Nokia 2010 Annual Report Download - page 25

Any actual or even alleged defects or other quality, safety and security issues in our products,
including the hardware, software and content used in our products, could have a material
adverse effect on our sales, results of operations, reputation and the value of the Nokia
brand.
Our products are highly complex, and defects in their design, manufacture and associated hardware,
software and content 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
smartphones, in particular, 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 may also increase the risk of quality issues in our smartphones. Further,
our mobile product portfolio is subject to continuous renewal which, particularly during periods of
significant portfolio renewals, may increase the risk of quality issues related to our products, in
particular in smartphones.
Defects and other quality issues may result from, among other things, failures in our own product and
service creation and deliveries as well as 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 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 including but not limited to privacy or
security, we may be subject to damages due to product liability, and defective products, components
or service offerings 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 in 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 result of actual or perceived errors or defects in the map
database. In addition, the business customers may require us to correct defective data, which could
be costly, or pay penalties if quality requirements or service level agreements are not satisfied.
We make provisions to cover our estimated warranty costs for our products. 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.
Our mobile devices and related accessories are also subject to counterfeiting activities in certain
markets. Counterfeit products may erode our brand due to poor quality. Such activities may affect us
disproportionately due to our brand recognition in various markets. Furthermore, our products are
increasingly used together with hardware, software or service components that have been developed
by third parties, whether or not we have authorized their use with our products. However, such
components, such as batteries or software applications and content, may not be compatible with our
products and may not meet our and our customers’ and consumers’ quality, safety, security or other
standards. Additionally, certain components or layers that may be used with our products may enable
them to be used for objectionable purposes, such as to transfer content that might be illegal, hateful
or derogatory. The use of our products with incompatible or otherwise substandard hardware,
software or software components, or for purposes that are inappropriate, is largely outside of our
control and could harm the Nokia brand.
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