Nokia 2009 Annual Report Download - page 15

The competitiveness of our products and services and their combinations is also influenced by the
value of the Nokia brand and our ability to communicate effectively about our mobile devices,
particularly our converged mobile devices, to the target audience through consistent and focused
marketing messages. Increasingly, we need to position the Nokia brand as representing the same
high quality and desirability in our converged mobile devices as in our traditional mobile devices.
Further, a number of factors, including actual or even alleged quality issues or defects in our products
and services and their combination, may have a negative effect on our reputation and erode the
value of the Nokia brand. Insufficient investments in marketing and brand building could also erode
the value of the Nokia brand. Any impairment of our reputation or erosion of the value of the Nokia
brand or failure to optimize the Nokia brand in the marketing of our mobile devices could have a
material adverse effect on our capacity to retain our current customers and consumers and attract
new customers and consumers and on our business, sales and results of operations.
Our sales and profitability have been, and continue to be, driven to a significant extent by our
success in the traditional mobile device market. Increasingly, however, our sales and
profitability depend on our success in the market for converged mobile devices. Our failure to
effectively, timely and profitably adapt our business and operations to the developing
requirements of the converged mobile device market could have a material adverse effect on
our business, results of operations, particularly our profitability, and our financial condition.
Our sales and profitability have been, and continue to be, driven to a significant extent by our success
in the traditional mobile device market. We believe that our scale and resulting low cost structure,
worldclass sourcing, manufacturing, logistics and distribution network, supported by one of the
strongest intellectual property portfolios and the Nokia brand, provide us with a competitive
advantage in the development, production, marketing and sale of traditional mobile devices. Such
devices range from basic mobile phones focused on voice capability to mobile devices with a number
of additional functionalities such as Internet connectivity. During the past several years, the
traditional mobile device market has been characterized by declining average selling prices and
increasing pressure on profitability, as well as intense competition and less product differentiation.
The mobile communications industry continues to undergo significant changes in response to the
increasing maturity of the traditional mobile device market. Traditional mobile voice communications,
the Internet, various means of messaging, media, music, entertainment, navigation, locationbased
and other services, personal computing and other consumer electronics are converging in many areas
into one broader industry. Increasingly, people are using mobile devices to access digital content and
web services and share their experiences. Converged mobile devices are based on programmable
software platforms, can run applications such as email, web browsing, navigation and enterprise
software, and can also have builtin music players, video recorders, mobile TV and other multimedia
features. Increasingly, such devices are becoming more affordable for a wider population. The
software that powers converged mobile devices has also become increasingly sophisticated, providing
greater opportunities for the development of services, including applications and content, that enrich
the experiences people have with their mobile device. A consumer’s choice of device is increasingly
influenced by the quality and compatibility of the software and/or services and the resulting user
experience, in addition to the quality of the hardware. During the past several years, the converged
mobile device market has been characterized by growing volumes, high average selling prices and
attractive profitability, as well as intense competition particularly from new entrants, and heightened
media and consumer attention.
We have made significant investments during the past several years to address the developing
requirements of the converged mobile device market, particularly in the areas of mobile Internet
access, various means of messaging, media, music, entertainment, navigation, locationbased and
other services, and we are working to deliver those services in an easily accessible manner to our
customers and consumers. Going forward, we believe that in order to succeed in the converged
mobile device market we need to combine the hardware, software and services elements in our
mobile devices in a manner that creates a rich user experience, allows compatibility with other
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