia Mobile Phones net sales) in 2003, representing an
increase of 10%, compared to EUR 1 884 million (8.1% of Nokia Mobile Phones net sales) in 2002.
In 2003, Nokia Mobile Phones selling and marketing expenses increased by 14% to
EUR 2 053 million, including advertising and promotional expenses of EUR 1 368 million,
compared to 2002, when Nokia Mobile Phones selling and marketing expenses were
EUR 1 804 million, including advertising and promotional expenses of EUR 1 080 million. In 2003,
the selling and marketing expenses represented 8.7% of Nokia Mobile Phones net sales, compared
to 7.8% in 2002.
Nokia Mobile Phones operating profit increased by 5% to EUR 5 483 million in 2003 compared to
EUR 5 201 million in 2002. Nokia Mobile Phones operating margin improved to 23.2% in 2003,
from 22.4% in 2002. This improvement primarily came from lower product costs in 2003,
compared to 2002. Improved product quality and our product mix, which included more
lower-end, lower cost phones, as well as the depreciation of our main sourcing currencies, the US
dollar and the Japanese yen, were the main contributors to lower product costs.
Nokia Networks—Net sales of Nokia Networks decreased by 14% to EUR 5 620 million in 2003
compared to EUR 6 539 million in 2002 due to an overall market decline. At constant currency, the
net sales decrease would have been 9%. Although sales grew in the Americas, this was more than
offset by lower sales in Europe, Middle-East & Africa and Asia-Pacific, compared with 2002.
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