Nokia 2010 Annual Report Download - page 13

3B. Capitalization and Indebtedness
Not applicable.
3C. Reasons for the Offer and Use of Proceeds
Not applicable.
3D. Risk Factors
Set forth below is a description of risk factors that could affect Nokia. There may be, however,
additional risks unknown to Nokia and other risks currently believed to be immaterial that could turn
out to be material. These risks, either individually or together, could adversely affect our business,
sales, profitability, results of operations, financial condition, market share, brand, reputation and
share price from time to time. Unless otherwise indicated or the context otherwise provides,
references in these risk factors to “Nokia”, “we”, “us” and “our” mean Nokia’s consolidated operating
segments—Devices & Services; NAVTEQ and Nokia Siemens Networks. Additional risks primarily related
to Nokia Siemens Networks that could affect Nokia are detailed under the heading “Nokia Siemens
Networks” below.
Our proposed partnership with Microsoft may not succeed in creating a competitive
smartphone platform for highquality differentiated winning smartphones or in creating new
sources of revenue for us.
The mobile communications industry continues to undergo significant changes. The broad
convergence of the mobility, computing, consumer electronics and services industries has led to a
significant shift in the mobile device market for smartphones from a device oriented strategy to a
platform oriented strategy. Today, industry participants are creating competing ecosystems of
mutually beneficial partnerships to combine the hardware, software, services and application
environment to create highquality differentiated winning smartphones. Consumers increasingly
choose mobile products based on the quality of the software, web applications and services, together
with the overall user experience, rather than the hardware. As a result, in volume and value terms,
smartphones are capturing the major part of the growth and public focus in the mobile device
market. We believe that winning smartphones deliver great hardware, compelling user interfaces and
the coherent aggregation of a vast array of applications and services, including search, advertising,
ecommerce, social networking, locationbased services, entertainment and unified communications,
which results from a broad ecosystem of those industry participants all contributing to the final
mobile product and user experience. Our current smartphone platform utilizes the Symbian operating
system, and we work with developers and other partners and collaborators to create applications and
provide services and content for our smartphones. We invest our own resources in developing
Symbian, which is royaltyfree to us. Since the fall of 2010, the development of the Symbian platform
has been under our control. We have also been working with Intel to develop a new smartphone
platform, MeeGo, an opensourced platform focused on longerterm nextgeneration devices.
Other smartphone platforms with their related ecosystems have gained significant momentum and
market share, specifically Apple’s iOS proprietary platform and Google’s open source Android platform,
and are continuing apace. Until very recently, we believed our competitive position in smartphones
could be improved with Symbian, as well as MeeGo, and our strategy based on those platforms. We
are now of the view, however, that for the longer term our Symbian platform is not sufficiently
competitive in leading markets. Accordingly, on February 11, 2011, we announced our intention to
enter into a broad strategic partnership with Microsoft that would combine our respective
complementary assets and expertise to build a new global mobile ecosystem for smartphones (the
“Microsoft partnership”). Under the proposed partnership, we would adopt, and license from
Microsoft, Windows Phone as our primary smartphone platform. Microsoft will continue to license
Windows Phones to other mobile manufacturers. The Microsoft partnership would provide us,
however, with opportunities to innovate and customize on the Windows Phone platform with a view
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