Nokia Strategic Audit

Presented by Adrian Bogdan Raminder Bola Bill Greydanus Ron Kampling Jason Ross

Table of Contents
Introduction.................................................................................................................... !urrent Situation............................................................................................................ !urrent Per"ormance.................................................................................................. Strategic Posture........................................................................................................ #ission................................................................................................................... $b%ecti&es..............................................................................................................' Strategies................................................................................................................' Policies...................................................................................................................( !orporate Go&ernance.................................................................................................1) Board o" *irectors....................................................................................................1) +op #anagement.....................................................................................................1, -.ternal -n&ironment/ $pportunities and +0reats......................................................12 Societal -n&ironment...............................................................................................12 +ask -n&ironment....................................................................................................1' Internal -n&ironment/ Strengt0s and 3eaknesses.......................................................41 !orporate Structure..................................................................................................41 !orporate !ulture.....................................................................................................42 !orporate Resources................................................................................................4' #arketing.............................................................................................................4' 5inancials.............................................................................................................,1 Researc0 and *e&elopment..................................................................................,2 $perations and 6ogistics......................................................................................,' 7uman Resources #anagement..........................................................................24 In"ormation Systems............................................................................................2( Summary.................................................................................................................. 1 Analysis o" Strategic 5actors....................................................................................... 1 Re&ie8 o" #ission and $b%ecti&es.......................................................................... 4 Recommendations9 Implementation9 and -&aluation.................................................. 2

Recommendation 1/ 3alk +0e 3alk on Social Practices....................................... 2 Recommendation 1/ In&est in Battery Alternati&es Researc0................................. ................................................................................................................................. ( Recommendation 4/ #ake -nterprise Ser&ices Pro"itable9 $r Sell It..................... ( Recommendation ,/ Impro&e Support "or +0ird:Party Application *e&elopers..... ( Recommendation 2/ 6e&erage Brand Strengt0 Into In:!ar !ommunications......... ; !onclusion...................................................................................................................') Appendi. < Risk 5actors..............................................................................................'1 5oreign e.c0ange risk .............................................................................................'2 Structured 5inance !redit Risk ...............................................................................'2 -=uity price risk ......................................................................................................' 6i=uidity risk ...........................................................................................................' Appendi. < #edium:+erm 5inancial Goals o" Nokia !orporation.............................'( Appendi. < Nokia -mployee *i&ersity and Global Reac0.........................................'; Appendi. : Group -.ecuti&e Board !ompensation....................................................(, Appendi. : Group -.ecuti&e Board Biograp0ies........................................................;, Appendi. < Biograp0ies o" t0e *irectors o" Nokia...................................................1)4 Appendi. < !ommittees o" t0e Board o" *irectors...................................................1)

Table of Tables
+able 1. Nokia Board o" *irectors !ompensation9 1))4 : 1))2................................11 +able 1. Nokia Board o" *irectors -=uity $8ners0ip9 1)) &s. 1))2.......................14 +able 4. !ompensation o" Nokia>s 2 7ig0est:Paid -.ecuti&es9 1))2........................11 +able ,. Stock $ptions Granted to Nokia +op #anagement9 1))2............................14 +able 2. Stock $ptions 7eld by Nokia -mployees9 1))2..........................................1, +able . -5AS +able "or Nokia..................................................................................41 +able '. Nokia 7eadcount by !ountry9 1))2.............................................................4' +able (. Nokia -mployee Sur&ey Results on *i&ersity9 1))2...................................4' +able ;. Brand ?alue o" #obile 7andset #akers 1)) @InterbrandA..........................4( +able 1). Nokia Ad&ertising and Promotional -.penditures &s. Re&enue..................4( +able 11. #otorola SGBA &s. Re&enue......................................................................4; +able 11. Samsung SGBA &s. Re&enue......................................................................4; +able 14. Nokia and #otorola #argins by Segment9 1)), and 1))2.........................,1 +able 1,. Nokia 1))2 -arnings by Business Group....................................................,4 +able 12. Nokia -nterprise Solutions 5inancials9 1)), &s 1))2.................................,, +able 1 . Nokia Researc0 and *e&elopment In&estment9 1))4:1))2........................, +able 1'. $utsourcing Strategy o" $range #obile.....................................................24 +able 1(. I5AS +able "or Nokia................................................................................. 1 +able 1;. S5AS #atri. "or Nokia............................................................................... 1

Table of Figures
5igure 1. Nokia !orporate Structure...........................................................................44 5igure 1. +raditional #atri. $rganiCation !0art @P#I.orgA.......................................4, 5igure 4. -&olution o" Nokia>s Business.....................................................................4, 5igure ,. Nokia Product *e&elopment #odel............................................................,' 5igure 2. Nokia 5acilities 3orld8ide.........................................................................21 5igure . Single:?endor &s. #ulti:?endor Spares #odel..........................................21 5igure '. -mployee Bene"it Pre"erences....................................................................2 5igure (. Nokia !ommunicator ;2))......................................................................... 1

Introduction
30at is kno8n today as t0e Nokia !orporation 8as establis0ed in 1( 2 as a paper mill on t0e banks o" t0e Nokia rapids in 5inland. +0e Nokia !orporation e&ol&ed into its current "orm in 1; ' and at t0e time 8as in&ol&ed in many sectors9 "rom t0e production o" bicycle tires to "oot8ear. In t0e 1;')Ds t0ey became more in&ol&ed in telecommunications and are no8 t0e 8orldDs largest manu"acturer o" mobile p0ones.

Current Situation
Current Performance
Nokia turned a E,. bil operating pro"it on E4,.1 bil re&enue in 1))2 @operating margin o" 14. FA9 up "rom E,.4 bil operating pro"it on E1;., bil re&enue in 1)), @operating margin o" 1,.'FA. By 8ay o" comparison9 t0eir most similar competitor9 #otorola9 reported G,.'bil operating pro"it on G4 .( bil re&enue in 1))29 "or an operating margin o" 11.(F.

Strategic Posture
Mission
Connecting is about helping people to feel close to what matters. Wherever, whenever, Nokia believes in communicating, sharing, and in the awesome potential in connecting the 2 billion who do with the 4 billion who dont. If we focus on people, and use technolog to help people feel close to what matters, then growth will follow. In a world where ever one can be connected, Nokia takes a ver human approach to technolog .! Hn"ortunately9 NokiaDs mission statement does not clearly de"ine t0e companyDs purpose. By si"ting t0roug0 t0eir mission statement and based on t0eir tag line9 I!onnecting People9J 8e 0a&e determined t0at NokiaDs purpose is to connect people through the use of technology. A simpli"ied and more "ocused mission statement like
1

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t0at could promote a sense o" s0ared e.pectation in employees and better communicate 80at t0e company is in business to do/ create and sell telecommunications e=uipment.

Objectives
NokiaDs corporate ob%ecti&es1/ "or Nokia to be number one in customer and consumer lo alt "or Nokia to be number one in product leadership "or Nokia to be number one in operational e#cellence

+0e Nokia ob%ecti&es are loosely tied to t0e company mission. Product leaders0ip9 operational e.cellence9 and customer loyalty 8ill lead Nokia t0roug0 t0eir mission. +0e telecommunications industry is dynamic9 so NokiaDs business and "unctional ob%ecti&es are constantly c0anging. +0e business and "unctional ob%ecti&es t0at 8e "ound 8ere aligned and consistent 8it0 t0e corporate ob%ecti&es. +0e Nokia ob%ecti&es 8e created "or eac0 "unction are consistent 8it0 7unger and 30eelenDs 7ierarc0y o" Strategy4. +0e corporate ob%ecti&es pro&ide long:term9 o&erall direction "or t0e company and t0e "unctional ob%ecti&es pro&ide competiti&e and cooperati&e strategies9 and ma.imiCe resource producti&ity. *etailed in"ormation on t0e "unctional ob%ecti&es can be "ound in t0e !orporate Resources section o" t0is report. +0e Nokia ob%ecti&es are consistent 8it0 t0e internal and e.ternal en&ironment. +0e ob%ecti&es 0a&e speci"ic goals and time "rames t0e Nokia employees can use to guide and e&aluate t0eir per"ormance. +0e ob%ecti&es are also "le.ible enoug0 t0at t0ey can be applied to a broadening product and ser&ice line. +0is "le.ibility 8ill be necessary because Nokia operates in a dynamic en&ironment.

Strategies
Nokia does not e.plicitly and publicly state its strategies. +0e "ollo8ing in"ormation 8as gat0ered "rom t0e IStrategyJ link on t0e Nokia 8ebsite,/

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At Nokia, customers remain our top priority. Customer focus and consumer

understanding must alwa s drive our da $to$da business behavior. Nokias priorit is to be the most preferred partner to operators, retailers, and enterprises. Nokia will continue to be a growth compan , and we will expand to new markets and businesses. World leading productivit is critical for our future success. %ur brand goal is for Nokia to become the brand most loved b our customers. In line with these priorities, Nokias business portfolio strateg focuses on five areas, with each having long$term ob&ectives' Create winning devices (mbrace consumer Internet services )eliver enterprise solutions *uild scale in networks (#pand professional services

+0e items Nokia bolded in t0eir 8ebsite seem to be t0eir strategic "ocus. By "ocusing on t0ose items9 Nokia 8ill be able to meet t0eir ob%ecti&es and accomplis0 t0eir mission. +0e one constant bet8een all o" t0e strategies is t0at customers are t0e top priority. +0e Nokia strategies are consistent 8it0 t0e internal and dynamic e.ternal en&ironment. +0e strategies 0a&e speci"ic goals and time "rames t0at t0e internal stake0olders can use to guide t0em and use to e&aluate t0eir per"ormance. +0e strategies are also "le.ible enoug0 t0at t0ey can be applied to a broadening product and ser&ice line. +0is "le.ibility 8ill be necessary because Nokia operates in a 0yper:competiti&e en&ironment. 3e e.pand on t0e internal and e.ternal en&ironments later in t0is report.

Policies
Product Leadership In June 1)) 9 Business 3eek ranked Nokia as t0e (t0 #ost Inno&ati&e !ompany in t0e 3orld. 19)') e.ecuti&es "rom top corporations "rom around t0e globe participated in Business 3eekDs #ost Inno&ati&e !ompanies sur&ey. +0ose e.ecuti&es recogniCed

Nokia as a leader in product inno&ation and "or creating lo8 cost mobile p0ones "or emerging markets2. +0is recognition implies t0at NokiaDs policies regarding product leaders0ip9 inno&ation9 and RB* are success"ul9 consistent 8it0 t0e mission and ob%ecti&es9 and compatible 8it0 t0e internal and e.ternal en&ironments. Quality and Customer Service %ur products and customer e#periences are the results of our ever da processes. +rocess management means finding the simplest wa of operating, in order to create customer value in a lean manner. %ur process thinking covers ever thing we do, and processes are continuousl improved based on the measures and the feedback we receive from our customers. ,ualit in management is vital for leveraging innovations globall and improving productivit in general. %ur approach to this is platform thinking, process management and combining fact$based management with values$based leadership. We have developed a ke framework for improvement at Nokia, which we call the -.elf$/egulating 0anagement . stem-. It-s about management practices that allow us to run our business in a consistent, effective and fact$ based manner. Muality and customer ser&ices policies 0a&e allo8ed Nokia to connect people in emerging markets by keeping operating e.penses and subse=uent mobile p0one costs lo8. 5or e.ample9 o&er0ead e.penses are kept at a minimum by policies suc0 as re=uiring all employees to "ly coac0 80en tra&eling "or business. In terms o" customer ser&ice9 Nokia is kno8n9 bot0 by its competitors and by its distributors9 as 0a&ing t0e most "le.ible 8arranty returns policy. Global Reach +0e current mission9 ob%ecti&es9 strategies9 and policies re"lect NokiaDs international operations. +0e Nokia ob%ecti&e o" being N1 in product leaders0ip ser&ed t0em 8ell in India. +0e "irst e&er GS# call in India 8as made on a Nokia 111) mobile p0one on its o8n net8ork in 1;;2. A"ter entering t0e Indian market in 1;;, Nokia =uickly became

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t0e leader in ma%or mobile p0one brands in t0e GS# segment o" t0e India market 8it0 ',F market:s0are'. +0is gro8t0 8as possible by "ocusing on t0eir mission.

Corporate Governance
Board of Directors
+0e Nokia !orporation 0as a nine member Board o" *irectors < eig0t independent directors and an inside !0airman. +0e eig0t independent directors come "rom &arious disciplinesO t0ere is one 8oman on t0e board. +0e biograp0ies o" t0e board members are presented in t0e appendi.. !0airman J$R#A $66I6A ?ice !0airman PAH6 J. !$66INS G-$RG -7RNR$$+79 Board #ember since 1))) *ANI-6 R. 7-SS-9 Board #ember since 1))2 *R. B-NG+ 7$6#S+R$#9 Board #ember since 1;;; P-R KAR6SS$N9 Board member since 1))1 *A#- #ARJ$RI- S!AR*IN$9 Board #ember since 1))1 K-IJ$ SHI6A9 Board #ember since 1)) ?-SA ?AINI$9 Board #ember since 1;;4 1he operations of the compan are managed under the direction of the *oard of )irectors, within the framework set b the "innish Companies 2ct and our articles of association and the complementar Corporate 3overnance 3uidelines and related charters as adopted b the *oard. Responsibilities of the Board of Directors4 1he *oard of )irectors represents and is accountable to the shareholders of the compan . 1he *oard-s responsibilities are active and not passive and include the responsibilit to regularl evaluate the strategic direction of the compan , management policies and the effectiveness with which management implements
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its policies. 1he *oard-s responsibilities further include overseeing the structure and composition of the compan -s top management and monitoring legal compliance and the management of risks related to the compan -s operations. In doing so the *oard ma set out annual ranges and5or individual limits for capital e#penditures, investments and divestitures and financial commitments not to be e#ceeded without *oard approval. 1he *oard has the responsibilit for appointing and discharging the Chief (#ecutive %fficer and the +resident and the other members of the 3roup (#ecutive *oard. .ub&ect to the re6uirements of "innish law, the independent directors of the *oard will confirm the compensation and the emplo ment conditions of the Chief (#ecutive %fficer and the +resident upon the recommendation of the +ersonnel Committee. 1he compensation and emplo ment conditions of the other members of the 3roup (#ecutive *oard are approved b the +ersonnel Committee. 1he basic responsibilit of the members of the *oard is to act in good faith and with due care so as to e#ercise their business &udgment on an informed basis in what the reasonabl and honestl believe to be the best interests of the compan and its shareholders. In discharging that obligation, the directors must inform themselves of all relevant information reasonabl available to them. +0e responsibilities o" t0e Audit9 Personnel9 and !orporate Go&ernance and Nomination !ommittees are described in t0e appendi.. Compensation of the Board of irectors !""#$!""% Since Nokia is a publicly traded company9 t0e compensation o" t0e board members is a matter o" public record. In recent years9 t0e board members 0a&e been compensated 8it0 a mi. o" cas0 and e=uity. +0e tables belo8 s0o8 t0eir annual compensation "or t0e past t0ree years9 as 8ell as t0e amount o" stock 0eld by eac0 director. +0e directors recei&e slig0tly more t0an 0al" t0eir compensation as Nokia stock @and t0e ot0er 0al" as cas0A : t0at compensation mi. is broadly consistent 8it0 aligning director and s0are0older goals. All but t0e ne8est t8o directors 0a&e personal 0oldings o" 0undreds o" t0ousands o" euros in Nokia stock9 and t8o 0a&e se&eral millions o" euros o" Nokia stock < again9 consistent 8it0 t0e principle o" aligning director and s0are0older goals.

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Chairman Gross Pear Annual 5ee @-HRA 1)) 4 1)) , 12) ))) S0ares recei&ed
1

&ice Chairman Gross Annual 5ee @-HRA 112 )))

1

'ther (embers Gross Annual 5ee @-HRA 1)) ))) S0ares recei&edQ

)dditional )nnual Retainers

S0ares recei&edQ

!0airman o" t0e Audit

, )41

44 )

1 ((

!ommittee and Personnel !ommittee9 eac0 -HR 12 ))) !0airman o" t0e Audit

12) )))

, (4,

112 )))

, )1(

1)) )))

4 114

!ommittee and Personnel !ommittee9 eac0 -HR 12 ))) !0airman o" t0e Audit !ommittee and Personnel

1)) 2

1 2 )))

2 )11

14' 2)),

, 1'2

11) ))) 29

4 4,)

!ommittee9 eac0 -HR 12 )))O -ac0 member o" t0e Audit !ommittee9 -HR 1) )))

! 2s part of the gross annual fee for that ear 2 1he 2778 and 2774 fees of +aul Collins amounted to totals of (9/ !:7 777 per ear, consisting of a fee of (9/ !2: 777 for services as ;ice Chairman of the *oard and (9/ 2: 777 for services as Chairman of the +ersonnel Committee. 2s part of the total remuneration, 0r. Collins has received a total of 4 782 Nokia shares in 2778, and 4 484 Nokia shares in 2774. 8 1he 2774 fee of +er <arlsson amounted to a total of (9/ !2: 777, consisting of a fee of (9/ !77 777 for services as member of the *oard and (9/ 2: 777 for services as Chairman of the 2udit Committee. 2s part of the total remuneration, 0r. <arlsson has received a total of 4 72= Nokia shares in 2774. 4 1he 277: fee of 0r +aul Collins amounts to a total of (9/ !>2 :77, consisting of a fee of (9/ !8? :77 for services as ;ice Chairman of the *oard and (9/ 2: 777 for services as Chairman of the +ersonnel Committee. 2s part of the total remuneration, 0r Collins has received a total of 4 =8: Nokia shares. : 1he 277: fee of +er <arlsson amounts to a total of (9/ !8: 777, consisting of a fee of (9/ !!7 777 for services as 0ember of the *oard and (9/ 2: 777 for services as Chairman of the 2udit Committee. 2s part of the total remuneration, 0r. <arlsson has received a total of 4 !77 Nokia shares. > 1he 277: fee of each of 3eorg (hrnrooth, ;esa ;ainio and 2rne Wessberg amounts to a total of (9/ !27 777 consisting of a fee of (9/ !!7 777 for services as a member of the *oard and (9/ !7 777 for services as a member of the 2udit Committee. 2s part of the total

Table 1. Nokia Board of Directors Compensation, 200 ! 200"

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Position Jorma $llila1A Paul J. !ollins Georg -0rnroot0 *aniel R. 7esse Bengt 7olmstrRm Per Karlsson Kei%o Suila ?esa ?ainio Total
4A 4A

Shares*+ 1( 9, ( : 41,9;; : 1 9 ) 1;924( : 192') 1'9'(, --./0-!

Change,+ ) : : : : : : : :

) Ss : 1119 1 : 29 ; : : 1,9)1( : : *,!/#,"

Change,+ : : : : : : : : :

!0airman ?ice !0airman #ember #ember #ember #ember #ember #ember #ember

#ar%orie Scardino

!@

1he number of shares includes not onl shares ac6uired as compensation for services rendered as a member of the "or 0r. %llila-s holdings of stock options, see the table 3roup (#ecutive *oard, %ptions link. 0r. (hrnrooth-s and 0r. <arlsson-s holdings include both shares held personall and shares held through a compan . Changes are compared to the previous month. +ossible trades of the board members can be reviewed b clicking the

*oard of )irectors, but also shares ac6uired b an other means.

2@ 8@ 4@

relevant number in the Change column.

Table 2. Nokia Board o !irectors "#uit$ O%ners&ip' 2(() vs. 2((*

Success"ul gro8t0 o" a company re=uires e.perienced board members. All o" t0e board members 0a&e e.ecuti&e management e.perience 8it0 multi:national companies ranging "rom t0e banking industry to media outlets to telecommunications companies. +0ey 0a&e all ser&ed as board members on at least one ot0er board. +0e 8ide range o" e.perience o" its board members pro&ides Nokia access to a great deal o" connections in areas suc0 as "inance and t0e media. All but t8o o" t0e members 0a&e at least a #asters degree. +0e directorsD educations range "rom la8 to science9 "rom p0ilosop0y to business

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administration. Nokia su""ered gro8ing pains 80en t0ey e.panded into India in spite o" an e.perienced board. +0e board s0ould elect members 8it0 di&erse cultural backgrounds to 0elp alle&iate cultural issues during global e.pansion.

