Nokia 2012 Annual Report Download - page 13

3D. Risk Factors
Set forth below is a description of risk factors that could affect Nokia, starting with the risks which are
mainly related to our primary revenue generating areas. 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, liquidity, 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. Additional risks
primarily related to Nokia Siemens Networks that could affect Nokia are detailed under the heading
“Nokia Siemens Networks” below.
We may not be able to make Nokia products with Windows Phone a competitive choice for
consumers unless the Windows Phone ecosystem becomes a competitive and profitable global
ecosystem that achieves sufficient scale, value and attractiveness to relevant market
participants.
We believe that successful smartphone platforms require a successful ecosystem around them. At the
heart of the major smartphone ecosystems is the operating system and the development platform upon
which smartphones are based and services built. Today, industry participants are creating competing
ecosystems of mutually beneficial partnerships to combine hardware, software, services and an
application environment to create high-quality differentiated smartphones. Certain smartphone
platforms and their related ecosystems have gained significant momentum and market share,
specifically Google’s Android platform and Apple’s iOS platform, and are continuing apace, with
Android-based smartphones continuing to gain significant market share during 2012 and also reaching
lower price points.
We have adopted, and are licensing from Microsoft, Windows Phone as our primary smartphone
platform. Although Microsoft will continue to license Windows Phone to other mobile manufacturers, we
believe we can differentiate Nokia smartphones from those of our competitors that also use the
Windows Phone platform as well as other platforms. The first Nokia smartphones powered by Windows
Phone were launched in October 2011 under the Lumia name. We launched additional Windows
Phone 7 devices and the first Windows Phone 8 Lumia devices during 2012. See Item 4B. “Business
Overview—Devices & Services—Smart Devices” for a more information.
The creation of an ecosystem for Windows Phone smartphones that receives acceptance from
contributing parties and reaches sufficient scale is critical to making our Nokia products with Windows
Phone a competitive choice. If a successful Windows Phone ecosystem does not materialize in a
timely manner, this would have a material adverse effect on sales of our Nokia products with Windows
Phone and our profitability, and otherwise significantly impair our ability to compete effectively in the
smartphone market. The principal risks and challenges that could prevent the creation of a successful
ecosystem for Nokia Windows Phones include the following:
• The Windows Phone platform may not achieve or retain broad or timely market acceptance or
be preferred by ecosystem participants, mobile operators and consumers.
• Microsoft has recently launched the Windows 8 operating system used to power personal
computers and tablets, and the related Windows Phone 8 operating system is used in the
latest Nokia smartphones. The success of Nokia’s Windows Phone 8 smartphones will be
negatively affected if the Windows 8 platform does not achieve or retain broad or timely
market acceptance or is not preferred by ecosystem participants, mobile operators and
consumers.
• If we are not successful in our partnership with Microsoft or the benefits of that partnership do
not materialize as expected, we may have limited our options to build a competitive
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