Nokia 2011 Annual Report Download - page 122

As of December 31, 2011, we had recognized cumulative net charges in Devices & Services of
EUR 797 million related to restructuring activities in 2011, which included restructuring charges and
associated impairments. While the total extent of the restructuring activities is still to be determined, we
currently anticipate cumulative charges in Devices & Services of around EUR 900 million before the
end of 2012. We also believe total cash outflows related to our Devices & Services restructuring
activities will be below the level of the cumulative charges related to these restructuring activities.
Operating Margin
Devices & Services operating profit decreased 75% to EUR 884 million in 2011, compared with
EUR 3 540 million in 2010. Devices & Services operating margin in 2011 was 3.7%, compared with
12.2% in 2010. The year-on-year decrease in operating margin in 2010 was driven primarily by the
lower net sales and gross margin compared to 2010 in both Smart Devices and Mobile Phones as well
as higher restructuring charges and Accenture transaction related consideration.
Smart Devices
The following table sets forth selective line items for Smart Devices for the fiscal years 2011 and 2010.
Year Ended
December 31,
2011
Change
2010 to 2011
Year Ended
December 31,
2010
Net sales (EUR millions)(1) ........... 10820 (27)% 14 874
Smart Devices volume (millions
units) ........................... 77.3 (25)% 103.6
Smart Devices ASP (EUR) ........... 140 (3)% 144
Gross margin (%) ................... 23.7% 30.8%
Operating expenses (EUR millions) .... 2974 (12)% 3 392
Contribution margin (%) ............. (3.8)% 9.3%
(1) Does not include IPR royalty income. IPR royalty income is recognized in Devices & Services
Other net sales.
Net Sales
Smart Devices net sales decreased 27% to EUR 10 820 million in 2011, compared to
EUR 14 874 million in 2010. The year-on-year decline in our Smart Devices net sales in 2011 was
primarily due to significantly lower volumes and, to a lesser extent, lower ASPs.
Volume
Smart Devices volume decreased 25% to 77.3 million units in 2011, compared to 103.6 million units in
2010. The year-on-year decrease in our Smart Device volumes in 2011 was driven by the strong
momentum of competing smartphone platforms relative to our higher priced Symbian devices,
particularly in Europe and Asia Pacific, as well as pricing tactics by certain of our competitors. During
the second quarter of 2011, our Smart Device volumes were also negatively affected by distributors
and operators purchasing fewer of our smartphones as they reduced their inventories of those devices,
which were slightly above normal levels at the end of the first quarter of 2011, particularly in China.
During the second half of 2011, our Symbian competitiveness continued to be challenged across the
portfolio driving the significant year-on-year volume decline.
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