Top #anagement
Group Executi e Board! Nokias 3roup (#ecutive *oard Atop management@ is responsible for managing the operations of the compan . 1he Chairman and the members of the 3roup (#ecutive *oard are elected b the *oard of )irectors. %nl the Chairman of the 3roup (#ecutive *oard can be a member of both the *oard of )irectors and the 3roup (#ecutive *oard. 1he current members of our 3roup (#ecutive *oard are set forth below' "lli#$ekka %allas uo& 'hairman 3roup (#ecutive *oard member since !==7. 3roup (#ecutive *oard Chairman as from Bune !, 277>. CC.0. A9niversit of Delsinki@. +resident and C%% of Nokia Corporation 277:$277>, (#ecutive ;ice +resident and 3eneral 0anager of 0obile +hones 2774$277:, (#ecutive ;ice +resident, C"% of Nokia !===$2778, (#ecutive ;ice +resident of Nokia 2mericas and +resident of Nokia Inc. !==?$!==4, (#ecutive ;ice +resident, C"% of Nokia !==2$!==>, .enior ;ice +resident, "inance of Nokia !==7$!==!. 0ember of the *oard of )irectors of (0C Corporation. 0ember of Citigroup International 2dvisor *oard. Robert Andersson& Executi e (ice $resident, 'ustomer and )arket "perations 3roup (#ecutive *oard 0ember since %ctober !, 277:. Boined Nokia in !=4:.
;

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0aster of *usiness 2dministration A3eorge Washington 9niversit @, 0aster of .cience A(con.@ A.wedish .chool of (conomics and *usiness 2dministration in Delsinki@. .enior ;ice +resident of Customer and 0arket %perations, (urope, 0iddle (ast and 2frica 2774$277:, .enior ;ice +resident of Nokia 0obile +hones in 2sia$+acific 277!$2774, ;ice +resident of .ales for Nokia 0obile +hones in (urope and 2frica !==4$277!. *imon Beresford#+ylie& Executi e (ice $resident and General )ana,er of Networks 3roup (#ecutive *oard member since "ebruar !, 277:. Boined Nokia !==4. *achelor of 2rts A(conomic 3eograph and Distor @ A2ustralian National 9niversit @. .enior ;ice +resident of Nokia Networks, 2sia +acific 2778$2774, .enior ;ice +resident, Customer %perations of Nokia Networks 2772$2778, ;ice +resident, Customer %perations of Nokia Networks 2777$2772, 0anaging )irector of Nokia Networks in India and 2rea 3eneral 0anager, .outh 2sia !===$2777, /egional )irector of *usiness )evelopment, +ro&ect and 1rade "inance of Nokia Networks, 2sia +acific !==4$!===, Chief (#ecutive %fficer of 0odi 1elstra, India !==:$!==4, 3eneral 0anager, *anking and "inance, Corporate and 3overnment business unit of 1elstra Corporation !==8$!==:, holder of e#ecutive positions in the Corporate and 3overnment business units of 1elstra Corporation !=4=$!==8, holder of e#ecutive, managerial and clerical positions in the 2ustralian Commonwealth +ublic .ervice !=42$!=4=. 0ember of the *oard of )irectors of the ;itec 3roup. )ary -. )cDowell& Executi e (ice $resident and General )ana,er of Enterprise *olutions 3roup (#ecutive *oard member since 2774. Boined Nokia 2774.

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*achelor of .cience AComputer .cience@ ACollege of (ngineering at the 9niversit of Illinois@. .enior ;ice +resident, .trateg and Corporate )evelopment of Dewlett$ +ackard Compan 2778, .enior ;ice +resident E 3eneral 0anager, Industr $.tandard .ervers of Dewlett$+ackard Compan 2772$2778, .enior ;ice +resident E 3eneral 0anager, Industr $.tandard .ervers of Compa6 Computer Corporation !==4$2772, ;ice +resident, 0arketing, .erver +roducts )ivision of Compa6 Computer Corporation !==>$!==4. Dolder of e#ecutive, managerial and other positions at Compa6 Computer Corporation !=4>$!==>. .allstein )oerk& Executi e (ice $resident, .uman Resources 3roup (#ecutive *oard member since 2774. Boined Nokia !===. )iplomekonom A(con.@ ANorwegian .chool of 0anagement@. Dolder of various positions at Dewlett$+ackard Corporation !=??$!===. 0ember of the *oard of 2dvisors for Center for D/ .trateg , /utgers 9niversit . -ero "/anper0& Executi e (ice $resident, 'hief -echnolo,y "fficer 3roup (#ecutive *oard member since Banuar !, 277:. Boined Nokia !==7. 0aster of .cience A9niversit of %ulu@, +h.). A)elft 9niversit of 1echnolog , 1he Netherlands@. (#ecutive ;ice +resident E Chief .trateg %fficer 277:$277>, .enior ;ice +resident, Dead of Nokia /esearch Center 2772$2774. ;ice +resident, /esearch, .tandardiFation and 1echnolog of I+ 0obilit Networks, Nokia Networks !===$277!. ;ice +resident, /adio 2ccess . stems /esearch and 3eneral 0anager of Nokia Networks in <orea, !===. Dead of /adio 2ccess . stems /esearch, Nokia Networks !==4$!===, +rincipal (ngineer, Nokia /esearch Center, !==?$!==4. Chairman of Nokia "oundation. 2 member of Goung 3lobal Ceader.

Niklas *a ander& Executi e (ice $resident, -echnolo,y $latforms 3roup (#ecutive *oard 0ember as of 2pril !, 277>. Boined Nokia !==? 0aster of .cience A(ng.@ ADelsinki 9niversit of 1echnolog @, 0aster of *usiness 2dministration A.wedish 9niversit of (conomics, Delsinki@. .enior ;ice +resident and 3eneral 0anager of Nokia (nterprise .olutions, 0obile )evices *usiness 9nit 2778$277>H .enior ;ice +resident, Nokia 0obile .oftware, 0arket %perations 2772$2778H ;ice +resident, Nokia 0obile .oftware, .trateg , 0arketing E .ales 277!$ 2772H ;ice +resident and 3eneral 0anager of Nokia Networks, 0obile Internet 2pplications 2777$277!H ;ice +resident of Nokia Networks, 0arketing !==4$2777H ;ice +resident of Nokia Networks, Network . stems, 0arketing !==?$!==4. Dolder of e#ecutive and managerial positions at Dewlett$+ackard Compan !=4?$!==?. 0ember of the *oard of )irectors of 1amfelt % &. 0ember of the *oard of )irectors and secretar of Waldemar von "renckells .tiftelse.

Richard A. *imonson& Executi e (ice $resident, 'hief 1inancial "fficer 3roup (#ecutive *oard member since 2774. Boined Nokia 277!. *achelor of .cience A0ining (ng.@ AColorado .chool of 0ines@, 0aster of *usiness 2dministration A"inance@ AWharton .chool of *usiness at 9niversit of +enns lvania@. ;ice +resident E Dead of Customer "inance of Nokia Corporation 277!$ 2778, 0anaging )irector of 1elecom E 0edia 3roup of *arcla s 277!, Dead of 3lobal +ro&ect "inance and other various positions at *ank of 2merica .ecurities !=4:$277!. 0ember of the *oard of )irectors of (lectronic 2rts, Inc. 0ember of the *oard of 1rustees of International Douse $ New Gork.

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(eli *undb0ck& Executi e (ice $resident, 'orporate Relations 2 Responsibility of Nokia 'orporation 3roup (#ecutive *oard member since !==>. Boined Nokia !==>. CC.0. A9niversit of Delsinki@. (#ecutive ;ice +resident, Corporate /elations and 1rade +olic of Nokia Corporation !==>$. .ecretar of .tate at the 0inistr for "oreign 2ffairs !==8$!==:, 9nder$.ecretar of .tate for (#ternal (conomic /elations at the 0inistr for "oreign 2ffairs !==7$!==8. 0ember of the *oard of )irectors of "innair % &. 0ember of the *oard and its e#ecutive committee, Confederation of "innish Industries A(<@, ;ice Chairman of the *oard, 1echnolog Industries of "inland, ;ice Chairman of the *oard of the International Chamber of Commerce, "innish .ection, Chairman of the *oard of the "inland$China 1rade 2ssociation.

Anssi (an/oki& Executi e (ice $resident and General )ana,er of )ultimedia 3roup (#ecutive *oard member since !==4. Boined Nokia !==!. 0aster of .cience A(con.@ ADelsinki .chool of (conomics and *usiness 2dministration@. (#ecutive ;ice +resident of Nokia 0obile +hones !==4$2778, .enior ;ice +resident, (urope E 2frica of Nokia 0obile +hones !==4$!==4, ;ice +resident, .ales of Nokia 0obile +hones !==!$!==4, 80 Corporation !=47$!==!. Chairman of the *oard of )irectors of 2mer 3roup +lc.

Dr. %ai 3ist0m4& Executi e (ice $resident and General )ana,er of )obile $hones 3roup (#ecutive *oard 0ember since %ctober !, 277:. Boined Nokia in !==!.

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)octor of 1echnolog A.ignal +rocessing@, 0aster of .cience A(ngineering@ A1ampere 9niversit of 1echnolog @ .enior ;ice +resident, *usiness Cine 0anagement of 0obile +hones 2774$277:, .enior ;ice +resident, 0obile +hones *usiness 9nit, Nokia 0obile +hones 2772$2778, ;ice +resident, 1)0253.0 !=77 +roduct Cine of Nokia 0obile +hones !===$2772, ;ice +resident, 1)02 +roduct Cine !==?$!===, various technical and managerial positions in Nokia Consumer (lectronics and Nokia 0obile +hones !==!$!==?. 0ember of the *oard of )irectors of the "innish "unding 2genc for 1echnolog and Innovation A1ekes@. Chairman of the /esearch and 1echnolog Committee of the Confederation of "innish Industries (<. Based on t0ese biograp0ies9 publis0ed by Nokia9 8e obser&e t0e c0ie" c0aracteristic o" NokiaDs top management is t0at t0ey are 0ig0ly educated and 0a&e muc0 e.perience in multi:national tec0nology companies. +0eir backgrounds include international e.perience9 eit0er "rom a pre&ious position or "rom ser&ing on a corporate board. +0at international e.perience is necessary "or managing t0e operations o" a global player suc0 as Nokia. Alt0oug0 Nokia acti&ely ac=uires companies9 none o" NokiaDs Group -.ecuti&es come "rom t0e ac=uired companies. Nine Nokia e.ecuti&es 8ere internally promoted9 80ile t0e ot0er t8o 8ere e.ternal 0ires @#c*o8ell "rom 7P and Sundback "rom t0e 5inis0 national go&ernmentA. -ig0t o" t0e ele&en e.ecuti&es 0a&e been at t0eir current position "or less t0an t0ree years. +0is e.ecuti&e turno&er suggests t0at t0e Board o" *irectors 0as been acti&ely trying to s0ake t0ings up. Strategic (anagement +0e past t8o years 0a&e been turbulent "or Nokia management. Because t0ere 0a&e been so many ne8 e.ecuti&es9 management 0as yet to establis0 a systematic approac0 to strategic management. +0is strategic audit can ser&e as a "oundation "or strategic management o" t0e company going "or8ard. +urno&er not8it0standing9 t0e Group -.ecuti&e Board 0as recently become 0ig0ly in&ol&ed in t0e strategic management process. Regarding t0e top priorities in 1))29 !-$

1;

$lli:Pekka stated I$n an 1(: to 1,:mont0 strategic &ie89 top management last year set out "i&e strategic priority areas "or t0e company>s continued industry leaders0ip.J +roduct competitiveness Customer satisfaction /E) effectiveness )emand$suppl network alignment (nd$to$end capabilit

In terms o" Nokia>s broader long:term strategy9 $lli stressed t0at continuity 8ould be key1). Nokia top management encourages t8o:8ay communication t0roug0out t0e organiCation9 including lo8er:le&el management. I$pen communication is part o" t0e Nokia 8ay o" operating. 3e gain commitment "rom our employees and employee representati&es t0roug0 ongoing dialogue and employee "eedback and participation. $ur people 0a&e se&eral di""erent c0annels "or e.pressing t0eir opinions and concerns as 8ell as "or dri&ing positi&e c0ange in our organiCation9 principles and policiesJ11. Nokia belie&es in s0ared management principles. Because most o" t0e Group -.ecuti&e Board 0as been promoted "rom 8it0in9 a natural9 in"ormal line o" communication e.ists 8it0 t0e top e.ecuti&es and t0e di""erent Nokia "unctions in 80ic0 t0ey 0a&e 8orked. Nokia corporate guidelines allo8 t0e !-$ to be a *irector9 but t0e current !-$ 0as not yet been elected to t0e Board. +op management o""icially meets t8ice a year 8it0 t0e Board o" *irectors Audit !ommitteeO t0e only ot0er "ormal interaction e.ecuti&es 0a&e 8it0 t0e Board is 80en t0e Board decides t0e annual bonus "or eac0 top e.ecuti&e. As a practical matter9 most companies do not publis0 a "ormal relations0ip bet8een top management and t0e board9 so t0e absence o" t0at disclosure at Nokia isnDt particularly concerning. Nokia claims t0at its strategic decisions are made et0ically in a socially responsible manner. 3it0in t0e organiCation9 top management emp0asiCes t0e !ode o" !onduct11/
1) 11

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2t Nokia, how we do business is ever bod -s business. 2nd we believe that ethical business behavior can onl be realiFed b an e6ual commitment from ever emplo ee. 1he strong message we are sending across ever level and geographical area of our organiFation is this' we take our responsibilities seriousl , and we support each other in achieving our ethical goals through our Code of Conduct. 5667 hi,hli,hts In 277:, Nokia-s (#ecutive *oard made a decision to revise our Code of Conduct. 1his was in a move to ensure consistent business practices across an increasingl diverse organiFation as well as better respond to increasing e#ternal regulations. We developed a significant training and communication campaign designed to bring the new Code of Conduct alive for our people, as well as make sure that ever one ever where in the organiFation is committed to the code and its messages. As a global company9 Nokia realiCes t0eir social responsibility. UIt is clear t0at socio: economic de&elopment and telecommunications gro8t0 are intimately linked.U @?eli
SundbVck/ -.ecuti&e ?P9 !orporate Relations and ResponsibilityA.

2s a market leader with global operations, we accept the responsibilit that comes with our position. 1he best contribution Nokia can make to sustainable development is to carr out its business in a responsible wa . 1his premise forms the basis of our commitment to creating ethicall sound policies and principles and implementing corporate responsibilit programs!8. *oes Nokia put t0ese &alues into practiceS $ne ad&ocacy group claims t0ey do not. +0e !entre "or Researc0 on #ultinational !orporations @S$#$A accuses Nokia o" &iolating its Social Responsibility policy9 and =uestions its commitment to t0e en&ironment and basic 0uman rig0ts. 3e 8ill go into t0is issue in more detail in t0e +ask -n&ironment section o" t0is reportO t0is perception9 rig0t or 8rong9 suggests t0at Nokia may be 8ell:ad&ised to be more socially responsible 80en making strategic decisions. (anagement Compensation 1*"+
14

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11

+0e annual compensation o" NokiaDs "i&e most 0ig0ly paid e.ecuti&e o""icers "or 1))2 is detailed in t0e "ollo8ing table/
Cas& co+pensation Cas& Na+e and Principal Position in 2((* ,ear Base salar$ -"./0 1 500 000 1 475 238 1 400 000 717 000 717 000 711 279 623 524 584 000 575 083 476 000 461 526 incentive pa$+ents -"./0 200 3or+a Ollila, Chairman and Chief Executive Officer Pekka 1la2Pietil4, Unti Oct!"er 1, 2005, #re$ident !f %!&ia C!r'!rati!n and (ead !f Cu$t!mer and )ar&et O'erati!n$ Olli Pekka 5allasvuo, +$ !f Oct!"er 1, 2005, #re$ident and COO, Unti -e'tem"er 30, 2005, E.# and /enera )ana0er !f )!"i e #h!ne$ 1nssi 6anjoki, E.# and /enera )ana0er !f )u timedia /ic&ard Si+onson, E.#, Chief 1inancia Officer 5 2004 2003 200 5 2004 2003 200 5 2004 2003 200 5 200 5 3 212 037 1 936 221 2 253 192 946 332 479 509 520 143 947 742 454 150 505 724 718 896 634 516 Ot&er 1nnual Co+pensation * * * * * * * * * * * Ot&er Co+pen2 sation -"./0 165 000 150 000 150 000 * * * * * * * 358 786

Table 7. Co+pensation o Nokia8s * 9ig&est2Paid ":ecutives' 2((*

+0e e=uity portion o" top managementDs compensation comes in t0e "orm o" stock options. +0ose option grants "or 1))2 are detailed in +able ,. Nokia also discloses t0e number o" stock options granted to all employees9 and t0e "raction o" t0ose options 80ic0 are granted to top management9 in +able 2.

11

2umber of Stoc3 'ptions* Stoc3 'ption category $lli Pekka Kallas&uo Robert Andersson Simon Beres"ord 3ylie Pertti Kor0onen #ary #c*o8ell 7allstein #oerk +ero $%anperV Ric0ard Simonson ?eli SundbVck 1))2 ,M 1))2 ,M 1))2 1M 1))2 1M 1))2 1M 1))2 1M 1))2 1M 1))2 1M 1))2 46ercise price per share 45R 1,.,( 46ercisabl e

Total realisable value of Stoc3 'ptions/ ecember #*/ !""% 45R! 46ercisable# 5ne6ercisable

5ne6ercisable

1)) )))

;' )))

1,.,(

1( )))

1' 1 )

11.';

) )))

12; ))

11.'; 11.'; 11.'; 11.'; 11.';

) ) ) ) )

) ))) ) ))) ,) ))) ,) ))) ) )))

) ) ) ) )

12; )) 12; )) 1) ,)) 1) ,)) 12; )) 1) ,))

11.'; ) ,) ))) ) 1M ! Number of stock options e6uals the number of underl ing shares represented b the option entitlement.
2

1he realiFable value of the stock options is based on the difference between the e#ercise price of the options and the )uring 277:, there were no gains realiFed upon e#ercise of stock options to report, nor were an share based 0r. 2la$+ietilI resigned as member of the 3roup (#ecutive *oard effective %ctober !, 277:, and ceased emplo ment

closing market price of Nokia shares on the Delsinki .tock (#change as of )ecember 87, 277: of (9/ !:.4:.
8

incentive grants settled for the members of the 3roup (#ecutive *oard.
4

with us on Banuar 8!, 277>. )r. Gr&J Neuvo resigned as member of the 3roup (#ecutive *oard effective %ctober !, 277:, and retired from Nokia effective )ecember 8!, 277:. 1he information relating to stock options held and retained b 0r. 2la$+ietilI and )r. Neuvo as of the date of termination of emplo ment.

Table ;. Stock Options Granted to Nokia Top Manage+ent' 2((*

14

Stoc3 Shares Group -.ecuti&e Board $t0er employees Total 41 (44 W 7

*

options 1 12' 14' ( ; )4), *,, ,0% *8.

7! ,.2(

).)1 2 W

;2.,1,

*""

1he percentage is calculated in relation to the outstanding share capital and total voting rights of the compan as of )ecember 8!, 1he percentage is calculated in relation to the total outstanding e6uit plans, i.e. stock options, performance shares and restricted +erformance shares at threshold represent the original grant. 2t ma#imum performance, the settlement amounts to four times the 1he number includes the total number of stock options outstanding, consisting of !24 7=! 8:4 options held b other emplo ees and no information available.

277:, e#cluding shares held b the 3roup as of that date.

2

shares, as applicable, as of )ecember 8!, 277:.

8

number of performance shares originall granted Aat threshold@.

4

= ??? >?> options sold to the market.

K

Table *. Stock Options 9eld b$ Nokia "+plo$ees' 2((*

As +able 4 and +able , s0o89 stock options are not as signi"icant a component o" e.ecuti&e compensation as cas0 incenti&es based on per"ormance or base salary are. 5or e.ample9 i" t0e top e.ecuti&e team 8ere able to double NokiaDs price "rom t0e 1))2 ,M grant price o" E1,.1(9 #r. Kallas&uo 8ould stand to gain roug0ly E1.,mil on 0is 1))2 option grant. +0at gain is only about t0e siCe o" 0is base salary "or 1))29 and 0al" t0e siCe o" t0e per"ormance:based cas0 compensation 0e recei&ed. +0is compensation structure emp0asiCes per"ormance9 but still carries a small risk o" management misusing t0eir stock options. Alt0oug0 t0e Nokia Board o" *irectors "eels t0at t0is ne8 group o" e.ecuti&es 0as su""icient skills to cope 8it0 "uture c0allenges9 t0ey may not t0e 0a&e t0e di&erse e.perience needed to cope 8it0 likely "uture c0allenges. Nokia is recei&ing competition "rom unlikely sources suc0 as Apple and t0eir ne8 iP0one. #obile ser&ice pro&iders are also entertaining t0e idea o" manu"acturing t0eir o8n mobile p0ones. +0is ne8 market entry 8ould greatly 0urt NokiaDs market s0are because t0e ma%ority o" Nokia mobile p0ones are sold t0roug0 t0e mobile ser&ice pro&ider. +o deal 8it0 t0is 0yper: competition9 Nokia may need to e.pand t0eir ser&ices to compete 8it0 t0e ne8

1,

competition. Promoting "rom 8it0in 0as 0istorically been success"ul "or most companies9 but in a 0yper:competiti&e en&ironment like telecommunications e=uipment9 0iring a "e8 managers "rom t0e non:traditional competitors 8ill bring in "res0 ideas and may 0elp Nokia mo&e into ne8 industries.

