Nokia 2005 Annual Report Download - page 62

2004. Research and development expenses increased in Mobile Phones and Enterprise Solutions
and decreased in Multimedia and Networks. In 2005, Multimedia incurred a restructuring charge
of EUR 15 million related to R&D activities. Networks R&D expenses included impairments of
EUR 115 million in 2004. If these items were excluded, R&D expenses would have increased 4% in
2005 and would have represented 11.1% of Nokia net sales in 2005 compared with 12.5% of Nokia
net sales in 2004.
Selling and marketing expenses increased in Mobile Phones, Multimedia and Enterprise Solutions
due to increased marketing spend in the device business groups and decreased spending in
Networks. In 2005, selling and marketing expenses were EUR 3.0 billion, up 15% from
EUR 2.6 billion in 2004. Selling and marketing expenses were equal to 8.7% of Nokia net sales in
both 2005 and 2004.
Administrative and general expenses were EUR 0.6 billion in both 2005 and 2004. Administrative
and general expenses were equal to 1.8% of net sales in 2005 and 2.1% in 2004.
In 2005, other operating income and expenses included a gain of EUR 61 million relating to the
divesture of the Group’s Tetra business, a gain of EUR 18 million related to the partial sale of a
minority investment, and a gain of EUR 45 million related to qualifying sales and leaseback
transactions for real estate. In 2005, Enterprise Solutions recorded a charge of EUR 29 million for
personnel expenses and other costs in connection with the restructuring taken in light of general
downturn in market conditions. In 2004, other operating income and expenses included a return
of an insurance premium of EUR 160 million and a EUR 12 million loss from the divestiture of
Nextrom.
Nokia Group’s operating profit for 2005 increased 7% to EUR 4 639 million compared with
EUR 4 326 million in 2004. A substantial increase in Multimedia’s operating profit in 2005 more
than offset operating profit declines in the other business groups. Our operating margin was 13.6%
in 2005 compared with 14.7% in 2004.
Results by Segments
Mobile Phones
The following table sets forth selective line items and the percentage of net sales that they
represent for the Mobile Phones business group for the fiscal years 2005 and 2004.
Year ended
Year ended December 31, Percentage
December 31, Percentage of 2004 Percentage of Increase/
2005 Net Sales As revised Net Sales (decrease)
(EUR millions, except percentage data)
Net sales .................. 20 811 100% 18 521 100.0% 12%
Cost of sales ................ (14 331) (68.9)% (12 045) (65.0)% 19%
Gross profit ................ 6 480 31.1% 6 476 35.0% —
Research and development
expenses ................. (1 245) (6.0)% (1 196) (6.5)% 4%
Selling and marketing expenses (1 541) (7.4)% (1 300) (7.0)% 19%
Administrative and general
expenses ................. (68) (0.3)% (96) (0.5)% (29)%
Other operating income and
expenses ................. (28) (0.1)% (21) (0.1)% 33%
Amortization of goodwill ..... — — (77) (0.4)% (100)%
Operating profit ............. 3 598 17.3% 3 786 20.4% (5)%
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