Nokia 2005 Annual Report Download - page 64

6680 and the Nokia 6630, as well as the Nokia N70 towards the end of the year. Sales growth was
highest in the Middle East & Africa, Europe and China, as well as in Asia-Pacific. Multimedia sales
in the Americas continued at a low level.
Multimedia 2005 gross profit increased by 60% to EUR 2 489 million compared with
EUR 1 558 million in 2004. This represented a gross margin of 41.6% in 2005 compared with a
gross margin of 42.4% in 2004. The increase in gross profit was in line with the growth in net
sales.
Multimedia 2005 R&D expenses were EUR 860 million compared with EUR 863 million in 2004,
representing 14.4% of Multimedia net sales in 2005 compared with 23.5% of its net sales in 2004.
A restructuring charge of EUR 15 million was recorded in 2005, as a result of more focused R&D
activities.
In 2005, Multimedia’s selling and marketing expenses increased by 44% to EUR 705 million as a
result of increase in marketing and advertising expenses, primarily due to the launch of the Nokia
Nseries sub-brand. Selling and marketing expenses were EUR 488 million in 2004. In 2005, selling
and marketing expenses represented 11.8% of Multimedia’s net sales compared with 13.2% of its
net sales in 2004.
In 2005, other operating income and expenses included a gain of EUR 19 million related to the
divesture of the Group’s Tetra business.
Multimedia 2005 operating profit increased to EUR 836 million compared with EUR 175 million in
2004, with an operating margin of 14.0% in 2005, up from 4.8% in 2004. Operating profit was
affected by significant expenditures to launch and market the Nokia Nseries sub-brand in 2005.
Enterprise Solutions
The following table sets forth selective line items and the percentage of net sales that they
represent for the Enterprise Solutions 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 .................. 861 100.0% 839 100.0% 3%
Cost of sales ................ (459) (53.3)% (475) (56.6)% (3)%
Gross profit ................ 402 46.7% 364 43.4% 10%
Research and development
expenses ................. (329) (38.2)% (304) (36.2)% 8%
Selling and marketing expenses (221) (25.7)% (199) (23.7)% 11%
Administrative and general
expenses ................. (74) (8.6)% (61) (7.3)% 21%
Other operating income and
expenses ................. (36) (4.2)% (4) (0.5)% —
Amortization of goodwill ..... — — (6) (0.7)% 100%
Operating loss .............. (258) (30.0)% (210) (25.0)% 23%
Enterprise Solutions business group 2005 net sales increased 3% to EUR 861 million compared
with EUR 839 million in 2004. While overall net sales for the year demonstrated modest growth,
net sales in 2005 were negatively impacted by the significantly lower sales in the fourth quarter.
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