":ternal "nviron+ent< Opportunities and T&reats

Societal $n%ironment
Nokia is a 8orld8ide company 8it0 2(9))) employees 8orking in 1) countries across t0e globe. As a global company9 Nokia is sub%ect to a number o" "orces t0at in"luence 0o8 it does business. At 0ome9 Nokia is considered a leader o" industry in 5inland. $&er 149))) o" NokiaDs employees are based in 5inland. 5innis0 society "ollo8s a social:democratic model9 and 5inland 0as some o" t0e best social programs in t0e -uropean Hnion. $" course9 t0ese programs come at a 0ig0 cost to businesses including 0ig0 corporate ta.es and lo8 producti&ity. Nokia pays its s0are o" t0e burden "or t0ese programs. Nokia is c0allenging 5innis0 society to gauge t0e bene"its o" t0ese programs. +0ey are leading t0e 8ay in c0anging t0e business climate in 5inland by t0ri&ing in an en&ironment o" competition and globaliCation. Nokia 0as a 0ea&y in"luence in 5inland9 since it is one o" t0e largest employers. +0e go&ernment is responding to t0is c0allenge. 3it0in t0e past year9 t0e go&ernment passed la8s to reduce corporate ta.es "rom 1;F to 1 F1,. +0is ta. reduction represents a signi"icant sa&ings to t0e companyDs bottom line. +0ese socio:political issues represent a "uture t0reatO 5innis0 society may need to c0ange in order "or Nokia to 0a&e a le&el playing "ield to compete upon as it enters emerging markets across t0e globe. Nokia recogniCes t0at in order to remain competiti&e it must recruit =uali"ied candidates in its &arious %ob markets and retain its talented employees. Nokia is a &alues: based organiCation t0at &alues di&ersity9 per"ormance:based re8ards9 pro"essional and personal gro8t09 and 8ork:li"e balance. $ne 8ay to accomplis0 NokiaDs recruitment goals is to o""er a &ariety o" interns0ips "ocused on attracting talent at an early stage o"

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1,

12

careers. $&er t0e past "e8 years NokiaDs -=uity Program12 0as o""ered key employees stock options based on key per"ormance. +0is issue represents a current and "uture opportunity "or Nokia. 5ailing to capitaliCe on t0is opportunity to recruit and retain talent 8ould lea&e Nokia less competiti&e in t0e "uture. Part o" t0e companyDs strategy to maintain a skilled and talented 8ork"orce 0as been its support "or a =uality education system in at its 0ome base. 5inland 0as been e""ecti&e in building an education system t0at is able to pro&ide a 0ig0ly skilled 8ork"orce. +0e upper le&el education system is composed o" uni&ersities and polytec0nic &ocational sc0ools. -ac0 year 5inland graduated appro.imately 1)k 0ig0ly skilled 8orkers capable o" 8orking in t0e tec0nology sectors1 . Nokia is one o" t0e key bene"iciaries o" t0is system. In addition9 as Nokia e.pands into t0e global market t0ey are looking "or partners in countries suc0 as !0ina and India. 5inland 0as partnered 8it0 India to create an Indo: 5innis0 I!+ @In"ormation and !ommunications +ec0nologyA cluster1'. +0is partners0ip 0as remo&ed many trade barriers. +0e result is better access to a 0ig0ly educated 8ork "orce9 lo8er 8ages9 and access to an Indian economy soon to become )F t0e siCe o" t0e H.S. economy. $ne e.ample o" t0e success o" t0e I!+ is t0e agreement to build a Nokia manu"acturing plant in !0ennai9 India. Nokia 0as 8orked closely 8it0 t0e Indian go&ernment to de&elop t0is alliance and create manu"acturing %obs t0at 8ill bene"it bot0 parties. As ne8 markets are created in de&eloping countries9 Nokia is e.periencing di""iculties in e.panding its supply c0annels. +0is issue represents a current t0reat to t0e organiCation. Ine""icient distribution c0annels erode a companyDs pro"it margins. Nokia is e.periencing a &ariety o" issues in de&eloping ne8 supply c0annels. Nokia must "ind dependable distributors9 8are0ouses9 and product s0ipping logistics operations. Some o" t0is in"rastructure may need to be built "rom t0e ground up. $t0ers may be establis0ed t0roug0 partners0ips. All o" t0is in"rastructure adds cost and takes time be"ore t0e market
Nokia 8ebsite9 January 1)9 1))'9 0ttp/KK888.nokia.comKN$KIAL!$#L1KAboutLNokiaKPressKPressL-&entsKNokiaLPressL!on"erenceLi nLM,L1))2KnokiaLe=uityLprogram.pd" 1 American.edu 8ebsite9 January 1)9 1))'9 0ttp/KK888.american.eduKcarmelK%k;,((aKI+3ork.0tm 1' India Business 8ebsite9 January 1)9 1))' 0ttp/KKtimeso"india.indiatimes.comKarticles0o8K11) (24.cms
12

becomes pro"itable. Nokia 8ill need to create e""iciencies and "ind economies o" scale in t0eir operation to meet t0e need o" t0ese ne8 markets 8it0out depleting pro"it margins. +0ere are ot0er issues t0at 0a&e t0e potential to a""ect NokiaDs pro"it margin. NokiaDs credit policy is an e.ample o" signi"icant risk. +0is current t0reat 0as t0e potential to cause Nokia to lose millions i" buyers are not able to repay. Political instability in emerging markets 0eig0tens t0is risk. #any o" t0e countries t0at are part o" t0e emerging markets suc0 as in !0ina9 A"rica9 and -astern -urope 0a&e no in"rastructure to support t0ese ne8 industries. !reation o" ne8 in"rastructure re=uires close 8ork 8it0 go&ernments to ensure security and "oster communication industry gro8t0. +0is rapid in"lu. o" capital 0as t0e potential to spa8n corruption. !orruption and poor o&ersig0t o" business acti&ities increase t0e risk in t0ose in&estments. I" a go&ernment decides not to abide by its agreement 8it0 Nokia t0ere is a possibility t0ey could lose t0e money t0ey in&est in t0at market. +0is concern is anot0er key risk mentioned in NokiaDs 1))2 Annual Report1(.

Task $n%ironment
NokiaDs position as a company e.panding in emerging markets creates a strain on t0e "inancial position o" t0e company. Political issues in emerging markets create t0e potential "or instability in t0ose economies. +0ese instabilities can 0a&e ad&erse a""ects on a countryDs currency. +0e potential "or currency "luctuations in t0ese countries may send pro"it margins "or Nokia up and do8n. In No&ember o" 1)) 9 t0e !entre "or Researc0 on #ultinational !orporations @S$#$A reported t0at Nokia and ot0er manu"acturers 8ere operating or partnering 8it0 manu"acturing "acilities t0at &iolated "air 8age la8s and unsa"e 8orking conditions1;. +0is report claimed a series o" &iolations ranging "rom e.posing 8orkers to 0aCardous cancer:causing c0emicals to "orcing employees to 8ork o&ertime 8it0out proper compensation. In addition9 t0ere are ot0er t0reats to t0e en&ironment itsel". !0emicals used during manu"acturing and by:products dumped in 8ater8ays or on land create serious concerns to Nokia and ot0er manu"acturers. +0ese concerns are a current t0reat
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t0at is o" serious concern in t0e de&eloping countries 80ic0 0a&e little or no en&ironmental la8s and o&ersig0t. *e&eloping countries in 80ic0 Nokia is establis0ing manu"acturing "acilities9 suc0 as !0ina9 India9 and t0e P0ilippines9 are being closely 8atc0ed by en&ironmental ad&ocacy groups. S$#A9 as an e.ample9 is "ig0ting a battle in t0e media and courts to 0old manu"acturers responsible. S$#$ accuses Nokia o" &iolating its Social Responsibility policy and =uestions its commitment to t0e en&ironment and basic 0uman rig0ts. +0is t0reat 0as serious current and "uture implications. Not only does t0is report damage NokiaDs credibility9 it creates a signi"icant "inancial risk. #any potential impro&ements to t0eir manu"acturing "acilities could increase operating e.penses. +0e tec0nology used in cell p0ones 0as been in e.istence "or many years. Ne&ert0eless9 t0ere are ongoing 0ealt0 concerns related to t0e long:term e""ects o" t0e electromagnetic radiation transmitted by cell p0ones. NokiaDs risk management9 legal ser&ices9 and researc0 departments acti&ely 8ork to minimiCe t0ese concerns. +0ere is a close 8atc0 on studies9 litigation9 and ot0er researc0 to address t0is issue. +0e battle is to maintain trust and con"idence in cell p0ones and to maintain t0e perception o" no real danger to t0e 0ealt0 and sa"ety o" consumers. As ne8 emerging markets create a greater demand "or cell p0one pro&iders9 t0e demand "or mobile de&ices 8ill increase. Nokia9 like ot0er mobile de&ice manu"acturers9 sells to a relati&ely small customer base since it sells t0e ma%ority o" its products to cell p0one ser&ice pro&iders. +0is obser&ation is not to say t0at Nokia does not 0a&e a strong market s0are : across t0e eart09 t8o o" e&ery t0ree cell p0ones 8ere made by Nokia : but rat0er t0at t0e market could "unction as an bilateral oligopoly. I" Nokia e.periences a ri"t 8it0 t0ese ser&ice pro&ider customers9 t0e outcome could be a substantial loss o" market s0are. Studies 0a&e concluded t0at cell p0one users are loyal to t0eir cell p0one net8ork pro&iders more t0an to t0e cell p0one manu"acturers1). +0is loyalty may be related to t0e "act t0at cell p0ones are sold primarily t0roug0 cell p0one pro&ider:branded retail outlets9 not t0roug0 manu"acturer:branded retail outlets. Some o" t0is loyalty is also based on t0e structure o" cell p0one net8ork ser&ices. !ustomers are re=uired to sign ser&ice contracts "or a set period o" time9 usually t8o years. In addition9 t0e cell p0one ser&ice pro&iders
1)

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subsidiCe t0e cost o" t0e p0ones and o""er t0e p0ones at a "raction o" t0eir cost. Because o" t0is lack o" loyalty9 NokiaDs gro8t0 is dependent on t0e gro8t0 o" cell p0one pro&iders and t0eir opening o" ne8 markets. I" t0ey do not e.pand into ne8 markets9 Nokia sales 8ill su""er. Besides t0e dependency on t0e cell p0one net8ork ser&ice pro&iders9 t0ere is anot0er concern t0at t0reatens NokiaDs market s0are in t0e "uture. Se&eral large cell p0one net8ork ser&ice pro&iders are considering de&eloping t0eir o8n brand o" p0ones. +0ese cell p0one ser&ice pro&iders 0a&e begun con&ersations 8it0 a number o" companies in !0ina9 t0e P0ilippines9 and India 80o 0a&e t0e tec0nology and o8n t0e intellectual property to manu"acturer ne8 brands o" p0ones. $t0er cell p0one net8ork ser&ice pro&iders are looking into building t0eir o8n "actories and manu"acturing t0eir o8n mobile de&ices. +0is "uture t0reat could create ne8 competition "rom $*# @$riginal *esign #anu"acturerA 0ouses < companies 80ic0 act as contract design and manu"acturing 0ouses11. +0ese companies9 suc0 as BenM and 5le.tronics9 0a&e 8orked as contract designers "or Nokia9 on products 80ic0 Nokia 0as manu"actured. In t0e "uture9 BenM and 5le.tronics could decide to compete directly against Nokia9 eit0er by selling directly to t0e cell p0one net8ork ser&ice pro&iders9 or by selling t0e product directly to consumers. !ell p0one net8ork ser&ice pro&iders 8ield a 0uge amount o" bargaining po8er. +0e relations0ip and buying po8er 80ic0 cell p0one ser&ice pro&iders 0a&e 8it0 t0e cell p0one manu"acturers9 including Nokia9 is signi"icant because o" t0eir control o&er cell p0one end users. !ell p0one ser&ice pro&iders suc0 as !ingular9 +:#obile9 and ?eriCon create signi"icant s8itc0ing:costs "or t0e end:user. +0ey utiliCe term contracts9 control o&er cell p0one telep0one numbers9 email accounts9 and ot0er processes to make it e.pensi&e or di""icult to c0ange ser&ice. In addition9 end:users pay 0ig0 costs "or replacing t0eir 0and:set 8it0in t0e term o" t0eir contracts. +0e H.S. go&ernment 0as passed legislation reducing some o" t0e obstacles "or end:users. 3it0 t0e passing o" t0e !ell P0one Number Portability Act9 end:users no longer "ear lea&ing t0eir ser&ice pro&ider. !onsumers may c0ange ser&ice and take t0eir number 8it0 t0em in many cases. +0is type o" legislation is uni=ue and creates unintended conse=uences. +0e
11

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ma%ority o" consumers do not 0a&e t0is type o" protection and t0ey are "orced to pay 0ig0 s8itc0ing costs. +0is po8er o" customers9 called out in PorterDs 2 5orces +0eory119 suggests t0at Nokia and ot0er cell p0one manu"acturers are t0reatened by t0e "uture possibility o" substitute products being introduced into t0e market place. !ompetition in t0e mobile tec0nology industry is intense. Nokia recogniCes t0at it must maintain a competiti&e product port"olio. +0ey must 0a&e a &ariety o" products t0at meet user needs and o""er a &ariety o" "unctions including &ideo9 instant messaging9 internet access9 and producti&ity. All o" t0ese options must be pro&ided in a &ariety o" de&ices t0at come in all s0apes and siCes. A di&erse port"olio o" products is re=uired to remain competiti&e in t0e mobile communications industry as a 80ole. Nokia9 like its competitors9 is e.periencing constant c0anges in tec0nology and cell p0one ser&ice pro&ider demands. 3it0 t0e ad&ent o" 4G or I+0ird GenerationJ mobile de&ice tec0nology9 Nokia must de&ote signi"icant e.penditures in RB*. +0e c0anging tec0nology landscape creates t0e "uture t0reat o" customers becoming competitors9 suc0 as !ingular 80o 0as considered creating its o8n Brand o" cell p0ones. #anu"acturers are constantly introducing ne8 inno&ations to t0e mobile telecommunications de&ice industry. Recently9 ne8 inno&ati&e products 8ere introduced at t0e !onsumer -lectronics S0o8 @!-SA in 6as ?egas9 Ne&ada14. #otorola introduced its ne8 music p0one9 t0e #otoRiCr X . +0is de&ice uses a 6inu.:based media player to play #P4s. +0is ne8 product is an e.ample 80ere #otorola is 0eeding t0e demand to create multiuse de&ices t0at are "a&ored by consumers "or entertainment9 personal data assistant @P*AA "unctions9 and cell p0one "unctions. Nokia recently introduced its N Series o" de&ices to address its need to compete in product categories suc0 as smart p0ones9 t0inner "lip p0ones9 and mobile Internet applications. Nokia9 8it0 its ne8 partner ?isa9 introduced tec0nology to be used in t0eir mobile cell p0ones to enable mobile payments. +0is tec0nology is anot0er e.ample o" integrating ot0er "unctions into t0e
11 nettlab.ttk 8ebsite9 January 1)9 1))' 0ttp/KK888.netlab.tkk."iKopetusKs4(4),1Kk) K6ecturesK6(L!ompetition.pd" 14 5orbes.com 8ebsite9 January 1)9 1))' 0ttp/KK888."orbes.comK1))'K)1K11Kces:apple:ip0one:tec0:media:c.LrrL)111ces: ces8rapupLslideL4.0tmlSt0isSpeedT')))

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mobile de&ices. Besides ne8 inno&ation in current mobile de&ice manu"acturers9 t0ere are t0ose 80o represent a "uture t0reat to manu"acturers like Nokia. In San 5rancisco9 during t0e same time"rame as t0e !-S9 Apple introduced its ne8 iP0one. +0e iP0one 0as all t0e "eatures o" t0e iPod9 plus cell p0one capabilities and an internet communications "eature 8it0 e:mail9 8eb bro8sing9 maps9 and searc0 "eatures. Nontraditional cell p0one manu"acturers suc0 as Apple represent a ne8 t0read to t0e industry 8it0 substitute products. 3e can e.pect t0at t0is trend to continue and apply ne8 pressure on Nokia and its competitors. Product substitutions suc0 as Skype and ot0er ?oIP products represent anot0er "uture t0reat to t0e cell p0one and telecommunications industry. +0ese products o""er lo8 cost alternati&es to cell p0one ser&ice plans. 30ile t0ese products 0a&e 0ad c0allenges in gaining signi"icant market s0are9 t0ey do demonstrate t0at ot0er tec0nologies are a&ailable. +o counter t0is t0reat9 Nokia and Skype announced at t0e !-S t0at t0ey 8ere partnering to create a product t0at 8ould allo8 users to be "reed "rom t0eir desktop1,. It in&ol&es using NokiaDs N()) Internet +ablet to allo8 "or mobile Internet. +0is 8ay a user can use Skype a8ay "rom t0eir P!. In anot0er de&elopment Nokia recently introduced a product to block peer to peer "ile s0aring and ?oIP calls. +0e centraliCed solution is implemented as a so"t8are upgrade to t0e Nokia 5le.i Intelligent Ser&ice Node @ISNA and 8ill be commercially a&ailable during t0e "irst 0al" o" 1))'. +0e Nokia Peer:to:Peer +ra""ic !ontrol solution no8 gi&es operators t0e means to analyCe and manage suc0 tra""ic. It allo8s t0em to apply t0eir business models by prioritiCing t0e tra""ic o" pre"erred ser&ices and partners9 ma.imiCe t0eir return on net8ork in&estment9 and a&oid becoming only Ibit pipesJ "or ot0er content pro&iders.12 +0ese are only a "e8 e.amples 80ere Nokia is de&eloping ne8 products to address t0e t0reat o" substitute products or to take ad&antage o" t0e t0reat and create opportunities. Nokia 8ill need to continue its e""orts by "unding ade=uate RB* le&els to remain competiti&e in t0is "asting c0anging en&ironment.

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41

":ternal =actors Opportunties 2ecruitin03retainin0 ta ent 5ncrea$e mar&et $hare 6eve !' emer0in0 mar&et$ %e7 8echn! !09 T&reats 1inni$h $!cia *dem!crac9 6i$tri"uti!n channe $ 1!rEx ri$& (uman 2i0ht$ i$$ue$ Envir!nmenta 3(ea th c!ncern$ Cu$t!mer Credit ine$ C!m'etiti!n #r!duct -u"$titute$ Totals

>eig&ted Missing >eig&t /ating Score Score Co++ents 0405 5 0425 0 5ntern$hi'$ 041 4 044 041 0415 4 046 0415 China, 5ndia, #hi i''ine$ 041 3 043 042 .i$a #artner$hi' 0405 2 041 0415 Chan0in0 Cu ture 0405 3 0415 041 +ddin0 infra$tructure 041 2 042 043 .! ati e ec!n!mie$ 0405 3 0415 041 -O)O re'!rt 0405 3 0415 041 E ectr!ma0netic 0405 3 0415 041 0415 4 046 0415 i#h!ne 041 2 042 043 -&9'e 1 3425

Table ). "=1S Table or Nokia

Internal "nviron+ent< Strengt&s and >eaknesses

Corporate Structure
Nokia makes e.cellent use o" a "lat and decentraliCed organiCation structure. A "lat organiCational structure is &ery important in an en&ironment 80ere =uick decision: making is needed9 suc0 as t0e 8ireless cellular en&ironment. !ompetition is &ery intense in t0e cell p0one business9 80ere t0e big players are be0emot0s o" tec0nology suc0 as Samsung9 #otorola9 Sony -ricson9 Siemens9 and 6G. 3e 8ill "irst assess NokiaDs corporate structure by e.amining t0e top management. $ut o" ele&en e.ecuti&e managers9 si. o" t0em are directing organiCations directly in&ol&ed 8it0 tec0nologyO #obile P0ones9 #ultimedia9 +ec0nology Plat"orms9 !0ie" +ec0nology $""icer9 -nterprise Solutions9 and Net8orks. +0is structure is =uite uni=ue because in ot0er companies all tec0nological e""orts are directly under a !I$ @c0ie" in"ormation o""icerA or !+$ @c0ie" tec0nological o""icerA. But t0is spread o" tec0nological "unctions9 e&en among t0e top le&el9 is re"lecti&e o" t0e "lat structure utiliCed. +0e "lat structure is actually =uite common amongst companies t0at are in t0e tec0 industry. In ot0er industries9 suc0 as "inance9 one 8ould e.pect to see more layers in management9 but in t0e tec0nology sector "lat is better. Recalling a c0art "rom a pre&ious class9 Nokia operates in an unstable and comple. en&ironment9 and it utiliCes t0e #atri.

