Nokia 2006 Annual Report Download - page 70

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 Percentage
December 31, Percentage of December 31, Percentage of Increase/
2005 Net Sales 2004 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.
In Enterprise Solutions, gross profit increased by 10% to EUR 402 million due to higher sales,
compared with EUR 364 million in 2004. This represented a gross margin of 46.7% in 2005
compared with a gross margin of 43.4% in 2004.
In Enterprise Solutions, R&D expenses in 2005 increased by 8% to EUR 329 million due to the target
to broaden the product offering including the launch of Nokia Business Center and Eseries products.
R&D expenses in 2004 were EUR 304 million. R&D expenses represented 38.2% of Enterprise
Solutions net sales in 2005 and 36.2% of its net sales in 2004.
In 2005, Enterprise Solutions selling and marketing expenses increased by 11% to EUR 221 million as
a result of the marketing of the Nokia 9300 enterprise smartphone and the launch of Eseries
products. Selling and marketing expenses were EUR 199 million in 2004. In 2005, selling and
marketing expenses represented 25.7% of Enterprise Solutions net sales and 23.7% of its net sales in
2004.
Other operating income and expenses in 2005 included a EUR 29 million restructuring charge for
personnel expenses primarily related to headcount reductions.
Enterprise Solutions operating loss increased 23% to EUR 258 million (including a EUR 29 million
restructuring charge) in 2005 compared with a loss of EUR 210 million in 2004, with an operating
margin of (30.0%) in 2005 and an operating margin of (25.0%) in 2004.
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