Nokia 2011 Annual Report Download - page 29

As we are a global company with sales in most countries of the world, our sales and profitability are
dependent on general economic conditions globally and regionally. The traditional mobile
communications industry has matured to varying degrees in different markets and, consequently, the
industry is more vulnerable than before to the negative impacts of deteriorations in global economic
conditions. Although the overall economic environment improved during 2010, in comparison to 2009,
events in 2011 and recently involving the financial and credit markets of governments in both Europe
and the United States are casting doubt on the impact and timing of a sustainable global recovery in
the various markets where we do business. Indeed, the concerns regarding the ongoing European
debt crisis discussed below, whether real or perceived, could result in a recession, prolonged
economic slowdown or otherwise negatively affect the general health and stability of the economies in
certain regions where we do business. The overall economic uncertainty is making it difficult to
estimate for business planning purposes the impact and timing of changes in economic conditions in
the various markets where we do business. In 2011, we also witnessed political unrest in various
regions where we do business, which adversely affected our sales in those markets.
Continued uncertainty or deterioration in global economic conditions or a recurrence or escalation of
political unrest may result in our current and potential customers and consumers postponing or
reducing spending on our products. In addition, mobile network operators may reduce the device
subsidies that they offer to the consumers or attempt to extend the periods of contracts that obligate
the consumer to use a certain device and postpone or reduce investment in their network infrastructure
and related services. The demand for digital map information and other location-based content by
automotive and mobile device manufacturers may decline in relation to any further contraction of sales
in the automotive and consumer electronics industry.
In addition, any further deterioration in the global or regional economic conditions may:
• Limit the availability of credit or raise the interest rates related to credit which may have a
negative impact on the financial condition, and in particular on the purchasing ability, of some
of our distributors, independent retailers and network operator customers and may also result
in requests for extended payment terms, credit losses, insolvencies, limited ability to respond
to demand or diminished sales channels available to us.
• Cause financial difficulties for our suppliers and collaborative partners which may result in
their failure to perform as planned and, consequently, in delays in the delivery of our products.
• Increase volatility in exchange rates which may increase the costs of our products that we
may not be able to pass on to our customers and result in significant competitive benefit to
certain of our competitors that incur a material part of their costs in other currencies than we
do; hamper our pricing; and increase our hedging costs and limit our ability to hedge our
exchange rate exposure.
• Result in inefficiencies due to our deteriorated ability to appropriately forecast developments
in our industry and plan our operations accordingly, delayed or insufficient investments in new
market segments and failure to adjust our costs appropriately.
• Cause reductions in the future valuations of our investments and assets and result in
impairment charges related to goodwill or other assets due to any significant
underperformance relative to historical or projected future results by us or any part of our
business or any significant changes in the manner of our use of acquired assets or the
strategy for our overall business.
• Cause lowered credit ratings of our short- and long-term debt or their outlook from the credit
rating agencies and, consequently, impair our ability to raise new financing or refinance our
current borrowings and increase our interest costs associated with any new debt instruments.
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