41

$rganiCation1 9 albeit a customiCed &ersion o" it. Belo8 8e can see NokiaDs current corporate structure/

=igure ?. Nokia Corporate Structure

+0is &ersion o" t0e corporate structure 8as adopted in 1))49 80en Nokia decided t0at it needed to c0ange its structure due to market needsO t0e competition and ot0er "actors in NokiaDs en&ironment deemed it necessary. At t0at time9 $lli:Pekka Kallas&uo9 no8 t0e !-$9 8as t0e !5$. Replacing 0im as t0e !5$ 8as Rick Simonson9 80o became t0e "irst non:5innis0 senior le&el e.ecuti&e in t0e companyDs 0istory. U#obility is one o" t0e 8orld>s megatrends 8it0 a great opportunity9U t0en !-$ Jorma $llila said. UIt 8ill c0ange 0o8 businesses are run and it is our ongoing ambition to 0elp consumers and corporations in t0is transition. +0e industry and corporate structures t0at 8ere establis0ed a decade ago at t0e da8n o" mobile communications 8ere &ery di""erent "rom 80at is needed going a0ead1'.J Belo8 is a matri. organiCation according to P#I.org/

James 6. Bo8dic0 and Ant0ony 5. Buono9 A Primer on $rganiCational Be0a&ior9 Jo0n 3iley and Sons9 Inc.9 1))2A9 page 1(4. 1' INokia Plans Ne8 !orporate StructureJ9 0ttp/KKtelep0onyonline.comKaccessK8ebKtelecomLnokiaLplansLne8K

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ed. @Ne8 Pork/

44

=igure 2. Traditional Matri: Organi@ation C&art -PMI.org0

As an e.ample o" t0is matri. structure9 Nokia makes muc0 use o" cross:"unctional teams t0at 0as employees "rom &arious departments suc0 as marketing9 sales9 and logistics. $ne o" t0e reasons "or t0e "lat corporate structure is t0e "act t0at Nokia itsel" 0as c0anged o&er its li"etime9 spanning a century.

=igure 7. "volution o Nokia8s Business

5rom a manu"acturer o" paper in 1( 29 to a manu"acturer o" cellular p0ones in 1)) 9 Nokia 0ad to go t0roug0 a lot o" structural c0anges. In todayDs en&ironment Nokia de"initely needs to be "ast and nimble. $ne e.ample is t0e cell p0one as a portable music de&ice. #otorola 0as incorporated digital music playback in its p0ones9 and Nokia 8as

4,

caug0t o"" guard by t0is ne8 trend. It 8as "orced to play catc0:up. It 0as done t0at so 8ell t0at a "e8 analysts predict Nokia 8ill displace t0e iPod as t0e leading personal digital music player. +0e current corporate structure does support NokiaDs corporate &ision and mission. By keeping itsel" "lat9 80ere =uick decision making is possible9 Nokia can respond to customer needs =uicker t0an t0e competition. +0is "latness and t0e use o" teams also enable NokiaDs RB* department to in&ent and de&elop cool tec0nologies9 c0eaper9 80ic0 8ill enable more 0uman beings to be connected. A 8onder"ul e.ample is t0e ne8 Nokia "lags0ip product "or 1))'9 t0e N;29 80ic0 combines a =uadband 0andset @8it0 support "or 4G and 7S*PA net8orksA 8it0 a GPS na&igator and mapping application9 2: megapi.el camera9 3i:5i connecti&ity9 and a 3eb bro8ser1(.
8he %!&ia name c!me$ fr!m the river >&at is t&e origin o t&e Nokia na+eA %!&ia :!n 7hich 1redri& 5de$tam f!unded the 7!!d 'u ' mi , %!&ia +", in 1865;4 8he river t!!& it$ name fr!m a dar&, furr9 r!dent ca ed the n!&ia :in En0 i$h, the mu$te ine;, 7hich ived !n the "an&$ !f the river4

=or T&e Curious

It is a relative of the North American skunk.

Corporate Culture
$rganiCational culture9 or corporate culture9 comprises t0e attitudes9 e.periences9 belie"s and &alues o" an organiCation. According to 3ikipedia9 corporate culture is IYt0e speci"ic collection o" &alues and norms t0at are s0ared by people and groups in an organiCation and t0at control t0e 8ay t0ey interact 8it0 eac0 ot0erJ. +0ere 0as al8ays been a 8ell de"ined culture at Nokia9 e&er since its creation in 1( 2. Nokia>s o""icial corporate culture mani"esto9 1he Nokia Wa 9 emp0asiCes t0e speed and "le.ibility o" decision:making in a "lat9 net8orked organiCation9 alt0oug0 t0e corporation>s siCe @roug0ly 2(9))) employeesA necessarily imposes a certain amount o" bureaucracy1;.
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42

-=uality o" opportunities and openness o" communication are also stressed9 along 8it0 management leaders0ip and employee participation. +0e culture is best described as "lat9 e=ual opportunity9 inno&ati&e9 decisi&e9 and enduring. +0e "irst aspect o" t0e culture t0at can be detected is t0e decisi&eness. At Nokia9 employees are e.pected to 0it t0e ground running. Indi&iduals are e.pected to understand t0eir deli&erables and to kno8 to complete t0eir tasks. Because o" t0is e.pectation employees can be immediately placed in t0e 0eat o" t0e battle. UIn less t0an a "ortnig0t I "elt like a &eteran Nokia employee9U said Ra&neet Sing0 P0okela 80o %oined Nokia India as brand marketing and !R# manager4). +0e culture is &ery consistent 8it0 t0e current ob%ecti&es9 strategies9 policies9 and programs. +0at is because t0e culture is o" suc0 a nature t0at it 8ould bene"it any industry. 7ence t0e easy9 relati&ely speaking9 manner in 80ic0 Nokia c0anged "rom "irst a paper company9 t0en rubber9 t0en telep0one and radio9 t0en net8ork components9 and t0en "inally to cell p0ones. $ne underlying aspect o" t0e culture is 80at is called t0e sisu trait 8it0in Nokia41. .isu means ZgutsD mi.ed 8it0 endurance. +0is trait o" NokiaDs culture is 80at 0as enabled t0e company to sur&i&e "or suc0 a long time9 and t0roug0 so many c0anges and market "luctuations. NokiaDs culture is &ery di&ersity "riendly. +0e culture borro8s &ery muc0 "rom t0e 5innis0 social culture. UNokia is a melting pot o" people9 based on t0e egalitarian society t0at e.ists in 5inland9J according to San%ay B0asin9 *irector o" t0e India Strategy *i&ision. 6ooking at t0e c0arts belo89 8e can see t0at Nokia is de"initely a global company.

1he (ssence of 3reat Workplaces. Retrie&ed January 1;9 1))' "rom t0e 8eb site 0ttp/KK888.gro8talent.comKgpt8Kno(.0tm 41 I!-$ $llila says Nokia>s >sisu> 8ill see it past toug0 times.J HSA +oday9 July 1)9 1)),.

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Table B. Nokia 9eadcount b$ Countr$' 2((*72

#ore c0arts depicting t0e le&el o" di&ersity 8it0in Nokia can be seen in t0e appendi.. Also9 in 1))2 Nokia introduced t8o ne8 =uestions related to di&ersity and inclusion in t0eir annual employee sur&ey9 8it0 t0e "ollo8ing results/
Total avorable + em' !9ee$ !f %!&ia are treated a$ individua $ re0ard e$$ !f a0e, race, 0ender, 'h9$ica ca'a"i itie$, etc4 )9 team ha$ a c imate in 7hich diver$e 'er$'ective$ are va ued4 67< 23< 10< 70< 16< 13< Neutral Total un avorable

Table C. Nokia "+plo$ee Surve$ /esults on !iversit$' 2((* 77

6ooking at t0e sur&ey results 8e see t0at t0ere is a bit o" room "or impro&ement. $ne suggestion9 Nokia s0ould become a member o" *i&ersity Best Practices. +0is members0ip 8ill 0elp t0e company "ocus more on di&ersity and ranking in t0e top ten 8ill pro&ide an incenti&e. 6ooking o&er t0e list o" t0e 1)), 8inners9 !isco Systems9 Inc. 8as t0e clear 8inner "or t0e Net8orkKcommunications industry @a8arded ; points "or di&ersityA.4,

Corporate &esources
Marketing
NokiaDs key strengt0 in marketing is its brand. NokiaDs is t0e si.t0 most &aluable brand 8orld8ide9 and t0e strongest brand among mobile 0andset manu"acturers9 according to InterbrandDs 1)) sur&ey. In "act9 Interbrand claims t0e Nokia brand is nearly t8ice as &aluable as t0at o" its ne.t leading competitor9 and NokiaDs brand e=uity is gro8ing "aster t0an its nearest competitors.

41 44

Nokia !orporate Responsibility Report 1))29 0ttp/KK888.nokia.comKlinkScidT-*I+$RIA6L 1) Ibid 4, I*i&ersity Best Practices #ember !ompanies9J 0ttp/KK888.di&ersitybestpractices.comKmem.0tml

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2an& @6 @20 @26 @69 @94

C!m'an9 %!&ia -am$un0 -!n9 )!t!r! a A/

2006 =rand ?!? .a ue :>m; Chan0e >30,131mi 14< >16,169mi 8< >11,695mi 9< >4,569mi 18< >3,010mi 14<

Table D. Brand 6alue o Mobile 9andset Makers 2(() -Interbrand0 7*

#obile manu"acturers must belie&e t0at branding mattersO eac0 o" t0e 2 key players @80o command ()F o" t0e unit &olume bet8een t0emA4 0as a global brand ranked in t0e 1)) most &aluable 8orld8ide. +0at suggests t0at t0ese companies 0a&e all 0ea&ily in&ested in marketing "ocused on branding. NokiaDs sales and marketing budget is &ery "lat9 as a percentage o" re&enue9 o&er t0e past t0ree years.
+dverti$in0 and #r!m!ti!na 8466< B 1,481mi 8473< B 1,144mi 9400< B 1,414mi

2evenue 2005 B 34,191mi 2004 B 29,371mi 2003 B 29,533mi

-a e$ and )ar&etin0 B 2,961mi B 2,564mi B 2,657mi

4433< 3489< 4479<

Table ?(. Nokia 1dvertising and Pro+otional ":penditures vs. /evenue 7B

Nokia also makes kno8n9 in its annual report9 t0e portion o" its Sales and #arketing line item 80ic0 goes to Ad&ertising and Promotional e.penses. +0e Ad&ertising budget 8as roug0ly e=ual in 1))4 and 1))29 but notably smaller in 1)),. In any case9 itDs di""icult to ask "or an increase in marketing "unds 80en NokiaDs brand 0as essentially lapped its competition. NokiaDs spending on sales and marketing appears to be in line 8it0 industry a&erages < itDs di""icult to be certain9 since ot0er companies donDt break out t0eir Ad&ertising and #arketing e.penditure9 or e&en a Sales and #arketing line item9 but simply report t0e re=uired Sales9 General and Administrati&e e.pense. 3e 8ould e.pect ot0er companiesD

Interbrand and Business3eek9 IBest Global Brands 1)) / A Ranking by Brand ?alueJ9 pp. 11:14 I*! Press Release9 I#obile P0one S0ipments !ontinue Robust Gro8t0 in t0e Second Muarter9 According to I*!O 3ill 1)) Be a Billion Hnit PearSJ9 July 1)9 1)) 4' Nokia Annual Report 1)) 9 p. 9 and Note '9 p. 11
4

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SGBA to be larger t0an NokiaDs Sales and #arketing e.pense9 and a glance at ot0er annual reports bears t0at out.
-/C+ 2evenue 2005 > 36,843mi > 3,859mi 2004 > 31,323mi > 3,714mi 2003 > 23,155mi > 3,285mi

10447< 11486< 14419<

Table ??. Motorola SGE1 vs. /evenue7C

-/C+ 2evenue 2005 > 56,720mi > 9,121mi 2004 > 56,892mi > 8,228mi

16408< 14446<

Table ?2. Sa+sung SGE1 vs. /evenue7D

Nokia segments t0e global mobile 0andset market into 11 categories o" purc0asers. In mature markets9 Nokia o""ers t0e N:series @targeted at Itec0 leadersJA and -:series @targeted at users pre"erring more simple de&icesA sub:brands9 appealing to t8o di""erent sets o" market segments. $ne marketing tec0ni=ue 80ic0 Nokia 0as embraced is blogging. In #arc0 1))29 Nokia distributed 1()) o" its Nokia ''1) Smartp0ones to bloggers 8orld8ide,)9 and asked t0em to 8rite about t0eir e.periences. Business3eek picked up on t0is PR operation in its o8n blog t0at April9 8riting I6ook 0o8 Nokia is using a blog to promote a ne8 p0one. It>s a te.tbook e.ample o" 0o8 corporations are bending t0e blog "ormat to "it t0eir needs.J,1 +0e column 8as corrected a s0ort time later 80en t0e aut0or o" t0e linked blog 8rote to clari"y t0at 0e 8asnDt employed by Nokia9 but 8as part o" t0e Nokia ''1) ?IP program. In t0e summer o" 1)) 9 Nokia contracted to identi"y young9 0ip bloggers in !anada 8it0 at least ,)) blog 0its per day and 8it0 8ireless ser&ice t0roug0 a particular carrier9

#otorola Annual Report 1)) 9 p. ,, Samsung Annual Report 1)) 9 p. ') ,) Guillaume du Gardier9 IRemember #ar=ui>s Blogosp0ere programS No8 Nokia is playingJ9 #arc0 9 1))2. 0ttp/KK888.prt0oug0ts.comKnokiaL''1)Kinde..0tml ,1 I!ase study o" a marketing blog/ Nokia>s ''))J9 Step0en Baker9 Business3eek9 April 1;9 1))2 0ttp/KK888.business8eek.comKt0eLt0readKblogspottingKarc0i&esK1))2K),KcaseLstudyLo"La.0tml
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and ga&e ;) suc0 bloggers a ne8 camera p0one.,1 5inally9 Nokia gets a 0ea&y amount o" press "rom some 8ell:kno8n tec0nology bloggers9 most notably *arla #ack,49 as part o" an indeterminate relations0ip. 30et0er t0e medium is or is not t0e message in general9 it certainly is 8it0 respect to blogs in speci"ic. By promoting its 0andsets in t0is manner9 Nokia seeks to establis0 itsel" as t0e youngest and 0ippest o" t0e mobile p0one brands. Nokia also uses Pou+ube as a medium "or getting its young:and:0ip brand image across. ItDs posted a t8o:minute IcommercialJ,,9 spoo"ing t0e idea o" a &ideo "orm letter "rom a !-$ 8it0 one personDs name pasted in9 and concluding 8it0 a brie" Nokia logo and message. ItDs use"ul "or t0e e.periential marketing 80ic0 Nokia is most interested in9 appealing to its customersD "eelings9 but less use"ul at e.plaining e.actly 80at t0e product is or 80at it does. 5inally9 Nokia promotes its young:and:0ip brand image 8it0 e&ents suc0 as t0e INokia Ne8 PearDs -&eJ party in 1)) . $n *ecember 41st9 Nokia sponsored e&ents in 7ong Kong9 #umbai9 Berlin9 Rio de Janeiro9 and Ne8 Pork !ity9 reac0ing o&er 1mil people and presenting suc0 musicians as Nelly 5urtado9 t0e Black -yed Peas9 Jo0n 6egend9 S[rgio #endes9 Ri0anna9 6udacris and K+ +unstall.,2 In 0is Nokia 3orld 1)) keynote9 P0il Bro8n9 Nokia ?ice President o" Sales and #arketing "or #obile P0ones < -urope9 pressed t0e Nokia marketing t0eme o" appealing to peopleDs emotions and needs9 as opposed to emp0asiCing 0o8 many megapi.els a p0oneDs camera can resol&e. In keeping 8it0 t0at "ocus on e.periential marketing9 Nokia 0as redoubled its emp0asis on retail stores. !li"" !rosbie9 Nokia *irector o" Retail #arketing9 ga&e a Nokia 3orld 1)) session on NokiaDs 5lags0ip Store concept. Nokia 0as plans "or 1( 5lags0ip Stores 8orld8ide9 in ma%or cities suc0 as Ne8 Pork9 !0icago9 #osco89 7ong Kong9 #e.ico !ity9 and 6ondon. +0us "ar9 t0e A&erage Selling Price o" p0ones at t0e 5lags0ip Stores is trending to 1 2\F o" t0e market a&erage.
INokia >seeds> bloggers 8it0 "ree camera p0onesJ9 5inancial Post9 June 4)9 1)) 0ttp/KK888.canada.comKtopicsKtec0nologyKne8sKgiCmosKstory.0tmlSidT""a2'1a(:1,12:,bb :(eb2: 1c1db b';c11BkT ,;'' ,4 darlamack.blogs.com < and seriously9 searc0 t0is 8omanDs name9 or I#obile *i&aJ9 and youDll "ind a lot o" discussion around 0er blog. ,, 0ttp/KK888.youtube.comK8atc0S&TL4N4PuoIauk ,2 0ttp/KKnokiane8yearse&e.msn.comK
,1

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NokiaDs strong brand9 e""ecti&e segmentation o" t0e 0uge and di&erse cell p0one market9 promotional "ocus on yout0"ul consumers @80o 8ill purc0ase many cell p0ones o&er t0eir li&esA9 and cle&er marketing tec0ni=ues lea&e t0em 8ell positioned among mobile 0andset makers.

=inancials
Nokia turned a E,. bil operating pro"it on E4,.1 bil re&enue in 1))2 @operating margin o" 14. FA9 up "rom E,.4 bil operating pro"it on E1;., bil re&enue in 1)), @operating margin o" 1,.'FA. By 8ay o" comparison9 t0eir most similar competitor9 #otorola9 reported G,.'bil operating pro"it on G4 .( bil re&enue in 1))29 "or an operating margin o" 11.(F. Nokia reports "inancial results "or "our operating segments/ #obile P0ones #ultimedia -nterprise Solutions Net8orks

Products o" t0e #obile P0ones and #ultimedia segments are becoming di""icult to distinguis0. Bot0 segments produce 80at most people 8ould call Icell p0onesJ. #obile P0ones takes a bottoms:up approac09 integrating 80at are becoming common "eatures @suc0 as a camera and a music playerA into cell p0ones9 80ile #ultimedia starts 8it0 a con&erged de&ice. ItDs not clear 80et0er t0is organiCational structure 8ill continue to make senseO itDs =uite likely t0at merging t0e di&isions9 or retasking #obile P0ones to "ocus on ine.pensi&e communication de&ices and #ultimedia to "ocus on con&ergence de&ices9 8ill better ser&e Nokia as it seeks to capitaliCe upon gro8t0 opportunities in emerging markets. -nterprise Solutions is best described by Nokia itsel"/ (nterprise .olutions offers businesses and institutions a broad range of products and solutions, including enterprise$grade mobile devices, underl ing securit infrastructure, software and services. We also collaborate with a range of companies to provide fi#ed I+ network securit , mobiliFe corporate e$mail and e#tend corporate telephone s stems to Nokias mobile devices. ,1

5inally9 Net8orks is t0e Nokia di&ision responsible "or @cellA net8ork pro&ider in"rastructure < not only does Nokia sell t0e mobile 0andset9 but t0ey also sell t0e base station at t0e ot0er end o" t0e radio 8a&es. $ne o" NokiaDs primary competitors in t0e mobile 0andset market is #otorola. In "act9 #otorola competes directly 8it0 all "our o" NokiaDs operating segments. #otorola reports its business as #obile *e&ices9 Go&ernment and -nterprise #obility Solutions9 Net8orks9 and !onnected 7ome Solutions. +0ree o" #otorolaDs reporting units 0a&e direct analogs in NokiaDs business < !onnected 7ome Solutions isnDt a market in 80ic0 Nokia competes.
:%!&ia 6ivi$i!n %ame$; Mobile P&ones F %et -a e$ Multi+edia O'eratin0 #r!fit O'eratin0 )ar0in Net%orks %et -a e$ O'eratin0 #r!fit O'eratin0 )ar0in "nterprise %et -a e$ O'eratin0 #r!fit O'eratin0 )ar0in 2((* Nokia Motorola B 26,792 >21,455 B 4,434 >2,198 1645< 1042< B 6,557 >6,332 B 855 >990 1340< 1546< B 861 >6,597 *B 258 >882 *3040< 1344< 2((; Nokia Motorola B 22,197 >17,108 B 3,961 >1,728 1748< 1041< B 6,431 >6,026 B 884 >718 1347< 1149< B 839 >6,228 *B 210 >842 *2540< 1345< :)!t!r! a 6ivi$i!n %ame$; Mobile !evices %et -a e$ O'eratin0 #r!fit O'eratin0 )ar0in Net%orks %et -a e$ O'eratin0 #r!fit O'eratin0 )ar0in Govern+ent and %et -a e$ O'eratin0 #r!fit "nterprise Mobilit$ O'eratin0 )ar0in Solutions :a fi0ure$ in mi i!n$, exce't 'ercent;

Table ?7. Nokia and Motorola Margins b$ Seg+ent' 2((; and 2((*;)

Hn"ortunately9 #otorola does not report e.pense categories by segment9 so 8e canDt per"orm common:siCe analysis on a segment by segment basis at t0e le&el o" detail 8e mig0t like. Still9 8e obser&e t0at NokiaDs t8o main 0andset di&isions combine to operate at signi"icantly 0ig0er margins t0an does #otorolaDs 0andset di&ision9 and on about ,)F more re&enue @depending on e.c0ange ratesA. #otorolaDs Go&ernment and -nterprise di&ision is at least si. times t0e siCe o" NokiaDs -nterprise Solutions di&ision9 and operates pro"itably. +0e net8ork di&isions o" Nokia and #otorola are broadly similar in t0eir re&enue and margins. +0is analysis suggests t0at NokiaDs 0andset di&ision is its biggest strengt0. +0ree o" NokiaDs di&isions combined to record total operating pro"its o" E,.2bil and E,.;bil in 1)), and 1))29 respecti&ely. $ne di&ision9 -nterprise Solutions9 0ad operating losses o" E11)mil and E1 ) in t0ose same periods.

