Nokia 2012 Annual Report Download - page 227

Mobile Phones focuses on the area of mass market entry and feature phones as well as affordable
smart phones and has profit-and-loss responsibility and end-to-end accountability for the full consumer
experience, including development, management and marketing of feature phone products, services
and applications.
Devices & Services Other includes net sales of spare parts and related cost of sales and operating
expenses, as well as intellectual property related income and common research and development
expenses. Devices & Services Other also included operating results of Nokia’s luxury phone business
Vertu until October 12, 2012, the date of divestment.
Net assets of Devices & Services Other consists of the assets and liabilities related to the above
mentioned activities as well as common functions responsible for selling Nokia’s products, executing
marketing and communications, sourcing, manufacturing and logistics across all Devices & Services
products which have not been allocated to Smart Devices and Mobile Phones segments.
Location & Commerce develops a range of location-based products and services for consumers, as
well as platform services and local commerce services for the Group’s feature phones and
smartphones as well as for other device manufacturers, application developers, Internet service
providers, merchants, and advertisers. Location & Commerce also continues to serve NAVTEQ’s
existing customers both in terms of provision of content and as a business-to-business provider of map
data. Location & Commerce has profit and loss responsibility and end-to-end accountability for the full
consumer experience. In November 2012, we introduced HERE as the new brand for Nokia’s location
and mapping service. Also, as of January 1, 2013, Location & Commerce business and reportable
segment has been renamed as the HERE reportable business and segment. HERE focuses on the
development of location-based services and local commerce.
Nokia Siemens Networks provides a portfolio of mobile, fixed and converged network technology, as
well as professional services including managed services, consultancy and systems integration,
deployment and maintenance to operators and service providers.
Corporate Common Functions consists of company-wide functions.
In February 2011, Nokia announced a partnership with Microsoft to bring together the respective
complementary assets and expertise of both parties to build a new global mobile ecosystem for
smartphones. The partnership, under which Nokia is adopting and licensing Windows Phone from
Microsoft as its primary smartphone platform, was formalized in April 2011.
The Group is paying Microsoft a software royalty fee to license the Windows Phone smartphone
platform, which the Group records as royalty expense in its Smart Devices cost of goods sold. Nokia
has a competitive software royalty structure, which includes annual minimum software royalty
commitments and reflects the large volumes that the Group expects to ship, as well as a variety of
other considerations related to engineering work to which both companies are committed. The Group
expects that the adoption of Windows Phone will enable it to reduce significantly its operating
expenses.
In recognition of the contributions that the Group is providing, the Group will receive quarterly platform
support payments from Microsoft. The amount of the quarterly platform support payment is
USD 250 million for each quarter. The euro amount of the platform support payment will fluctuate
based on the applicable foreign exchange translation of the US Dollars into euro which is the Group’s
reporting currency. The received platform support payments are recognized over time as a benefit to
our Smart Devices costs of goods sold. The total amount of the platform payments is expected to
slightly exceed the total amount of the minimum software royalty commitments. At the end of 2012, the
amount of platform support payments received by Nokia has exceeded the amount of minimum
software royalty commitment payments made to Microsoft and the remaining minimum software royalty
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