Nokia 2009 Annual Report Download - page 19

available business resulting in increased competition and pressure on pricing and profitability. Nokia
Siemens Networks competes with companies that have larger scale and higher margins affording
them more flexibility on pricing, while some competitors may have stronger customer finance
possibilities due to internal policies or governmental support, for example in the form of trade
guarantees, allowing them to offer products and services at very low prices. The recently announced
plan by Nokia Siemens Networks to improve its financial performance and increase its profitability,
which includes a reorganization of its business units, may consume significant time, attention and
resources of Nokia Siemens Networks management and result in its customers being more intensively
targeted by competitors during the plan implementation period. If we cannot respond successfully to
the competitive requirements in the fixed network infrastructure and related services market, our
business and results of operations, particularly our profitability, may be materially adversely affected.
Any actual or even alleged defects or other quality, safety and security issues in our products
and services and their combinations, including but not limited to the hardware, software and
content used in our products, or any loss, improper disclosure or leakage of any personal or
consumer data collected by us, made available to us or stored in or through our products and
services, could materially adversely affect our sales, results of operations, reputation and the
value of the Nokia brand.
Our products and services and their combinations are highly complex, and defects in their design,
manufacture and associated hardware and software have occurred and may occur in the future. Due
to the very high production volumes of many of our mobile devices, even a single defect in their
design, manufacture or associated hardware, software and content may have a material adverse
effect on our business. Our converged mobile devices incorporate numerous functionalities, feature
computerlike and consumer electronicslike hardware and are powered by sophisticated software.
This complexity and the need for the seamless integration of the hardware, software and services
elements and compatibility with other relevant technologies to create a rich user experience may also
increase the risk of quality issues in our converged mobile devices. Further, our mobile device
portfolio is subject to continuous renewal which, particularly during periods of significant portfolio
renewals, may increase the risk of quality issues related to our new devices. In the network
infrastructure business, the undisturbed functioning of large mobile and fixed telecommunications
networks may depend, among other things, on the proper functioning of our products and services.
We make provisions to cover our estimated warranty costs for our products and services. We believe
that our provisions are appropriate, although the ultimate outcome may differ from the provided
level which could have a positive or negative impact on our results of operations and financial
condition.
Defects and other quality issues may result from, among other things, failures in our own product and
service creation and manufacturing processes, failures of our suppliers to comply with our supplier
requirements or failures in products and services created jointly with collaboration partners or other
third parties where the development and manufacturing process is not fully in our control. Prior to
shipment, quality issues may cause failures in ramping up the production of our products and
shipping them to the customers in a timely manner as well as related additional costs or even
cancellation of orders by customers. After shipment, products may fail to meet marketing
expectations set for them, may malfunction or may contain security vulnerabilities, and thus cause
additional repair, product replacement, recall or warranty costs to us and harm our reputation. In case
of issues affecting a product’s safety, regulatory compliance or security, we may be subject to
damages due to product liability, or defective products or components may need to be replaced or
recalled. With respect to our services, quality issues may relate to the challenges in having the
services fully operational at the time they are made available to our customers and consumers and
maintaining them on an ongoing basis. The use of NAVTEQ’s map data in our customers’ products and
services, including Ovi Maps and our mobile devices, involves a possibility of product liability claims
and associated adverse publicity. Claims could be made by business customers if errors or defects
result in a failure of their products or services, or by endusers of those products or services as a
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