Based on data "rom Nokia and #otorola 1))2 annual reports

,1

/"6IS"! ?2?2G2((* B, B.SIN"SS G/O.P' "./ +illion :audited; Mobile Multi+edia "nterprise Net%orks Co++on "li+ina2 Group P&ones Solutions Group tions =unctions %et $a e$ /r!$$ 'r!fit Gross +argin' H 2e$earch and deve !'ment ex'en$e$ < !f net $a e$ -e in0 and mar&etin0 ex'en$e$ < !f net $a e$ +dmini$trative and 0enera ex'en$e$ < !f net $a e$ Other inc!me and ex'en$e$ +m!rtiDati!n !f 0!!d7i O'eratin0 'r!fit Operating +argin' H 20,811 6,480 1.1 *1,245 640 *1,541 744 *68 043 *28 * 3,598 1). 5,981 2,489 '1.( *860 1444 *705 1148 *38 046 *50 * 836 1'.0 861 402 '(.) *329 7C.2 *221 2*.B *74 C.) *36 * *258 ! 0.0 6,557 2,590 *." *1,170 1748 *475 742 *211 342 121 * 855 1 .0 * 21 *19 * 34,191 11,982 ".0 *3,825 1142 *2,961 847 *609 148 52 * 4,639 1 .(

*221

*19

*218 45 * *392

* *

Table ?;. Nokia 2((* "arnings b$ Business Group;B

-nterprise Solutions is clearly =ualitati&ely di""erent "rom t0e ot0er business groups in terms o" its e.penses and pro"its. -nterprise SolutionsDs RB* e.pense is t8ice t0e ne.t largest RB* e.pense as a "raction o" sales9 and similarly "or Sales B #arketing and General B Administrati&e. Accordingly9 80ile t0e ot0er t0ree di&isions 0a&e operating margins bet8een 14 and 1' percent9 -nterprise Solutions runs at a 4) percent operating loss. ItDs possible "or -nterprise Solutions to be running at a loss "or a good reason. Some suc0 reasons mig0t include/ ItDs a ne8 business9 and e.pected to turn a pro"it in t0e "uture. ItDs a complementary business to one 80ic0 does turn a pro"itO losing money in t0is business enables t0e company to make more money in anot0er. ItDs a strategically important business because it denies or reduces a pro"itable market opportunity to a competitor.

A&ailable in NokiaDs 1))2 annual report or as an -.cel spreads0eet at 0ttp/KK888.nokia.comKA,11 ,;

,'

,4

A glance at t0e rele&ant section o" NokiaDs 1)), "inancials suggest t0at9 i" -nterprise Solutions is e.pected to turn a pro"it in t0e "uture9 it may 8is0 to get started already.
"nterprise "nterprise Solutions Solutions 2((* 2((; %et $a e$ /r!$$ 'r!fit Gross +argin' H 2e$earch and deve !'ment ex'en$e$ < !f net $a e$ -e in0 and mar&etin0 ex'en$e$ < !f net $a e$ +dmini$trative and 0enera ex'en$e$ < !f net $a e$ Other inc!me and ex'en$e$ +m!rtiDati!n !f 0!!d7i O'eratin0 'r!fit Operating +argin' H 861 402 '(.) *329 7C.2 *221 2*.B *74 C.) *36 * *258 ! 0.0 839 364 ' .' *304 7).2 *199 27.B *61 B.7 *4 *6 *210 !2".0

C&ange E246< E1044< +).(, E842< F*.*H E1141< FC.;H E2143< F?B.CH

Table ?*. Nokia "nterprise Solutions =inancials' 2((; vs 2((*;C

-nterprise Solutions did impro&e its top line by 1 percent "rom 1)), to 1))2. Hn"ortunately9 spending gro8t0 in eac0 o" its e.pense categories gre8 "aster t0an re&enue : RB*9 Sales9 and GBA all gre8 as a "raction o" re&enue "rom 1)), to 1))2. I" -nterprise Solutions 8ere a ne8 business e.pected to turn a pro"it in t0e "uture9 8eDd e.pect to see more t0an 1F year:o&er:year gro8t0 in sales. At t0e current top:line gro8t0 rate9 -nterprise Solutions 8onDt gro8 its 8ay into t0e black9 and 8it0 any top:line gro8t0 rate9 i" e.penses are gro8ing "aster t0an re&enue9 itDs impossible to gro8 into pro"itability. 3e canDt argue t0at -nterprise Solutions "alls into t0e second category9 eit0er. I" Net8orks ran at a loss9 8e mig0t be able to argue t0at Nokia subsidiCes its Net8orks business to ensure t0ere 8ere cell to8ers in t0e 8orld "or its #obile P0ones and #ultimedia di&isionsD products to use. Selling Ienterprise:grade mobile de&ices9 underlying security in"rastructure9 so"t8are and ser&ices9 Y "i.ed IP net8ork security9J
A&ailable in NokiaDs 1))2 annual report or as an -.cel spreads0eet at 0ttp/KK888.nokia.comKA,11 ,;
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,,

and so "ort09 t0oug09 canDt be reasonably argued to be critical to t0e success o" NokiaDs pro"it:making di&isions. 5inally9 t0ereDs t0e t0ird category9 denying a pro"itable market to a competitor. +0is test "ails because t0e -nterprise Solutions di&isionDs re&enue is so smallO i" t0ereDs a market to be denied9 itDs eit0er a tiny market9 or -nterprise Solutions isnDt denying muc0 o" it. 3e conclude t0at t0e -nterprise Solutions di&ision is a strategic 8eakness "or Nokia9 and address it "urt0er in our Recommendations. In summary9 NokiaDs "inancials are strong. Its E4. mil net pro"it on E4,mil sales is an entirely acceptable net margin9 and its top: and bottom:line gro8t0 are bot0 respectable. $nce it "i.es its -nterprise Solutions di&ision9 it s0ould 0a&e e&en brig0ter "inancial prospects.

/esearc& and !evelop+ent

Nokia is a 8orld leader in mobile communications9 dri&ing t0e gro8t0 and sustainability o" t0e broader mobility industry. Nokia connects people to eac0 ot0er and t0e in"ormation t0at matters to t0em 8it0 easy:to:use and inno&ati&e products like mobile p0ones9 de&ices and solutions "or imaging9 games9 media and businesses. Nokia pro&ides e=uipment9 solutions and ser&ices "or net8ork operators and corporations. Nokia>s global de&eloper program connects de&elopers to tools9 tec0nical in"ormation9 support9 and distribution c0annels t0ey can use to build and market applications around t0e globe. 5rom o""ices in t0e H.S.9 -urope9 Japan9 !0ina9 and Singapore9 5orum Nokia pro&ides tec0nical and business de&elopment support to de&elopers and operators to assist t0em in ac0ie&ing t0eir goal o" success"ully launc0ing applications and ser&ices to consumers and enterprises. Nokia design re=uirements/ include tec0nology combining t0e "our attributes re=uired "or mobile p0ones9 P!Ds B 8rist:top computers to connect 8it0 sensors9 0uman inter"ace de&ices9 toys B 0ome electronics de&ices. 1A 6o8 peak9 a&erage B idle mode po8er consumption 1A 6o8 cost B siCe "or accessories B 0uman inter"ace de&ices 4A #inimal cost B siCe addition to mobile p0ones B P!>D ,A Global9 intuiti&e B secure multi:&endor interoperability

,2

NokiaDs in&estment in Researc0 and *e&elopment 0as remained essentially "lat o&er t0e last t0ree years. NokiaDs consistently solid "inancial per"ormance and its leaders0ip position in t0e global 0andset market suggest it 0as positioned itsel" 8ell t0roug0 its in&estment and de&elopment strategies. Pear 1))2 1)), 1))4 RB* In&estment E49(129)))9))) E49'' 9)))9))) E49'((9)))9)))

Table ?). Nokia /esearc& and !evelop+ent Invest+ent' 2((722((*

By comparison9 #otorola in&ests o&er G4bil @HSA annually on RB*9 but #otorola claims 12F year on year gro8t0 in RB* spending "or 12 years. Bot0 companies in&est o&er 0al" t0eir RB* budgets on so"t8are de&elopment. +ec0nology is used by Nokia to impro&e internal operations and product de&elopment. Global operations may be managed =uickly t0roug0 0ig0 speed communication. By sourcing manu"acturing operations9 production may be managed to matc0 consumer demand. Assembly lines may be c0anged to matc0 market conditions. Nokia 0as de&eloped parts management models to e""iciently manage in&entory. +0ese models are used bot0 internally and e.ternally. $pportunities are created "or ne8 consumer products as tec0nology s0i"ts. Nokia 0as increased market s0are t0roug0 e""iciently combining ne8 tec0nologies. RB* managers are responsible "or Ie.ploring and de&elopingJ ne8 tec0nologies re=uired "or creating a "unctional mobile in"ormation society. Nokia 0as RB* centers in ele&en countries. Appro.imately 4 F o" employees are in&ol&ed in RB*. S0ort:term goals are to de&elop competiti&e products e""iciently. 6ong:term goals are to disrupt t0e present. Nokia cooperati&ely participates in standardiCation and RB* pro%ects 8it0 uni&ersities9 researc0 institutes and ot0er companies. NokiaDs corporate researc0 unit employs appro.imately 191)) sta"". 1)F o" t0ese people 0old a P0*. +0e researc0 group generates 0al" o" t0e patents o" t0e company. Sales 0a&e increased steadily since 1))1 @1;; discounting 1)))A. Net pro"it 0as been stable since 1))1. Nokia is e.tending a leaders0ip position into emerging markets. +0ese results indicate Nokia 0as positioned itsel" 8ell t0roug0 in&estment and de&elopment strategies.

Nokia 0as de"ined an ob%ecti&e to uni"y tec0nology and create a single de&ice "or personal needs. 7arry SantamVki in -spoo9 5inland &o8s to take a sip o" cod li&er oil "rom t0e bottle on 0is desk i" 0e e&er utters t0e 8ord Ip0oneJ. U3e are "orbidden to call t0em p0ones9U said t0e &ice president o" multimedia strategy and business de&elopment. Instead9 t0ey>re Umultimedia computers.U +0e decree re&eals Nokia>s &ision o" t0e cell p0one "uture9 one in 80ic0 one de&ice 8ill manage your in"ormation9 communication and entertainment needs ] a single remote control o" sorts "or your electronic li"e.,;

=igure ;. Nokia Product !evelop+ent Model

Operations and Iogistics

In No&ember o" 1)) Nokia !orporation announced t0at it 0as signed a 3!*#A 4GK7SPA net8ork and managed ser&ices contract t0at enables Indosat to o""er 4G and
,;

.eattle 1imes technolog reporter, 1ricia )ur ee' 27>$4>4$8248 or tdur eeLseattletimes.com.

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8ireless broadband ser&ices. Indosat 8ill 0a&e Nokia operate its net8ork so t0e operator can remain "ocused on its core business and customer relations0ips 80ile adopting 4G tec0nology. Nokia 8ill pro&ide Indosat turnkey ser&ices9 including ci&il 8orks9 net8ork planning9 implementation and integration o" a 3!*#A 4GK7SPA net8ork. In pro&iding managed ser&ices9 Nokia 8ould take responsibility "or building9 operating and trans"erring as 8ell as optimiCing t0e Indosat 4G net8ork. Nokia operates in "our business segments. +0e #obile P0ones segment o""ers mobile p0ones and de&ices based on global cellular tec0nologies9 suc0 as global system "or mobile communications @GS#AKen0anced data "or GS# e&olution @-*G-A9 t0ird generationK8ideband code di&ision multiple access @4GK3!*#AA and code di&ision multiple access @!*#AA Nokia President and !-$ $lli:Pekka Kallas&uo said9 I+o en%oy t0e "ull bene"its o" t0e continuing gro8t0 o" t0e global de&ice market t0at Nokia e.pects9 8eD&e made a number o" important strategic mo&es and organiCational c0anges9 and 0a&e put our marketing and design e""orts into a s0arper "ocus. 3it0 t0ese c0anges9 and more to come9 8e belie&e Nokia 0as t0e po8er to build a "urt0er impro&ed port"olio o" de&ices t0at raises industry standards to a 80ole ne8 le&el.J Kallas&uo also described t0e uni=ue opportunity 0e belie&es Nokia 0as to mobiliCe t0e Internet "or t0e mass market. I3it0 an estimated (2) million Nokia de&ice users out t0ere9 8e are positioned to connect more people to t0e Internet t0an any ot0er company in t0e 8orld. 3e are acti&ely aligning our strategy in pursuit o" t0is ma%or business opportunity.J Kallas&uo presented "orecasts "or t0e industry and its "inancial targets "or t0e ne.t one to t8o years @1))':)(A. Nokia recogniCes a &ariety o" operational &ulnerabilities. +0e &ulnerabilities are clearly articulated and strategies 0a&e been de&eloped to mitigate "or t0e &ulnerabilities 5oreign e.c0ange risk arising "rom &arious currency combinations. Structured 5inance !redit Risk associated 8it0 arranging or pro&iding term "inancing in relation to in"rastructure pro%ects. Strategic minority in&estments in publicly traded companies. International credit8ort0iness allo8ing "or use o" international capital and loan markets. ,(

5ailure to maintain or impro&e market position and respond success"ully to c0anges in t0e competiti&e landscape. 5ailure to e""iciently manage manu"acturing and logistics 8it0out interruption. 5ailure to ensure t0at products and solutions meet customersD =uality9 sa"ety9 security and ot0er re=uirements. Reliance on comple. and 0ig0ly centraliCed in"ormation tec0nology systems and net8orks. Increasingly comple. tec0nology in&ol&ing numerous ne8 Nokia patented and ot0er proprietary tec0nologies9 as 8ell as some de&eloped or licensed to us by certain t0ird parties.

+0e global net8orks business relies on a limited number o" customers and large multi:year contracts. -merging market countries may be materially ad&ersely a""ected by economic9 regulatory and political de&elopments. Pro"itability may be materially ad&ersely a""ected by a "ailure to manage price erosion or costs related to products and operations. +0ere is a continuing s0i"t o" 0andset manu"acturing operations to middle and lo8:income countries. Globally9 t0e geograp0ic "ocus o" electronics manu"acturing 0as s0i"ted o&er t0e years9 passing "rom de&eloped countries to Japan in t0e 1; )s9 to +ai8an and Korea in t0e ()s9 to #e.ico in t0e early ;)s9 and to !0ina in t0e late ;)s and early 11st century. +oday9 !0ina is clearly t0e dominant 0andset manu"acturing country9 but t0e dri&e to lo8er costs is leading manu"acturers to look to8ard India and ot0er Asian countries suc0 as +0ailand in searc0 o" lo8er costs.

Nokia deli&ers ad&anced repair and spare part logistics solutions to more t0an 12) operators globally. NokiaDs global spare part logistics net8ork comprises t0ree global distribution centers9 4; local country 0ubs and more t0an 1)) acti&e strategic spare part 8are0ouses "or mission:critical part s0ipments. +0e Nokia #ulti:?endor Spare Part #anagement ser&ice is built on a range o" acti&ities9 including/

,;

+ool:based spare part demand planning to =uanti"y &olumes and consumption patterns 5inancing and sourcing o" spare parts "rom se&eral suppliers Stocking parts in 8are0ouses close to customersD installed base In&entory management #ulti:ec0elon spare part distribution #ission:critical logistics @supply 8it0in 1<, 0oursA Returns management @rapid collectionA Repair9 re"urbis0ment and upgrade o" parts Repair &endor management "or multi:&endor e=uipment 3arranty management 6i"e cycleK&ersion management 1,K' call center operation +ec0nical support *isposal solutions

Strategic placement o" operations around t0e globe minimiCe man:made or natural t0reats. Nokia 0as mitigated "acility &ulnerabilities by distributing 8ork globally. +0ey 0a&e supplier management model to ensure a steady "lo8 o" components and assembled products. +0e illustration belo8 s0o8s 80ere Nokia is located. 4rror9 :yperlin3 reference not valid;

2)

=igure *. Nokia =acilities >orld%ide

-.ternal stake0olders include NG$s9 go&ernments9 in&estors9 s0are0olders9 uni&ersities9 suppliers9 and customers. +0roug0 dialogue 8it0 suppliers compre0ensi&e regional and 8orld8ide sur&eys are conducted on an ongoing basis. Nokia e&aluates regional risks and de&elops plans to ensure uninterrupted operations. $ngoing customer:speci"ic dialogues are also carried out bet8een account teams and t0eir trade customers9 along 8it0 customer satis"action sur&eys. 3it0 our suppliers9 8e 0a&e an e.tensi&e supplier management and de&elopment process. !R topics are generally included "or debate.

21

=igure ). Single26endor vs. Multi26endor Spares Model

+0e bene"its o" c0oosing Nokia as an outsourcing partner "or multi:&endor spare part management include/ -conomies o" scale t0roug0 t0e operation o" a s0ared user plat"orm "or Nokia customers @8are0ouses9 bu""er stock and I+ systemsA -.perience in contracting and managing numerous repair &endors across &arious tec0nologies and geograp0ies -.perience in contracting and managing se&eral logistics ser&ice pro&iders based on global contracts Application o" ad&anced I+ tools "or t0e management o" spare parts @planning9 sourcing9 "ield supply9 re&erse logistics9 s8ap9 repair and disposalA 3illingness and "inancial strengt0 to take o8ners0ip o" multi:&endor in&entory Hnderstanding o" t0e comple.ity and criticality o" telecommunications net8orks as a 0ig0ly e.perienced telecommunications e=uipment and ser&ice pro&ider9 Nokia 0as built its business on a "oundation o" tec0nical e.pertise and ser&ice e.cellence. *e&eloping long:term partners0ips is key to NokiaDs success.

21

Nokia is t0e outsourcing supply to ot0er companies like $range #obile. $range #obile 0as deployed a number o" outsourcing strategies9 80ic0 0a&e &aried o&er t0e past se&eral years. $range #obile $utsourcing Strategy 1;;; *ual Supplier @NokiaKSiemensA 1))1 Sole Supplier @SiemensA 1))4 *ual Supplier @SiemensK-riccsonA 1)) : Sole Supplier @NokiaA 1))(
Table ?B. Outsourcing Strateg$ o Orange Mobile

+able 1' suggests t0at Nokia 0as recently establis0ed an operations and logistics ad&antage in t0e communications "ield. Nokia 0as gro8n "aster t0an t0e market by engaging in 0ypercompetition. +0ey 0a&e increased t0e capacity o" "actories by installing ne8er mac0inery and impro&ing manu"acturing processes. Nokia can ac0ie&e 0ig0er &olumes t0an be"ore9 8it0 less labor. Ne8 products are designed "or manu"acturability as 8ell as per"ormance. +0e 8ireless 0andset market is dominated by a small number o" po8er"ul players. +0is trend9 80ic0 is e.pected to intensi"y in t0e coming years9 is t0e result o" large &endors bene"iting "rom t0eir economies o" scale 80ile t0e smaller players are su""ering "rom t0e e""ects o" se&ere price competition. Bet8een 1)), and 1))29 Nokia increased its market s0are by more t0an one percent 80ile #otorola grabbed an e.tra "i&e percent o" t0e pie. !on&ersely9 t0e 0andset &endors outside o" t0e top "i&e spots garnered only 14F o" t0e market in 1))29 a decrease o" nearly si. percent "rom t0e year:ago period. SiemensD decline in market s0are likely played a role t0e companyDs decision to sell t0e 0andset di&ision to BenM. I" t0is trend continues9 as seems probable9 t0e smaller players may be "orced to e.it t0e market.

