Nokia 2009 Annual Report Download - page 24

various means of messaging, media, music, entertainment, navigation, locationbased and other
services. Nokia Siemens Networks’ components and subassemblies sourced and manufactured by
thirdparty suppliers include Nokia Siemens Networksspecific integrated circuits and radio frequency
components; servers; subassemblies such as printed wire board assemblies, filters, combiners and
power units; and cabinets.
In some cases, our dependence on thirdparty suppliers has increased as a result of our strategic
decisions to outsource certain activities, for example parts of our own chipset R&D and to expand the
use of commercially available chipsets. In addition, a particular component may be available only
from a limited number of suppliers. Suppliers may from time to time extend lead times, limit
supplies, increase prices or be unable to increase supplies to meet increased demand due to capacity
constraints or other factors, which could adversely affect our ability to deliver our products and
services and their combinations on a timely basis. Moreover, a supplier may fail to meet our supplier
requirements, such as, most notably, our and our customers’ and consumers’ product quality, safety,
security and other standards, and consequently some of our products and services and their
combinations may be unacceptable to us and our customers and consumers, or may fail to meet our
quality controls. In case of issues affecting a product’s safety or regulatory compliance, we may be
subject to damages due to product liability, or defective products, components or services may need
to be replaced or recalled. In addition, a component supplier may experience delays or disruption to
its manufacturing processes or financial difficulties or even insolvency or closure of its business, in
particular due to difficult economic conditions. Due to our high volumes, any of these events could
delay our successful and timely delivery of products and services and their combinations that meet
our and our customers’ and consumers’ quality, safety, security and other requirements, or otherwise
materially adversely affect our sales and results of operations or our reputation and brand value. See
Item 4B. “Business Overview—Devices & Services—Production“and “—Nokia Siemens Networks—
Production” for a more detailed discussion of our production activities.
Possible consolidation among our suppliers could potentially result in larger suppliers with stronger
bargaining power and limit the choice of alternative suppliers, which could lead to an increase in the
cost, or limit the availability, of components that may materially adversely affect our sales and results
of operations. The intensive competition among our suppliers and the resulting pressure on their
profitability, as well as negative effects from shifts in demand for components and subassemblies,
may result in the exit of certain suppliers from our industry and decrease the ability of some
suppliers to invest in the innovation that is vital for our business. Further, our dependence on a
limited number of suppliers that require purchases in their home country foreign currency increases
our exposure to fluctuations in the exchange rate between the euro, our reporting currency, and such
foreign currency and, consequently, may increase our costs which we may not be able to pass on to
our customers.
Many of the production sites of our suppliers are geographically concentrated. In the event that any of
these geographic areas is generally affected by adverse conditions that disrupt production and/or
deliveries from any of our suppliers, this could adversely affect our ability to deliver our products,
services, and their combinations on a timely basis, which may materially adversely affect our business
and results of operations.
We are developing new technologies, products and services, including applications and
content, in collaboration with other companies. We believe that success in the converged
mobile device market in particular requires such collaboration and partnering. If any of those
companies were to fail to perform as planned or if we fail to achieve the collaboration or
partnering arrangements needed to succeed, we may not be able to bring our products and
services to market successfully or in a timely way and this could have a material adverse
effect on our sales and results of operations.
We are increasingly collaborating and partnering with third parties to develop technologies, products
and services, including applications and content. These arrangements involve the commitment by
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