Nokia 2010 Annual Report Download - page 26

Any actual or alleged loss, improper disclosure or leakage of any personal or consumer data
collected by us or our partners or subcontractors, made available to us or stored in or through
our products could have a material adverse effect on our sales, results of operations,
reputation and value of the Nokia brand.
Although we endeavor to develop products that meet the appropriate security standards, such as data
protection, we or our products may be subject to hacking, viruses, worms and other malicious
software, unauthorized modifications or illegal activities that may cause potential security risks and
other harm to us, our customers or consumers and other endusers of our products. This may affect
us disproportionately due to our market position in mobile products, as hackers tend to focus their
efforts on popular products. Due to the very high volumes of many of our mobile products, and the
evolving nature of services and map data, such events or mere allegations of such events may have a
material adverse effect on our business.
In connection with providing our products to our customers and consumers certain customer
feedback, information on consumer usage patterns and other personal and consumer data is collected
and stored through our products, in particular with smartphones, either by the consumers or by us or
our partners or subcontractors. Loss, improper disclosure or leakage of any personal or consumer data
collected by us or that is available to our partners or subcontractors, made available to us or stored in
or through our products could result in liability to us and harm our reputation and brand. In addition,
governmental authorities may use our products to access the personal data of individuals without our
involvement, for example, through socalled lawful intercept capability of network infrastructure. Even
perceptions that our products do not adequately protect personal or consumer data collected by us,
made available to us or stored in or through our products or that they are being used by third parties
to access personal or consumer data could impair our sales or our reputation and brand value.
Our business and results of operations, particularly our profitability, may be materially
adversely affected if we are not able to successfully manage costs related to our products and
to our operations.
We need to introduce products in a costefficient and timely manner and manage proactively the
costs and cost development related to our portfolio of products, including component sourcing,
manufacturing, logistics and other operations. Historically, our market position and scale provided a
significant cost advantage in many areas of our business, such as component sourcing, compared to
our competitors, but our ability to leverage that advantage is now more limited. As well, we have
benefitted from the cost of components eroding more rapidly than the price erosion of our mobile
products. Recently, however, component cost erosion is generally slowing, a trend which adversely
affected our profitability in 2010, and may do so in the future. Currency fluctuations may also have an
adverse impact on our ability to manage our costs relative to certain of our competitors who incur a
material part of their costs in other currencies than we do. If we fail to maintain or improve our
market position and scale compared to our competitors across the range of our products, as well as
leverage our scale to the fullest extent, or if we are unable to develop or otherwise acquire software,
applications and content cost competitively in comparison to our competitors, or if our costs increase
relative to those of our competitors due to currency fluctuations, any relative cost advantage may be
eroded, which could materially adversely affect our competitive position, business and results of
operations, particularly our profitability.
We need to manage our operating expenses and other internal costs to maintain cost efficiency and
competitive pricing of our products. Any failure by us to determine the appropriate prioritization of
operating expenses and other costs, to identify and implement on a timely basis the appropriate
measures to adjust our operating expenses and other costs accordingly or to maintain reductions
could have a material adverse effect on our business, results of operations and financial condition. In
particular, our profitability could be materially adversely affected when we transition from our
royaltyfree Symbian smartphone platform to the royaltybased Windows Phone platform if we are
unable to offset our higher cost of sales resulting from our royalty payments to Microsoft with new
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