9u+an /esources Manage+ent

According to 3ikipedia.org9 0uman resources 8it0in corporations and businesses re"ers to t0e indi&iduals 8it0in t0e "irm9 and to t0e portion o" t0e "irm>s organiCation t0at deals 8it0 0iring9 "iring9 training9 and ot0er personnel issues2). 7uman resource
2)

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management @7R#A on t0e ot0er 0and is bot0 an academic t0eory and a business practice t0at addresses t0e t0eoretical and practical tec0ni=ues o" managing a 8ork"orce. So9 t0e 0uman resource @7RA or 7R# department 8it0in a company is c0arged 8it0 0andling t0e 0uman aspects o" t0e organiCation. So 0o8 does Nokia 0andle t0e labor "orce 8it0in t0e companyS 30at is t0e "unction o" t0e 7R department 8it0in NokiaS Nokia 0as a 8ell:de"ined and e""icient 0uman resources team9 di&ided into t0ree core "unctional areas < $rganiCational 7R9 Business 7R9 and !P*. +0ese groups 8ork closely 8it0 employees and management to create and carry out all people initiati&es. +o understand t0at better 8e 0a&e to look at NokiaDs current 7R# ob%ecti&es9 strategies9 policies9 and programs. Since none o" t0e team members actually 8ork "or Nokia9 t0e 7R# ob%ecti&es9 strategies9 policies9 and programs are not kno8n. Scouring t0e Internet and t0e companyDs 8ebsite 0as not produced t0em9 but 8e can try to identi"y 80at t0ey are. +o detect 80at t0e 7R# &ision and mission 8ould be9 8e 8ill start by re&ie8ing t0e corporate &ision and mission. +0en 8e 8ill look at t0e leaders0ip o" t0e 7R department. A"ter t0at9 8e 8ill obser&e t0e structure o" t0e company. By looking at t0e corporate &ision and mission9 ;ision' %ur Customers continue to be our first priorit 0ission' In a world where ever one can be connected, we take a ver human approach to technolog 8e can determine 80at t0ey 8ould be "or t0e 7R department and "unction 8it0in Nokia. -&ery department in a company s0ould 0a&e a &ision and mission. +0ey 0elp set t0e direction t0at t0e department s0ould go in. +0ere"ore9 eac0 sub:department mission and &ision s0ould support t0e o&erall corporate ones9 to ensure e&eryone in all departments is going in t0e same direction. It is t0e same policy t0at is o"ten "ollo8ed 8it0 a balanced scorecard. -&ery ob%ecti&e supports t0e ob%ecti&e abo&e it. Ne.t9 8e 8ill look at t0e leaders0ip o" t0e 7R department. !urrently t0e 7R department at Nokia is led by 7allstein #oerk. 7e is responsible "or all 0uman resources acti&ity including employee de&elopment9 management and leaders0ip de&elopment9 compensation9 bene"its9 sta""ing and global di&ersity. 7e 0olds a U*iplomekonomU degree "rom t0e Nor8egian Sc0ool o" #anagement. +0e main "ocus o" 0is leaders0ip is 2,

to increase communication bet8een t0e &arious departments9 to ensure good communication across t0e board. Hnder 0is directi&e NokiaDs 7R department became more in&ol&ed e.ternally9 as e.empli"ied by NokiaDs members0ip in t0e -uropean 7R 5orum219 80ic0 meets regularly to discuss 7R issues and best practices. +0e organiCation c0art o" t0e company is &ery "lat. Nokia is kno8n to be one o" t0e "lattest organiCations in t0e 8orld. I tried to locate t0e actual org. c0art9 but t0at is tig0tly protected be0ind t0e company "ire8all. Ne&ert0eless9 8e 8ere able to "ind t0e structure c0art9 abo&e. 6ooking at t0e structure9 7R 8ould "all under t0e Business In"rastructure group9 and it 8ould be e""ecti&e across all t0e product lines. As an e.ample9 t0e 7R director at NokiaDs Palo Alto researc0 site 8orks in a matri.ed en&ironment9 reporting to t0e global 0ead o" business 7R9 and 8orking closely 8it0 site managers9 t0roug0out t0e H.S.9 to align 7R and $* strategy 8it0 business directi&es21. $ne ot0er aspect o" t0e 7R "unction t0at needs to be taken in account is t0e globaliCation aspect. Nokia operates around t0e 8orld. 5or e.ample9 in India t0e company 0as a &ery robust RB* site. +0is global "ootprint means t0at 7R 0as to ensure t0e &arious cultures and la8s are not trampled on. 7R seems to be li&ing up to its responsibility =uite 8ell9 as t0e 5innis0 society is =uite egalitarian. Anot0er corporate aspect 7R needs to consider is t0e &arious locations its employees actually 8ork. According to In"o8orld249 employees considered telecommuting t0e best personal bene"it9 in a 1))) sur&ey.

I$rganiCations Participating in -7R5J 0ttp/KK888.e0r".orgKinde..p0p INokia Researc0 !enterJ9 0ttp/KK888.&"andco.comKresourcesKP*5sKSamplePosition*escription.pd" 24 IRetaining Pour #ost ?aluable AssetsJ9 0ttp/KK888.in"o8orld.comKarticlesKcaK.mlK))K)'K1,K)))'1,caretain.0tml
21

21

22

=igure B. "+plo$ee Bene it Pre erences

Nokia does allo8 its employees to 8ork remotely9 eit0er "rom 0ome or ot0er places suc0 as co""ee s0ops. As 8e 8ill see in t0e section 80ere 8e discuss NokiaDs In"ormation +ec0nology9 7R is in&ol&ed in t0e e""ort to re:organiCe 8ork globally. 7a&ing taken all o" t0ese in consideration9 80at s0ould t0e 7R department &ision and mission beS $ur suggestion needs to take in consideration t0e "ollo8ing/ 5lat organiCation 3orking remotely GlobaliCation Promote communication Support e""ecti&e teams 6eader in t0e 7R industry

$ur suggestion o" t0e &ision and mission9 80ic0 s0ould be clearly stated on t0e 7R intranet site and documentation/

&ision< 7uman Resources 8ill "unction as a strategic partner to position Nokia as a leading employer by supporting et0ical and moral be0a&ior9 e.cellent combination9 and implementing best practices. (ission< +0e mission o" 7uman Resources is to promote a ric0ly di&erse9 inno&ati&e and creati&e en&ironment t0at 8ill support o&erall corporate goals. +o accomplis0 t0is mission 7uman Resources 8ill/ !reate inno&ati&e and "le.ible employee:centered programs and ser&ices to attract and retain t0e most talented 8ork"orce -mp0asiCe a di&erse9 positi&e9 and supporti&e 8ork en&ironment 5ocus on Zemployee as customerD consistently stri&ing to e.ceed e.pectations by supporting and maintaining/ Respect "or t0e indi&idual *i&ersity as a competiti&e strategy Appreciation and recognition "or good 8ork #anagement accessibility and communication 3ork"orce de&elopment9 globally

+0e 7R &ision and mission abo&e support and are consistent 8it0 t0e corporate &ision and mission. Nokia 0as made a strategic decision 8it0 implementing +0e Nokia 3ay. 7R is directly responsible 8it0 ensuring ne8 employees understand t0is culture9 and t0at t0ey can "unction and t0ri&e 8it0in it. 3e scoured t0e internet to see i" 8e can detect any la8suits9 complaints9 or ot0er any negati&e "eedback on t0e company9 and 8e could not "ind anyt0ing. Some o" t0e best companies9 suc0 as Intel9 can not boast as suc0. +0e trends t0at emerge "rom a 0appy 8ork"orce is a dri&e "or more social responsibility. Good employees make "or good ad&ertising. So Nokia 7uman Resources management introduced a ne8 global time:o"" guideline9 recommending t0at Nokia employees dedicate one to t8o 8orking days per year to t0e companyDs employee &olunteer program. In 1)) Nokia employees around t0e 8orld &olunteered "or nearly 1(9))) 0ours2,.
I!orporate Responsibility and NokiaDs Supply !0ainJ9 0ttp/KK888.nokia.comKN$KIAL!$#L1K!orporateLResponsibilityKSupplyLc0ainKSupplierLre=uirementsKN
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+0e 7R department also closely tracks e&ery employee>s progress. -&ery year in September9 Nokia employees across mobile p0ones9 net8orks and RB* di&isions set up teams comprising :( employees. -ac0 o" t0ese cross:"unctional teams 0as employees "rom marketing9 sales and logistics9 80o 8ould already 0a&e submitted a per"ormance rating o" t0emsel&es9 t0e company9 t0e di&ision9 and so on9 on &arious parameters. +0e teams are told to "ormulate an action plan and impro&e on t0e parameters 8it0 t0e lo8est scores. +0e 7R department coordinates t0is e.ercise and re&ie8s progress e&ery =uarter1. +0e 8ay t0at Nokia 7R 0andles &arious aspects o" globaliCation is by in"using a lot o" t0e 5innis0 social &alues into t0e company. +0e company places a 0uge emp0asis on e=uality9 80ere all employees are treated e=ually. +0is egalitarianism remo&es a lot o" barriers and stress points9 especially 80en dealing 8it0 a class structured society suc0 as -ngland and India. At Nokia e&eryone "lies economy class and stays at +a% 7otels 80en in India. All employees9 INokiansJ9 0a&e a !ommunicator as t0eir mobile p0one. And e&eryone "rom t0e 0ead to t0e guy 80o %oined yesterday : all 219))) Nokia employees 8orld8ide : 0a&e t0e same pro"it s0aring arrangement. +0is pro"it:s0aring could range "rom 1:2F o" its earnings globally. As 8e can see9 NokiaDs 7R department is an acti&e partner in 0elping set t0e strategy "or t0e 80ole corporation. 3e belie&e t0at t0e 7R department does pro&ide t0e company 8it0 a competiti&e ad&antage t0roug0 t0e &arious internal and e.ternal programs and relations0ips t0at it undertakes. 30ile 7R departments at ot0er companies engage in acti&ities t0at are similar9 8e belie&e t0e 5innis0 social &alue system allo8s NokiaDs 7R to do it better.

In or+ation S$ste+s
+0e In"ormation Systems @ISA department o" most companies pro&ides &arious ser&ices around tec0nology and process creation and implementation. $"ten9 t0e IS department is also re"erred to as t0e I+ @in"ormation tec0nologyA department. Hnder t0e IS department o"ten 8e can "ind &arious o&ersig0t departments9 suc0 as =uality and sa"ety. +0e IS department main "unction is to distribute e=uipment9 suc0 as computers

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and ser&ers9 set up and maintain net8orks9 and set up and maintain data management systems. !onsidering t0e "act t0at none o" us 8ork "or Nokia9 and none o" us are skilled enoug0 to penetrate t0eir corporate "ire8all @8e 8ouldnDt e&en i" 8e could "or &arious legal reasonsA9 8e 0a&e to resol&e oursel&es to using any company data a&ailable on t0e internet. So one o" t0e key aspects 80en inspecting a department is to assess t0e direction and leaders0ip9 and 0o8 it supports t0e o&erall organiCation. 3e can not detect 80at NokiaDs IS &ision and mission is9 and neit0er can 8e detect t0e strategies t0at it uses9 but 8e can dra8 in"erences based on ot0er documentation a&ailable. 3e 8ill also make some general assumptions t0at oug0t to be true "or any company o" NokiaDs siCe and operating in t0e same industry. At Nokia t0e IS department9 80ile it per"orms t0e said "unctions9 it seems to do a bit more. A ne8s release on NokiaDs 8ebsite states t0at its I+ department 0as partnered 8it0 its RB* department to de&elop9 test9 and conduct a "unctionality run on a ne8 tec0nology. 30ile many companies in t0e tec0nology sector use t0eir I+ departments as guinea pigs9 Nokia seems to make a concerted e""ort to ensure t0e I+ department is a partner in t0e de&elopment process as 8ell. +0e I+ department also 0as to take in consideration remote connecti&ity and 8ireless. Nokia is at t0e cutting edge o" t0e tele8orking tec0nology and its application < it is bot0 part o" t0eir business and essential to t0e 8ay t0ey operate. Nokia de&elops t0e 8ireless net8ork de&ices as 8ell as use t0em. +0e I+ department 0as to 0a&e a robust set o" procedures and standards in order to ensure minimal do8ntime. It 0as to allo8 remote accessibility to its net8ork "rom e.ternal locations suc0 as t0e 0ome. +o do t0at t0e I+ department 0as implemented 80at is kno8n as t0e Nokia IP Security. It is a piece o" 0ard8are t0at is an important part o" t0e company "ire8all22. $ne o" t0e assumptions t0at 8e can make is t0at Nokia 0as a large and comple. net8ork in"rastructure. Nokia 0as ten "actories 8orld8ide9 and it 0as to connect all o" t0em t0roug0 a company net8ork. +0is net8ork ine&itably 0as to use e.ternal pro&iders because it 8ill not be cost e""icient "or t0e company to p0ysically set up its o8n net8ork. +0ere"ore 8e kno8 t0at it 8ill use security so"t8are solutions suc0 as ?PNs @&irtual
IAriCona State Hni&ersity Simpli"ies Security 8it0 Nokia Solution.I 0ttp/KK80itepapers.tec0republic.com.comKcasestudy.asp.SdocidT ;14
22

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pri&ate net8orksA. Also9 t0e company 0as t0irty:one main suppliers globally. 3e can assume t0at it 0as set up an e.tranet to ensure e""icient and cost e""ecti&e collaboration 8it0 t0ese suppliers. Nokia partners 8it0 &arious "irms to test t0ird:party products on its 0ard8are. It 0as set up a program call t0e Nokia $K Program. +0is program is a certi"ication e""ort "or ot0er manu"actures to certi"y t0at t0eir products 8ork on t0e NokiaDs p0ones and 0ard8are. $ne suc0 e.ample is t0e collaboration 8it0 National So"t8are +esting 6abs @NS+6A to test t0e J1#- applications2 . +0ere are many ot0er programs 8it0in Nokia9 suc0 as t0e 6oopset product9 80ic0 0elps disabled I+ personnel conduct t0eir %obs more producti&ely. All o" t0ese programs and products 8ould "all under t0e %urisdiction o" t0e I+ department. +0ere"ore9 it can be sa"ely assumed t0at t0eir I+ department is not comprised o" a "e8 indi&iduals9 in a back room9 8orking on arc0aic e=uipmentO but more o" an e&ol&ed and ad&anced In"ormation Systems9 especially since Nokia manu"actures most o" t0e 0ard8are. All Nokians9 as Nokia employees call t0emsel&es9 0a&e a !ommunicator as t0eir mobile p0one. +0e !ommunicator is a series o" Nokia smart:p0ones9 all o" 80ic0 appear as normal p0ones on t0e outside yet 0a&e a keyboard and a large 6!* screen inside. +0is dual "unctionality ser&es t8o purposes9 constant a&ailability9 and data access. +0e system in place to allo8 t0e constant connecti&ity and dept0 o" data 0as to be =uite ad&anced. 3e can tell %ust by t0is detail t0at t0e IS department pro&ides a use"ul database 80ic0 pro&ides Nokians immediate data access "or e""icient decision making. +0is access pro&ides Nokia 8it0 a decisi&e competiti&e ad&antage in an industry 80ere timely data and decision making is strategically important.

INS+6 named Aut0oriCed +esting 6ab "or Nokia $K ProgramJ9 0ttp/KK888.nstl.comKaboutLnstlKpressLdocsKnokiaok4.12.)1.pd"

=igure C. Nokia Co++unicator D*((

Based on t0eses "indings9 80at do 8e e.pect NokiaDs IS departmentDs &ision and mission to look likeS 3ell9 letDs re&ie8 some o" our "indings/ -.tranet < 8it0 41 suppliers 8e can assume Nokia 0as an e.tranet Intranet < undoubtedly t0ey make use o" an intranet 3ebsite < 8e 0a&e spend countless 0ours perusing t0eir internet 8ebsite 5ire8all < a company o" t0is siCe 8ill make use o" a &ery e.tensi&e "ire8all setup ?PN < security measures "or remote connecti&ity9 "or telecommuting *atabases < in order to store all o" t0e data "rom testing9 logons9 etc

+aking all o" t0ese "actors into consideration9 8e t0ink t0e IS departmentDs &ision and mission s0ould be/ &ision< -nable leaders0ip and competiti&e ad&antage t0roug0 sound implementation o" tec0nology (ission< Nokia IS 8ill create and sustain a 8orld:class in"ormation tec0nology and telecommunications en&ironment t0at "osters inno&ation and collaboration9 8it0 minimal do8ntime "or all9 regardless o" time or place +0e IS &ision and mission9 abo&e9 s0ould be placed on t0e intranet 8ebsite9 and any communications "rom t0e I+ department. 3e belie&e t0at9 %ust like t0e 7R &ision and mission9 t0e IS &ision and mission supports t0e o&erall corporate &ision and mission. A"ter all t0e researc09 8eD&e concluded t0at NokiaDs IS department is on par 8it09 i" not a0ead o"9 ot0er corporations in t0e tec0nology industry. +0is result is to be e.pected

80en t0e -.ecuti&e Sta"" is so laden 8it0 tec0:sa&&y leaders9 suc0 as *r. +ero $%anperV9 80ic0 is t0e !0ie" +ec0nology $""icer "or Nokia. As t0e !+$ o" t0e company9 *r. $%anpera is e.pected to 0elp set t0e strategy "or t0e 80ole corporation. +0is decision: making role is re"lected in ot0er large corporations 80ere ISKI+ is represented in t0e top ec0elon o" t0e company.

SummarInternal =actors Strengt&s 5nn!vative mar&etin0 =rand $tren0th / !"a '!$iti!nin0 1 at 3 decentra iDed 3 matrixed !r0 1inni$h $!ci!'! itica envir!nment Out$!urced manufacturin0 -tr!n0 di$tri"uti!n net7!r& >eaknesses Aate t! c!nver0ence device$ .i$i!n3mi$$i!n unc ear -!cia re$'!n$i"i it9 Enter'ri$e 0r!u' financia $ Totals >eig&t /ating 0407 0415 0415 0410 0405 0415 0408 0410 0405 0405 0405 1400 5 5 4 3 5 4 4 1 1 1 1 >eig&ted Score 0435 0475 046 043 0425 046 0432 041 0405 0405 0405 3442 Co++ents = !0 mar&etin0, ex'erientia mar&etin0 are "rand $tren0th$ @6 m!$t va ua" e "rand 7!r d7ide * @1 am!n0 m!"i e hand$et ma&er$ -i0nificant revenue fr!m F c!untrie$ +''r!'riate !r0 $tructure f!r Guic& deci$i!n*ma&in0 * u$efu in tech :ever9!ne e $e d!e$ it, t!!; Create$ it$ !7n 7eather * drive$ it$ need$ int! 1inni$h 0!vernment and $!ciet9 On 9 d!e$ the m!$t va ue*added ta$&$, can Guic& 9 chan0e manufacturin0 ' an$ (undred$ !f th!u$and$ !f retai !ut et$ C!m'etiti!n arrived fir$t, fir$t attem't at a c!nver0ence device :%*/+/E; 7a$ n!t 7e received 6!e$nHt a''ear mi$$i!n3vi$i!n 7ere u'dated $ince de* c!n0 !merati!n -O)O re'!rt inc!n$i$tent 7ith interna '!$iti!nin0 %!t turnin0 a 'r!fit, d!e$nHt a''ear c !$e t! it, either4

Table ?C. I=1S Table or Nokia

1nal$sis o Strategic =actors

>eig&t /ating Strengt&s =rand $tren0th / !"a '!$iti!nin0 Out$!urced manufacturin0 0413 0413 0413 5 4 4 >eig&ted Score 0465 0452 0452 Co++ents @6 m!$t va ua" e "rand 7!r d7ide * @1 am!n0 m!"i e hand$et ma&er$ -i0nificant revenue fr!m F c!untrie$ On 9 d!e$ the m!$t va ue*added ta$&$, can Guic& 9 chan0e manufacturin0 ' an$ C!m'etiti!n arrived fir$t, fir$t attem't at a c!nver0ence device :%*/+/E; 7a$ n!t 7e received -O)O re'!rt inc!n$i$tent 7ith interna '!$iti!nin0 China, 5ndia, #hi i''ine$ .i$a #artner$hi' .! ati e ec!n!mie$ -&9'e

Aate t! c!nver0ence device$ >eaknesses -!cia re$'!n$i"i it9 Opportunties 5ncrea$e mar&et $hare 6eve !' emer0in0 mar&et$ %e7 8echn! !09 T&reats 1!rEx ri$& Totals #r!duct -u"$titute$

0408 0408 0408 0413 0408 0408 0408 1400

1 1 4 4 3 2 2

0408 0408 0432 0452 0424 0416 0416 3425

Table ?D. S=1S Matri: or Nokia

+0e S5AS table "or Nokia suggests t0ey respond slig0tly better t0an t0e a&erage "irm to t0e strategic "actors 80ic0 de"ine t0eir en&ironment. $ur recommendations are "ocused on le&eraging t0eir brand strengt09 addressing t0eir late arri&al in con&ergence 1

de&ices9 impro&ing t0eir reputation "or social responsibility9 and in&estigating ne8 tec0nology.

&e%ie. of #ission and /b0ecti%es

MIn a world where ever one can be connected, we take a ver human approach to technolog N +0e Nokia mission statement is consistent 8it0 some key strategic "actorsO global positioning9 increasing market:s0are9 and de&eloping emerging markets. +0ose strategies are directly linked to NokiaDs mission to connect e&eryone around t0e 8orld. +0e mission is broad enoug0 to be in:line 8it0 a 8ide range o" strategies suc0 as social responsibility and t0e creation o" con&ergence de&ices. Ironically Nokia is 8eak in bot0 o" t0ose strategies. +0e mission does not account "or NokiaDs problems suc0 as 0yper: competition and long:term pro"itability. +0at pro&es t0at a company needs proper ob%ecti&es t0at 8ill lead t0em t0roug0 t0eir mission. $t0er8ise t0e mission becomes only a p0rase t0ro8n around by management instead o" a dri&ing belie". +0e current Nokia ob%ecti&es @underlinedA and t0eir related strategies @"rom S3$+ analysisA/ N1 in !ustomer and !onsumer 6oyalty < brand strengt09 global positioning9 increase market:s0are9 de&elop emerging markets9 social responsibility @problemA. N1 in Product 6eaders0ip < late to con&ergence de&ices @8eaknessA9 product substitutes @8eaknessA. N1 in $perational -.cellence < outsourced manu"acturing9 distribution c0annel.

