Nokia Networks Reinvented
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To change the document information in the footer, press [Alt + F8] and use the “FORM“ Nokia Networks Reinvented Samih Elhage Chief Financial and Operating Officer Nokia Networks 1 14/11/14 © Nokia Confidential Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ Our evolution to continuous improvement TO: continuous improvement 1. Winning in key markets, expanding FROM: restructuring partnering and leveraging targeted and transformation acquisitions 2. Protecting our gross margin performance › 3. Managing our OPEX: focus and discipline 4. Protecting our operating profit performance 5. Differentiating through quality and operating model Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 1. Winning in key markets (1/2) Net sales (year-on-year change) 20% Nokia Networks 10% 13% • Execution is critical 3% 0% • Extremely well-organized global Customer -10% Operations -20% -26% • Tight sales funnel control -30% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Sales effectiveness KPIs 2012 2013 2014 • Structures and governance in place 40% 33% 30% • 20% Mobile Clearly defined steps and decision gates Broadband 10% 6% • 0% Leverage customer base for continued -5% -10% 2% upsell opportunities Global -20% Services -30% -23% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 *) Numbers shown are non-IFRS results as reported by Nokia. Non-IFRS results exclude special items for all periods. Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 1. Winning in key markets (2/2) Expanding partnering Leveraging acquisitions • Revenue expansion • Four acquisitions to date • Creating new ecosystems • Precise technology objectives • Exploiting technology disruptions • Specific geographic aims Extend Embed *) Our portfolio & Partner elements offerings inside our portfolio Plug-in Channel Via open interface New channels, to communities new customers *) Expected to close in 2015 Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 2. Protecting our gross margin performance Non-IFRS Gross Margin (%) • Structured transformation delivering continuous improvement in gross margin 50% 45% 36.6% 39.1% • Limited gross margin improvement from 40% 32.2% contract and country exits 35% 30% • Majority of gross margin improvement from 25% operational excellence 20% 15% • Permanent improvements in Mode of Operations 10% 5% • Pricing War Room 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Total Cost of Ownership 2012 2013 2014 • Regional Delivery • Global Delivery Centers Capability *) Numbers shown are non-IFRS results as reported by Nokia. Non-IFRS results exclude special items for all periods. Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 3. Managing our OPEX: continued focus & discipline -22% non-IFRS OPEX EUR million, 1-3Q 2 719 2 570 2 262 2 133 • Overall reductions in OPEX, while maintaining cost intensity 2011 2012 2013 2014 • Continued optimization of R&D • Rebalancing portfolio investments -19% towards growth technologies e.g. 4G, cloud, small cells non-IFRS R&D OPEX EUR million, 1-3Q 1 564 1 522 1 351 1 267 • Shifting costs from high to low cost 2011 2012 2013 2014 locations • Improved R&D efficiency and quality • Continuous improvement in SG&A -25% non-IFRS SG&A OPEX EUR million, 1-3Q 1 155 • Focused S&M to improve customer 1 048 911 866 acquisition and revenue impact 2011 2012 2013 2014 • Tight cost discipline in G&A Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ Non-IFRS Operating Margin (%) 4. Protecting our operating profit Nokia Networks performance 20% 13.5% 15% 9.3% 8.4% 10% • Achieved restructuring and transformation 5% targets 0% -5% • Business model with a strong operating -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 profitability mindset across all areas of the business 2012 2013 2014 • Maximising profitability through continuous 20% Global improvement of business segment specific 18% Services 15% levers 15% 12% 10% 11% • Focus on operating performance 5% Mobile 3% 5% Broadband 0% • Six quarters of double-digit operating -5% profit in Global Services -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Four quarters of continuous 2012 2013 2014 improvement in Mobile Broadband operating profit *) Numbers shown are non-IFRS results as reported by Nokia. Non-IFRS results exclude special items for all periods. Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 5. Differentiating by quality and operating model (1/2) • Quality Business System focused on improvements with transparent financial impacts • Quality Methodologies are the foundation (e.g., Kaizen, Lean & 6 Sigma) Customer- Defect & centric waste • Process improvements optimising our mode of alignment elimination operations and cost • Operating model rooted deep in the organization QUALITY with financial & operational KPIs Increased BUSINESS Leanest market share SYSTEM process • Governance model and operating rhythm to drive execution excellence • Quality improvements yielding: • measurable financial impacts linked directly to Top line Bottom-line the P&L growth improvement • improved Customer Perceived Value Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ 5. Differentiating by quality and operating model (2/2) – through ‘Smarter’ programs 1 Structural pricing improvement Net Sales & Gross Margin 2 Services productivity and cost improvement Gross Margin 3 Design to cost and hardware cost improvement 4 Design for serviceability improvement 5 Quality improvement Gross Margin & OPEX 6 R&D transformation OPEX 7 IT transformation 8 End-to-end supply chain improvement Enabler 9 Finance backbone Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ Summary • Winning in key markets, expanding Nokia partnering and leveraging targeted acquisitions Networks • Protecting our gross margin performance Reinvented • Managing our OPEX: focus and discipline • Protecting our operating profit performance • Differentiating through quality and operating model Core and background colors: R 18 R 0 R 104 R 168 R 216 G 65 G 201 G 113 G 187 G 217 B 145 B 255 B 122 B 192 B 218 To change the document information in the footer, press [Alt + F8] and use the “FORM“ Disclaimer It should be noted that Nokia and its business are incorrect could cause actual results to differ materially information and a reconciliation between the non-IFRS exposed to various risks and uncertainties and certain from those in the forward-looking statements. Nokia and the reported information for historical periods can statements herein that are not historical facts are does not undertake any obligation to publicly update be found in Nokia’s respective results reports. Please forward-looking statements, including, without or revise forward-looking statements, whether as a see our issued Interim Reports for more information limitation, those regarding future business and result of new information, future events or otherwise, on our results and financial performance for the financial performance of Nokia and its industry and except to the extent legally required. indicated periods as well as our operating and statements preceded by "believe“, "expect“, reporting structure. "anticipate“, "foresee“, "sees“, "target“, "estimate“, In addition to information on our reported IFRS "designed“, "aim", "plans“, "intends“, "focus“, results, we provide certain information on a non-IFRS, Nokia is a registered trademark of Nokia Corporation. “continue”, "will" or similar expressions. These or underlying business performance, basis. Non-IFRS Other product and company names mentioned herein statements are based on management's best results exclude all material special items for all periods. may be trademarks or trade names of their respective assumptions and beliefs in light of the information In addition, non-IFRS results exclude intangible asset owners. currently available to it. Because they involve risks and amortization and other purchase price accounting uncertainties, actual results may differ materially from related items arising from business acquisitions. Nokia © Nokia 2014 the results that we currently expect.