Nokia 2006 Annual Report Download - page 16

We believe that Nokia has a cost advantage in mobile devices compared to our competitors as a
result of our market position. If we fail to maintain or increase our market share and scale compared
to our competitors, our cost advantage may be eroded, which could materially adversely affect our
competitive position and our results of operations, particularly our profitability.
Consolidation among the industry participants, including also further concentration of the market on
fewer industry participants, could potentially result in stronger competitors that are better able to
compete as endtoend suppliers as well as competitors who are more specialized in particular areas.
This could have a material adverse effect on our business and results of operations.
As a result of developments in our industry, including convergence of mobile phone technology with
the Internet, we also face new competition from companies in related industries, such as Internet
based products and services, consumer electronics manufacturers and business device and solution
providers. Additionally, because mobile network operators are increasingly offering mobile devices
under their own brand, we face increasing competition from nonbranded mobile device
manufacturers. Further, as the industry now includes increasing numbers of participants that provide
specific hardware and software layers within products and solutions, we face competition at the
level of these layers rather than solely at the level of complete products and solutions. If we cannot
respond successfully to these competitive developments, our business and results of operations may
be materially adversely affected. See ‘‘Item 4.B Business Overview—Competition’’ for a more detailed
discussion of competition in our industry.
We must develop or otherwise acquire complex, evolving technologies to use in our
business. If we fail to develop or otherwise acquire these complex technologies as required
by the market, with full rights needed to use in our business, or to protect them, or to
successfully commercialize such technologies as new advanced products and solutions that
meet customer demand, or fail to do so on a timely basis, this may have a material adverse
effect on our business, our ability to meet our targets and our results of operations.
In order to succeed in our markets, we believe that we must develop or otherwise acquire complex,
evolving technologies to use in our business. However, the development and use of new
technologies, applications and technology platforms for our mobile devices involve time, substantial
costs and risks both within and outside of our control. We must also be able to convert these
complex technologies into affordable and usable products. This is true whether we develop these
technologies internally, acquire or invest in other companies with these technologies or collaborate
with third parties on the development of these technologies. In addition, we seek to protect our
technology investments with intellectual property rights. When doing this, our business is influenced
by the regulatory and legal environments’ approach to intellectual property rights, including the
scope and degree of patent protection as well as copyright levies which vary country by country.
The technologies, functionalities and features on which we choose to focus may not achieve as
broad or timely customer acceptance as we expect. This may result from numerous factors including
the availability of more attractive alternatives or a lack of sufficient compatibility with other existing
technologies, products and solutions. Additionally, even if we do select the technologies,
functionalities and features that customers ultimately want, we or the companies that work with us
may not be able to bring them to the market at the right time. We may also face difficulties
accessing the technologies preferred by our current and potential customers, or at prices acceptable
to them.
Our products and solutions include increasingly complex technology involving numerous new Nokia
patented, standardized, or proprietary technologies, as well as some developed or licensed to us by
third parties. There can be no assurance that the technologies, with full rights needed to be used in
our business, will be available or available on commercially acceptable terms on a timely basis.
Furthermore, as a result of ongoing technological developments, our products and solutions are
increasingly used together with hardware or software components that have been developed by
third parties, whether or not Nokia has authorized their use with our products and solutions.
15