As you can see9 NokiaDs ob%ecti&es 0a&e led t0em to success in many key strategies. 5or t0ose strategies t0at Nokia is 8eak9 suc0 as creating con&ergence de&ices9 it is not t0e "ault o" t0e ob%ecti&e. +0e ob%ecti&e is clear9 N1 in product leaders0ip. +0e problem is t0at Nokia 8as late to create smart p0ones. +0ere"ore 8e recommend making slig0t c0anges to t0e mission and ob%ecti&es in 0opes t0at t0ey 8ill 0elp strengt0en t0e 8eaknesses. +0e current Nokia mission statement is more o" a statement t0an a mission. Alt0oug0 t0e statement pro&ides a uni"ying t0eme9 it does not clearly state t0e purpose o" t0e company. By si"ting t0roug0 t0e Nokia 8ebsite and based on t0eir tag line9 I!onnecting 4

People9J 8e 0a&e determined t0at a more appropriate mission statement "or Nokia 8ould be9 =To connect people through the use of technology> +0is simpli"ied and more "ocused mission statement 8ill promote a sense o" s0ared e.pectation in employees and better communicate 80at t0e company is in business to do. Alt0oug0 it 0as been stated by 7unger and 30eelen t0at an ob%ecti&e s0ould state I80at is to be accomplis0ed by 80enYJ2' 8e belie&e t0at NokiaDs corporate ob%ecti&es donDt need to speci"y a time "rame because t0ey continuously 8ant to be N1. But Nokia s0ould e&aluate t0emsel&es against t0eir ob%ecti&es annually. +o properly e&aluate itsel"9 t0e Nokia Board o" *irectors and top management 8ill need to create ob%ecti&es t0at are =uanti"iable. +0e "ollo8ing recommended ob%ecti&es are more =uanti"iable t0an t0e current Nokia corporate ob%ecti&es/ N1 in t0e industry in !ustomer Satis"action and !ustomer Retention. N1 in t0e 8orld in Product Inno&ation N1 in t0e industry in $perational -""iciency and Muality.

+0e slig0t c0anges to t0e Nokia mission and ob%ecti&es 8ill "ocus t0e company more on key strategies t0at t0ey are currently 8eak in 80ile maintaining a "ocus on t0e key strategies t0at Nokia is strong in. 7a&ing measurable ob%ecti&es 8ill gi&e t0e employees a clear indication o" 80ere t0eir company stands against t0e competition. Not only 8ill t0ese ob%ecti&es "urt0er gal&aniCe t0e company9 but also t0ey allo8 managers to target incremental impro&ements. +0e implementation o" t0e impro&ed mission and ob%ecti&es can be done immediately by e.isting Nokia personnel. +0ey 8ould need to update t0eir 8ebsite and all ot0er items t0at contain t0e mission and ob%ecti&es. -mails9 memos9 and streaming &ideo 8ill need to be sent to all Nokia employees and stake0olders e.plaining t0e updated mission and ob%ecti&es. Alt0oug0 implementation can be done 8it0 no capital in&estment9 t0e o&er0ead cost to send t0e communications to '9')) Nokia employees and t0e time it 8ill take t0em to re&ie8 t0e material 8ill cost appro.imately G1mil HS @computed as '9')) employees2( . ).2 0rs estimated time to re&ie8 communications . G11K0r a&erage Nokia salary2; . 1 ^general multiplier to "ind cost to employ as a "unction o" salary_A
2' 2( 2;

7unger9 *a&id J. and +omas 6. 30eelen. -ssentials o" Strategic #anagement. ,t0 -d. Prentice 7all9 Ne8 Jersey. 1))' 3ikipediaDs Nokia article. 0ttp/KKen.8ikipedia.orgK8ikiKNokia 1))2 Nokia Annual Report9 pg. ,) < Personnel -.penses.

+0e success o" updating t0e mission and ob%ecti&es is di""icult to =uanti"y9 but NokiaDs Board o" *irectors and top management s0ould re&ie8 t0e appropriateness o" t0e mission and ob%ecti&es in "i&e years @1)11A. +0is timeline 8ill gi&e su""icient time to measure t0e outcome o" 0o8 t0e large company responded to t0e updated mission and ob%ecti&es.

/eco++endations' I+ple+entation' and "valuation

&ecommendation 11 2alk T3e 2alk on Social Practices

A recent article publis0ed by /euters reported IAs Nokia goes9 so goes 5inland.J +0is report re"erences t0e strong in"luence Nokia 0olds on t0e country. It is ob&ious t0at a ma%or portion o" t0is in"luence is based on economics. Nokia is one o" t0e largest corporations in t0e country. +0is in"luence 0as broug0t c0ange to t0e social:democratic system. 5or e.ample9 t0e company lobbied t0e go&ernment to reduce corporate ta.es. +0is c0ange 8as necessary to make t0e country more competiti&e in t0e global en&ironment. +0is same in"luence must be used as Nokia e.pands into emerging markets. Nokia stresses t0e importance o" its corporate responsibility. Pet9 in June o" 1)) 9 NokiaDs !-$ $lli:Pekka Kallas&uo stated it 8as in t0e process o" re&ie8ing t0eir corporate policies especially in t0e en&ironmental and et0ical sections so t0at t0ey re"lect t0e gro8ing public concern on issues suc0 as substance and 8aste management9 as 8ell as 0uman rig0ts. In *ecember o" 1)) 9 +0e !entre "or Researc0 on #ultinational !orporations @S$#$A submitted t0eir "indings "rom a study o" mobile p0one manu"acturers. In t0at report9 S$#$ reported a series o" serious en&ironmental and 0uman rig0ts issues. $ne o" t0e most serious accused Nokia o" using suppliers 80o e.posed employees to cancer causing c0emicals. NokiaDs response 8as a letter rebutting se&eral accusations9 80ile promising to in&estigate ot0er suppliers. +0e response 8as not a 8ort0y response based on t0eir !orporate Responsibility policies.

+0e company 0as created elaborate Social Responsibility statements. +0ey recently re&amped t0eir Standards o" !onduct "or employees and communicated t0e in"ormation to ;'F o" employees. +0e list o" commitments is long. +0ey 0a&e supported community e&ents9 made "inancial contributions to8ards sa&ing t0e en&ironment. Hn"ortunately9 t0eir principles 0a&e not al8ays been backed up by t0eir actions. +0is issue represents a serious t0reat to t0e companyDs credibility and reputation. I" not addressed9 t0e negati&e press 8ill become costly and a distraction to ot0er key strategies. It is time "or Nokia to li&e up to its &alues and e.ert its in"luence at t0e global le&el. 3e recommend t0at Nokia "orm a solid action plan to address t0eir commitment to corporate responsibility. +0is action plan must 0a&e speci"ic elements to address t0e accusations broug0t out in t0e S$#$ report. Nokia s0ould go onsite to all suppliers including t0ird party parts suppliers. I" t0ey "ind trut0 to t0ese accusations t0en t0ey s0ould take steps to s8itc0 suppliers and discontinue relations0ips 8it0 !orporate Responsibility policies until t0ey 0a&e been corrected. In addition9 Nokia s0ould conduct unannounced &isits to supplier "actories a minimum o" t0ree times per year. +0e organiCation s0ould establis0 an independent supplier o&ersig0t department. +0is department s0ould report directly to a senior e.ecuti&e leader. A cost center s0ould be establis0ed and comprising o" t8enty sta"" members 8it0 an annual budget o" "i&e million dollars. +0is budget co&ers t0e cost "or salaries9 tra&el9 and ot0er operating e.penses. +0e t8enty employees s0ould be dispersed amongst its 12 manu"acturing "acilities and ot0er suppliers. 5inally9 besides a compre0ensi&e action plan t0e company s0ould establis0 time"rames "or implementation and a transparent communication plan t0at describes t0eir progress. +0e total implementation period s0ould not e.ceed si. mont0s and t0e initial manu"acturing "acilities o&er&ie8 s0all be completed 8it0in one year. As a result9 8e belie&e Nokia 8ill gain back its tarnis0ed credibility. +0e measure o" t0eir success s0ould come in a "a&orable response "rom S$#$. 30ile t0is impro&ement may be di""icult9 it is t0e best 8ay to neutraliCe S$#$Ds clout.

&ecommendation 21 4n%est in Batter- 5lternati%es &esearc3

+0e most "rustrating e.perience "or most cell p0one users is repeated t0ousands o" times eac0 day. +0e message to t0eir caller is al8ays t0e same. It usually starts 8it09

ISorry9 I may lose you. #y battery is almost dead.J +0is e.perience is "rustrating and incon&enient. !ell p0one users 8ant a cell p0one battery t0at 0as a c0arge lasting a mont0 or e&en longer. +0ere are se&eral companies including 71?olt9 Nitto *enko9 and #ec0anical +ec0nology @#*+6A ) t0at are de&eloping ne8 batteries using "uel cell tec0nology. Some e.perts belie&e 8e are only t8o years a8ay "rom 0a&ing a cell p0one prototype t0at is o" e=ual siCe to lit0ium:ion batteries. 1 !ell p0one manu"acturers 0a&e t0e opportunity to support t0e de&elopment o" t0ese products. Nokia could greatly bene"it "rom alternati&e cell p0one battery tec0nology. !onsidering t0e "act t0at some o" its emerging markets 0a&e limited in"rastructure and in some cases t0ird:8orld limitations9 Nokia needs a cell p0one battery t0at doesnDt re=uire regular access to a 8all outlet. Ade=uate electricity and accessible po8er is a barrier "or many de&eloping t0ird:8orld countries. Since t0ere are se&eral companies 80o are ad&anced in t0eir researc0 and de&elopment it doesnDt make sense "or Nokia to start its o8n RB* initiati&e. Instead9 8e recommend t0at t0ey partner or purc0ase a controlling interest in one o" t0e ma%or companies 80o 0a&e promising tec0nology. 5or e.ample #ec0anical +ec0nology9 an Albany9 Ne8 Pork9 based company 0as a battery t0at 0as been tested to last ;) 0ours o" talk time. +0ey currently 0a&e se&eral 0ig0:po8ered partners including *uracell9 t0e H.S. Air 5orce9 and t0e H.S. Army. #*+6 8ill need anot0er cas0 in"usion by 1))( in order to sustain its researc0. +0eir current stock price is a bargain at under G1.)) per s0are. +0e 8ord is t0at t0ey 8ill be looking "or anot0er partner to pro&ide capital. It makes sense "or Nokia to step into t0e picture and de&elop t0is partners0ip and possibly take on a controlling interest in t0e company. -""orts to e&aluate t0is partners0ip s0ould begin immediately. !onsidering t0e e.isting tec0nologies under de&elopment Nokia needs to mo&e =uickly. +o gain controlling interest o" t0is company t0ey s0ould e.pect to in&est appro.imately G4) million.
Pa0oo 5inance 3ebsite9 January 129 1))'9 0ttp/KKbiC.ya0oo.comKseekingalp0aK)')11;K1,2( Lid.0tmlS.&T1 1 P! 3orld 3ebsite9 January 129 1))'9 0ttp/KK888.pc8orld.comKprintableKarticleKid911'4()Kprintable.0tml
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&ecommendation 1 #ake $nterprise Ser%ices Profitable, /r Sell 4t

As addressed in t0e 5inance section o" t0is report9 -nterprise Ser&ices is t0e only di&ision 80ic0 runs at an operating loss. +0is situation is unsustainable. -nterprise Ser&ices s0ould be gi&en a mandate to become pro"itable in 4 mont0s. By 11 mont0s9 -S s0ould cut its operating loss by ,)F9 and by 1, mont0s9 ()F. 30et0er t0is goal is accomplis0ed by gro8ing re&enue9 cutting spending9 or bot09 is a tactical =uestion best le"t to group management9 but t0e goal is aggressi&e9 attainable9 and =uanti"iable. I" -S cannot become pro"itable in 4 mont0s9 Nokia s0ould in&estigate options to sell t0at business. As described pre&iously9 t0ere are reasons to run a business at a loss in t0e medium term9 but t0ose reasons donDt apply to -nterprise Ser&ices. Remo&ing t0at business "rom NokiaDs port"olio 8ould impro&e t0e companyDs net margin by a "ull percentage point.

&ecommendation '1 4mpro%e Support for T3ird!Part5pplication De%elopers

By sponsoring e&ents suc0 as t0e Nokia 3orld con"erence9 Nokia already demonstrates a certain le&el o" support "or t0ird parties 80o 8is0 to de&elop applications "or its 0andsets. 3e recommend "urt0er e.tending t0at support "or t0e applications de&elopment community.

An open:source model may not be appropriate "or 0andsetsO e&en t0oug0 t0ereDs no e&idence o" open:source:based computers being less secure t0an t0eir closed:source counterparts9 8eDd e.pect 0andset makers suc0 as Nokia to 0a&e an instincti&e "ear o" opening t0eir plat"orms too muc09 out o" an o&erabundance o" caution. +0e "irst time peopleDs cellp0ones begin to cras0 mid:call9 t0e maker o" t0ose p0ones is going to 0a&e a truly di""icult time remaining a &iable player in t0e market. At t0e same time9 as multimedia players9 P*As9 and cellp0ones all con&erge into a single plat"orm9 t0ird:party application support becomes crucial. +0e plat"orm 80ic0 can do t0e most t0ings9 do t0em 8ell9 and do t0em simply9 is likely to be t0e e&entual 8inner. +o compete in t0at 8orld9 Nokia must eit0er spend truly astronomical sums o" money on in:0ouse RB*9 or partner 8it0 t0ird:party application de&elopers to make t0eir plat"orm t0e plat"orm o" c0oice "or a &ariety o" tasks < o" 80ic0 some 0a&enDt e&en been concei&ed yet. Support "or t0is recommendation re=uires a department o" about 4) people9 mostly engineers skilled in tec0nical marketing9 80o bot0 understand t0e 8orkings o" t0e Nokia plat"orms and can represent t0e company in enabling t0ird parties to create applications to run on t0ose plat"orms.

&ecommendation "1 6e%erage Brand Strengt3 4nto 4n!Car Communications

Nokia s0ould e.plore opportunities to team 8it0 automobile manu"acturers to de&elop ne8 communications de&ices. NokiaDs kno8ledge o" communication tec0nology may be le&eraged into automobiles. ?arious 8ired or 8ireless met0ods may be employed to connect personal communication de&ices 8it0 &e0icles. ?ol&o and Saab 8ill be ideal candidates "or pilot pro%ects. Personal communication e=uipment 0as t0e potential to ser&e "or security9 location9 monitoring9 and many ot0er user controlled "unctions. Automobiles are increasingly employing electronic controls. *ri&ers may personaliCe t0e "unction o" t0eir &e0icles t0roug0 t0e use o" a single unit. An indi&idual

could use a single control in a &ariety o" &e0icles. +0e concept may be incorporated into "leet operations9 la8 en"orcement suc0 as *HI9 or parentKc0ild o&ersig0t. *ata collection opportunities also e.ist. 7ig0er le&els o" automobile security may be ac0ie&ed t0roug0 ne8 communications de&ices. +0is concept 8ill bring ne8 bene"its to bot0 Nokia and t0e automobile industry. +0e possibilities "or a single in:car compatible communication de&ice are &irtually endless. *e&elopment o" suc0 a product 8ill re=uire si. mont0s to one year "or "easibility le&el studies9 including prototyping to establis0 a roug0:8orking model prior to a year to "acilitate production. +0e de&elopment period 8ill take about a year and a 0al". -.tending Bluetoot0 tec0nology to t0e ne8 e=uipment 8ill re=uire less time t0an de&eloping completely ne8 tec0nology. +0is approac0 is in line 8it0 NokiaDs p0ilosop0y o" le&eraging e.isting tec0nology. +0e de&elopment period 8ill be similar to t0at o" ne8 car model de&elopment. +0e design 8ill re=uire a small pro%ect team o" 1) to 11 employees < engineers9 salespeople9 and marketing representati&es. ?ol&o is going a"ter t0e ultra lu.ury mega:0orsepo8er SH? 8it0 t0e `! ) model. +0ey 8ant to keep t0e title o" Nort0 AmericaDs best:selling -uropean SH?. ?ol&o sells about one million `!;) SH?s annually. I" ten percent o" t0ese &e0icles 8ere sold 8it0 our ne8 in:car tec0nology9 t0e deli&ered cost 8ill be G,) : G2). +0is ne8 toy may be sold "or G1)). +0e ne8 product 8ill mo&e into mainstream autos as t0e cost o" production drops.

Conclusion
+0roug0out its 0istory9 Nokia 0as rein&ented itsel" many times. In its current "orm9 Nokia competes in a turbulent market9 but one t0at ric0ly re8ards e""ecti&e participants. By "ocusing on its reputation9 by supporting researc0 into +0e Ne.t Big +0ing9 80et0er t0at be long:lasting batteries or more t0ings t0at a con&ergence de&ice can do9 by "i.ing

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its 8eak di&isions9 and by le&eraging its marketing strengt0s9 Nokia can "urt0er ad&ance in its mission and ensure itsel" a brig0t "uture.

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1ppendi: J /isk =actors

0arch 2, 277> .et forth below is a description of factors that ma affect our business, results of operations and share price from time to time. Competition in our industr is intense. %ur failure to maintain or improve our market position and respond successfull to changes in the competitive landscape ma have a material adverse impact on our business and results of operations. %ur sales and results of operations could be materiall adversel affected if we fail to efficientl manage our manufacturing and logistics without interruption, or fail to ensure that our products and solutions meet our and our customers 6ualit , safet , securit and other re6uirements and are delivered on time. We depend on a limited number of suppliers for the timel deliver of components and for their compliance with our supplier re6uirements, such as our customers product 6ualit , safet , securit and other standards. 1heir failure to do so could materiall adversel affect our abilit to deliver our products and solutions successfull and on time. We are developing a number of our new products and solutions together with other companies. If an of these companies were to fail to perform, we ma not be able to bring our products and solutions to market successfull or in a timel wa and this could have a material adverse impact on our sales and profitabilit . %ur operations rel on comple# and highl centraliFed information technolog s stems and networks. If an s stem or network disruption occurs, this reliance could have a material adverse impact on our operations, sales and operating results.

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%ur products and solutions include increasingl comple# technolog involving numerous new Nokia patented and other proprietar technologies, as well as some developed or licensed to us b certain third parties. 2s a conse6uence, evaluating the rights related to the technologies we use or intend to use is more and more challenging, and we e#pect increasingl to face claims that we have infringed third parties intellectual propert rights. 1he use of increasingl comple# technolog ma also result in increased licensing costs for us, restrictions on our abilit to use certain technologies in our products and solution offerings, and5or costl and time$consuming litigation. 1hird parties ma also commence actions seeking to establish the invalidit of intellectual propert rights on which we depend.

1he global networks business relies on a limited number of customers and large multi$ ear contracts. 9nfavorable developments under such a contract or in relation to a ma&or customer ma adversel and materiall affect our sales, our results of operations and cash flow.

%ur sales derived from, and assets located in, emerging market countries ma be materiall adversel affected b economic, regulator and political developments in those countries or b other countries imposing regulations against imports to such countries. 2s sales from these countries represent a significant portion of our total sales, economic or political turmoil in these countries could adversel affect our sales and results of operations. %ur investments in emerging market countries ma also be sub&ect to other risks and uncertainties.

%ur sales, costs and results are affected b e#change rate fluctuations, particularl between the euro, which is our reporting currenc , and the 9. dollar, the Chinese uan, the 9< pound sterling and the Bapanese en, as well as certain other currencies.

%ur sales and profitabilit depend on the continued growth of the mobile communications industr as well as the growth and profitabilit of the '4

new market segments within that industr which we target. If the mobile communications industr does not grow as we e#pect, or if the new market segments which we target grow less or are less profitable than e#pected, or if new faster growing market segments emerge in which we have not invested, our sales and profitabilit ma be materiall adversel affected. We need to understand the different markets in which we operate, and meet the needs of our customers, which include mobile network operators, distributors, independent retailers, corporate customers and end$users. We need to have a competitive product portfolio and to work together with our operator customers to address their needs. %ur failure to identif ke market trends and to respond timel and successfull to the needs of our customers ma have a material adverse impact on our market share, business and results of operations. We must develop or otherwise ac6uire comple#, evolving technologies to use in our business. If we fail to develop or otherwise ac6uire these comple# technologies as re6uired b the market, with full rights needed to use in our business, or to successfull commercialiFe such technologies as new advanced products and solutions that meet customer demand, or fail to do so on a timel basis, this ma have a material adverse effect on our business, our abilit to meet our targets and our results of operations. %ur results of operations, particularl our profitabilit , ma be materiall adversel affected if we do not successfull manage price erosion and are not able to manage costs related to our products and operations. Customer financing to network operators can be a competitive re6uirement and could adversel and materiall affect our sales, results of operations, balance sheet and cash flow. 2llegations of health risks from the electromagnetic fields generated b base stations and mobile devices, and the lawsuits and publicit relating to them, regardless of merit, could negativel affect our operations b

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leading consumers to reduce their use of mobile devices or b causing us to allocate monetar and personnel resources to these issues. 2n unfavorable outcome of litigation could materiall impact our business, financial condition or results of operations. If we are unable to recruit, retain and develop appropriatel skilled emplo ees, our abilit to implement our strategies ma be hampered and, conse6uentl , our results of operations ma be materiall harmed. Changes in various t pes of regulation in countries around the world could have a material adverse effect on our business. %ur share price ma be volatile in response to conditions in the global securities markets generall and in the communications and technolog sectors in particular. We file an annual report on "orm 27$" with the 9. .ecurities and (#change Commission, which report also includes a description of risk factors that ma affect us. Nokia filed its "orm 27$" annual report for the ear ended )ecember 8!, 277: on 0arch 2, 277>. "or further information please refer to our "orm 27$ " annual report.

7oreign e8c3ange risk

Nokia operates globall and is thus e#posed to foreign e#change risk arising from various currenc combinations. "oreign currenc denominated assets and liabilities together with e#pected cash flows from highl probable purchases and sales give rise to foreign e#change e#posures. 1hese transaction e#posures are managed against various local currencies because of Nokias substantial production and sales outside the (uroFone.

Structured 7inance Credit &isk

Network operators in some markets sometimes re6uire their suppliers to arrange or provide term financing in relation to infrastructure pro&ects. Nokia has maintained a financing polic aimed at close cooperation with banks, financial '2

institutions and (#port Credit 2gencies to support selected customers in their financing of infrastructure investments. Nokia activel mitigates, market conditions permitting, this e#posure b arrangements with these institutions and investors. Credit risks related to customer financing are s stematicall anal Fed, monitored and managed b Nokias Customer "inance organiFation, reporting to the Chief "inancial %fficer. Credit risks are approved and monitored b Nokias Credit Committee along principles defined in the Compan s credit polic and according to the credit approval process. 1he Credit Committee consists of the C"%, 3roup Controller, Dead of 3roup 1reasur and Dead of Nokia Customer "inance. 2t the end of )ecember 8!, 277:, our long$term loans to customers and other third parties totaled O>8 million Ano outstanding loans in 2774@, while there was nil financial guarantees given on behalf of third parties AO8 million in 2774@. In addition, we had financing commitments totaling O!8 million, which does not, however, increase total outstanding and committed credit risk from O>8 million, as it is available onl provided that outstanding loan O:> million is repaid. 1otal structured financing Aoutstanding and committed@ stood at O>8 million AO:= million in 2774@.

$9uit- price risk

Nokia has certain strategic minorit investments in publicl traded companies. 1hese investments are classified as available$for$sale. 1he fair value of the e6uit investments at )ecember 8!, 277: was O4 million AO? million in 2774@. 1here are currentl no outstanding derivative financial instruments designated as hedges of these e6uit investments. 1he ;a/ figures for e6uit investments have been calculated using the same principles as for interest rate risk.

6i9uidit- risk
Nokia guarantees a sufficient li6uidit at all times b efficient cash management and b investing in li6uid interest bearing securities. )ue to the d namic nature of the underl ing business 1reasur also aims at maintaining fle#ibilit in funding '

b keeping committed and uncommitted credit lines available. 2t the end of )ecember 8!, 277: the committed facilit totaled 9.) 2.7 billion. 1he committed credit facilit is intended to be used for 9... and (uro Commercial +aper +rograms back up purposes. 1he commitment fee on the facilit is 7.74: P per annum. 1he most significant e#isting funding programs include' /evolving Credit "acilit of 9.) 2 777 million, maturing in 27!2 Cocal commercial paper program in "inland, totaling (9/ ?:7 million (uro Commercial +aper A(C+@ program, totaling 9.) :77 million 9. Commercial +aper A9.C+@ program, totaling 9.) :77 million

None of the above programs have been used to a significant degree in 277:. Nokias international creditworthiness facilitates the efficient use of international capital and loan markets. 1he ratings of Nokia from credit rating agencies have not changed during the ear.

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1ppendi: J Mediu+2Ter+ =inancial Goals o Nokia Corporation

Nokia operating margin target of !:P during the ne#t one to two ears. 1his target is revised from the one to two ear !?P operating margin target Nokia set in )ecember 277:, primaril due to Nokias increased e#posure to the infrastructure market following the e#pected start of operations of Nokia .iemens Networks. )evice A0obile +hones and 0ultimedia combined@ operating margin target of !?P during the ne#t one to two ears. 1his target is revised from the one to two ear !?P$!4P device operating margin target Nokia set in )ecember 277:. Nokia .iemens Networks operating margin target of !7P plus during the ne#t one to two ears. Nokia .iemens Networks maintains its target to achieve a double digit operating margin b restructuring charges. Nokia targets an improvement in the ratio of Nokia gross margin to /E) e#penses and an improvement in the ratio of Nokia gross margin to sales and marketing e#penses in 277?, compared to 277>. Nokia e#pects to meet its previousl stated target to reduce overall /E) e#penditure to =P$!7P of net sales b the end of 277>. .hare gains in devices in 277?. ear end 277?, before

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1ppendi: J Nokia "+plo$ee !iversit$ and Global /eac&

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1ppendi: 2 "lection' Co+position and Meetings o t&e Board o !irectors

+ursuant to the articles of association, Nokia Corporation has a *oard of )irectors composed of a minimum of seven and a ma#imum of ten members. 1he members of the *oard are elected for a term of one ear at each 2nnual 3eneral 0eeting, which convenes each 0arch, 2pril or 0a . .ince the 2nnual 3eneral 0eeting held on 0arch 87, 277> until 0a 2=, 277>, the *oard consisted of ten members. .ince 0a 2=, 277> the *oard has consisted of nine members. 1he members of the *oard are all non$e#ecutive and independent as defined in the "innish rules and regulations with the e#ception of the Chairman Borma %llila, who was Nokia-s Chief (#ecutive %fficer until 0a 8!, 277>. In Banuar 277>, the *oard determined that eight members of the *oard are independent, as defined in the New Gork .tock (#change-s corporate governance listing standards, as amended in November 2774. In addition to the Chairman, *engt DolmstrJm was determined to be non$independent due to a famil relationship with an e#ecutive officer of a Nokia supplier of whose consolidated gross revenues Nokia accounts for an amount that e#ceeds the limit provided in the NG.( listing standards, but that is less than !7P. 1he *oard convened thirteen times during 277:, five of the meetings were held b using technical e6uipment and the average ratio of attendance at the meetings was =4P. 1he non$e#ecutive directors meet without e#ecutive directors twice a ear, or more often as the deem appropriate. .uch sessions are presided over b the ;ice Chairman of the *oard or, in his absence, the most senior non$e#ecutive member of the *oard. In addition, the independent directors meet separatel at least once annuall . 1he *oard and each committee also has the power to hire independent legal, financial or other advisors as it deems necessar . 1he *oard elects a Chairman and a ;ice Chairman from among its members for one term at a time. %n 0arch 87, 277> the *oard resolved that Borma %llila should continue to act as Chairman and that +aul B. Collins should continue to act as ;ice Chairman. 2s of Bune !, 277> Borma %llila will continue as a Non$

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(#ecutive Chairman, following the termination of his emplo ment with Nokia. 1he *oard also appoints the members and the chairmen for its committees from among its non$e#ecutive, independent members for one term at a time. 1he *oard conducts annual performance self$evaluations, which also include evaluations of the committees- work, the results of which are discussed b the *oard. 1he Corporate 3overnance 3uidelines concerning the directorsresponsibilities, the composition and selection of the *oard.

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1ppendi: 2 Group ":ecutive Board Co+pensation

Nu+ber o Stock Optionsa Stock Option categor$ #e&&a + a #ieti I :5nf!rmati!n a$ 'er Januar9 31, 2006; 2001 +3= 2001 C 4K301 2002 +3= 2003 2K 2004 2K 2005 2K ?rLM %euv! :5nf!rmati!n a$ 'er 6ecem"er 31, 2005; 2001 +3= 2001 C 4K301 2002 +3= 2003 2K 2004 2K
a "

Total realisable value o Stock Options "./ b' c .n2 e:ercisable 0

/eali@ed gains in 2((* on Stock Options e:ercisedd Nu+ber o options 250 000 Gain s 5

":ercise price per s&are "./ 36475

":ercisabl

.n2

e e:ercisable 0 0

":ercisable7

26467

7 818

117 182

6 356 145 448 0 0 0 0

17489 14495 11479 12479 36475

15 625 0 30 000 0 70 000

0 0 0 0 0

0 0 97 800 0 0

0 0 0 0 0

203 125 0 0 0 0

26467

32 807

2 193 13 125 17 500 13 750

17489 14495 11479

56 875 22 500 6 250

0 11 250 22 875

0 8 750 50 325

0 0 0

0 0 0

%um"er eGua $ the num"er !f under 9in0 $hare$ re're$ented "9 the !'ti!n entit ement4

1!r 6r4 %euv! the rea i$a" e va ue !f the $t!c& !'ti!n$ i$ "a$ed !n the difference "et7een the exerci$e 'rice !f the !'ti!n$ and the c !$in0 1!r )r4 + a*#ieti I the rea i$a" e va ue !f the $t!c& !'ti!n$ i$ "a$ed !n the difference "et7een the exerci$e 'rice !f the !'ti!n$ and the 2ea iDed 0ain$ in 2005 re're$ent the t!ta 0r!$$ va ue received in 2005 in re$'ect !f !'ti!n$ $! d !ver the (e $in&i -t!c& Exchan0e

mar&et 'rice !f %!&ia $hare$ !n the (e $in&i -t!c& Exchan0e a$ !f 6ecem"er 30, 2005, 7hich 7a$ EU2 154454
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c !$in0 mar&et 'rice !f %!&ia $hare$ !n the (e $in&i -t!c& Exchan0e a$ !f Januar9 31, 2006, 7hich 7a$ EU2 154054
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:tran$fera" e $t!c& !'ti!n$;4

Per or+ance S&ares and /estricted S&ares 8he f! !7in0 ta" e 'r!vide$ certain inf!rmati!n re atin0 t! 'erf!rmance $hare$ and re$tricted $hare$ he d "9 mem"er$ !f the /r!u' Executive =!ard a$ !f 6ecem"er 31, 20054 8he$e entit ement$ 7ere 0ranted 'ur$uant t! !ur 'erf!rmance $hare ' an$ 2004 and 2005 and re$tricted $hare ' an$ 2003, 2004 and 20054

(,

Per or+ance S&ares Per or+ance Plan na+e? S&ares at T&res&old2 nu+ber J!rma O i a 2004 2005 O i #e&&a Na a$vu! 2004 2005 2!"ert +nder$$!n 2004 2005 -im!n =ere$f!rd O9 ie 2004 2005 #ertti N!rh!nen 2004 2005 )ar9 )c6!7e 2004 2005 (a $tein )!er& 2004 2005 8er! OLan'erI 2004 2005 2ichard -im!n$!n 2004 12 500 50 000 386 250 7 500 10 000 2 500 10 000 30 000 40 000 10 000 40 000 231 750 309 000 77 250 309 000 12 500 15 000 50 000 60 000 386 250 463 500 2005 2003 2004 2005 2004 2005 2003 2004 12 500 15 000 50 000 60 000 386 250 463 500 2 500 15 000 10 000 60 000 77 250 463 500 2005 2003 2004 2005 2003 100 000 100 000 15 000 15 000 2 600 3 000 Per or+ance Ma:i+u+2 nu+ber 400 000 400 000 60 000 60 000 10 400 12 000 6alue Plan na+e; 7?'2((*7 "./ 3 090 000 3 090 000 463 500 463 500 80 340 92 700 2004 2005 2004 2005 2004 2005 2003 S&ares at !ece+ber

/estricted S&ares Nu+ber S&ares 100 000 100 000 35 000 70 000 15 000 28 000 22 000 6alue 7?' 2((** 1 545 000 1 545 000 540 750 1 081 500 231 750 432 600 339 900

o /estricted !ece+ber

35 000 35 000 25 000 35 000 20 000

540 750 540 750 386 250 540 750 309 000

35 000 26 000 20 000 25 000 15 000 25 000 33 250 25 000

540 750 401 700 309 000 386 250 231 750 386 250 513 713 386 250

(2

2005 .e i -und"Ic& 2004 2005 +n$$i .anL!&i 2004 2005 Nai Pi$tImM 2004 2005 #erf!rmance -hare$ and 2e$tricted -hare$ he d "9 the /r!u' Executive =!ard, 8!ta 6, 7 + !ut$tandin0 #erf!rmance -hare$ and 2e$tricted -hare$, 8!ta
1

15 000 7 500 10 000 15 000 15 000

60 000 30 000 40 000 60 000 60 000

463 500 231 750 309 000 463 500 463 500

2005 2004 2005 2004 2005 2003

35 000 20 000 25 000 35 000 35 000 8 750 15 000 25 000

540 750 309 000 386 250 540 750 540 750 135 188 231 750 386 250

2 500 3 200

10 000 12 800

77 250 98 880

2004 2005

418 800

1 675 200

12 940 920

923 000

14 260 350

8 042 817

32 171 268

248 523 045

5 185 676

80 118 694

8he 'erf!rmance 'eri!d f!r the 2004 ' an i$ 2004*2007, 7ith !ne interim mea$urement 'eri!d f!r fi$ca 9ear$ 2004*20054

-imi ari 9, the 'erf!rmance 'eri!d f!r the 2005 # an i$ 2005*2008, 7ith !ne interim mea$urement 'eri!d f!r fi$ca 9ear$ 2005*20064
2

1!r the 'erf!rmance $hare ' an$ 2004 and 2005, the num"er !f 'erf!rmance $hare$ at thre$h! d re're$ent$ the num"er !f 'erf!rmance

$hare$ 0ranted4 8hi$ num"er $ha ve$t a$ $hare$, $h!u d the 're*determined thre$h! d 'erf!rmance eve $ !f the c!m'an9 "e met4 8he maximum num"er !f 'erf!rmance $hare$ $ha ve$t a$ $hare$, $h!u d the 'redetermined maximum 'erf!rmance eve $ "e met4 8he maximum num"er !f 'erf!rmance $hare$ eGua $ f!ur time$ the num"er !ri0ina 9 0ranted4
3

.a ue i$ "a$ed !n the c !$in0 mar&et 'rice !f the %!&ia $hare !n the (e $in&i -t!c& Exchan0e a$ !f 6ecem"er 30, 2005 !f EU2 154454 8he

va ue i$ 're$ented f!r the tar0et num"er !f $hare$, 7hich i$ t7! time$ the num"er at thre$h! d4 8he tar0et num"er i$ u$ed f!r ex'en$in0 the in$trument$ in the c!m'an9H$ acc!untin04
4

2e$tricti!n 'eri!d end$ f!r the re$tricted $hare ' an 2003 !n Oct!"er 1, 2006 :.e$tin0 6ate;4 .e$tin0 6ate f!r the 2004 ' an i$ Oct!"er 1, .a ue i$ "a$ed !n the c !$in0 mar&et 'rice !f the %!&ia $hare !n the (e $in&i -t!c& Exchan0e a$ !f 6ecem"er 30, 2005 !f EU2 15445 #e&&a + a*#ieti I re$i0ned a$ mem"er !f the /r!u' Executive =!ard a$ !f Oct!"er 1, 2005, and cea$ed em' !9ment 7ith u$ !n Januar9

2007, and f!r the 2005 ' an Oct!"er 1, 20084

5 6

31, 20064 +$ !f 6ecem"er 31, 2005 he he d 35 000 re$tricted $hare$ fr!m each !f the 2004 and 2005 2e$tricted -hare # an$, 20 000 'erf!rmance $hare$ at thre$h! d fr!m the 2004 #erf!rmance -hare # an and 15 000 'erf!rmance $hare$ at thre$h! d fr!m the 2005 #erf!rmance -hare # an4 (e f!rfeited a hi$ 'erf!rmance $hare$ and re$tricted $hare$ in acc!rdance 7ith the re evant ' an ru e$4
7

?rLM %euv! re$i0ned a$ mem"er !f the /r!u' Executive =!ard effective Oct!"er 1, 2005, and retired fr!m %!&ia a$ !f 6ecem"er 31, 20054

+$ !f 6ecem"er 31, 2005 he he d 5 000 'erf!rmance $hare$ at thre$h! d fr!m 2004 #erf!rmance -hare # an4 (e 7a$ entit ed t! &ee' a hi$ 'erf!rmance $hare$ and re$tricted $hare$ in acc!rdance 7ith the re evant ' an ru e$4

Nokia8s "#uit$ Based Co+pensation Progra+s 1!r a de$cri'ti!n !f %!&iaH$ eGuit9 "a$ed c!m'en$ati!n 'r!0ram$ a$ !f 6ecem"er 31, 2005 t! 7hich a $! mem"er$ !f the /r!u' Executive =!ard 'artici'ate, ' ea$e $ee 'a0e$ 74*75 in Q%!&ia in 2005Q4 "#uit$2based co+pensation progra+ 2(() 8he =!ard !f 6irect!r$ ann!unced it$ 'r!'!$ed $c!'e and de$i0n f!r the 2006 EGuit9 #r!0ram !n Januar9 26, 20064 8he main eGuit9 in$trument in 2006 7i "e 'erf!rmance $hare$4 5n additi!n, $t!c& !'ti!n$ 7i "e 0ranted t! a m!re imited '!'u ati!n, and re$tricted $hare$ 7i "e u$ed f!r a $ma num"er !f hi0h '!tentia and critica em' !9ee$4 8he #erf!rmance -hare # an in 2006 7i c!ver a 'erf!rmance 'eri!d !f three 9ear$ :2006*2008; 7ith n! interim mea$urement 'eri!d a$ c!m'ared 7ith the 2004 and 2005 ' an$ 7ith a f!ur*9ear 'erf!rmance 'eri!d$ and t7!*9ear interim mea$urement 'eri!d$4 %! 'erf!rmance $hare$ 7i ve$t un e$$ the c!m'an9 'erf!rmance reache$ at ea$t !ne !f the thre$h! d eve $ mea$ured "9 t7! inde'endent, 're*defined 'erf!rmance criteriaR the c!m'an9H$ avera0e annua net $a e$ 0r!7th and earnin0$ 'er $hare :QE#-Q; :"a$ic; 0r!7th f!r 2006 t! 20084 8he 'erf!rmance criteria !f the #erf!rmance -hare # an 2006 areR 14 +vera0e +nnua %et -a e$ /r!7thR 5< :thre$h! d; and 20< :maximum;, and 24 +nnua E#- /r!7thR EU2 0496 :thre$h! d; and EU2 1441 in 2008 :maximum;4 E#- 0r!7th i$ ca cu ated "a$ed !n the c!m'!unded annua 0r!7th rate !ver the 'erf!rmance 'eri!d :2006*2008; c!m'ared t! 2005 E#- !f 04834 +vera0e +nnua %et -a e$ /r!7th i$ ca cu ated a$ an avera0e !f the net $a e$ 0r!7th rate$ f!r the 9ear$ 2005 thr!u0h 20084 =!th the E#- and +vera0e +nnua %et -a e$ /r!7th criteria are eGua 9 7ei0hted and 'erf!rmance under each !f the t7! 'erf!rmance criteria are ca cu ated inde'endent !f each !ther4 +chievement !f the maximum 'erf!rmance f!r "!th criteria 7i re$u t in the ve$tin0 !f the maximum !f 3246 mi i!n %!&ia $hare$4 #erf!rmance exceedin0 the maximum criteria d!e$ n!t increa$e the num"er !f 'erf!rmance $hare$ that 7i ve$t4 +chievement !f thre$h! d 'erf!rmance f!r "!th criteria, 7i re$u t in the ve$tin0 !f 8415 mi i!n $hare$4 5f !n 9 !ne !f the thre$h! d eve $ !f 'erf!rmance are achieved, !n 9 4408 mi i!n !f the 'erf!rmance $hare$ 7i ve$t4 5f n!ne !f the thre$h! d eve $ are achieved, then n!ne !f the 'erf!rmance $hare$ 7i ve$t4 1!r 'erf!rmance "et7een the thre$h! d and maximum 'erf!rmance eve $ the $ett ement f! !7$ a inear $ca e4 5f the reGuired 'erf!rmance eve $ are achieved, the $ett ement 7i ta&e ' ace in 20094 Unti the $hare$ are tran$ferred and de ivered, the reci'ient$ 7i n!t have an9 $hareh! der ri0ht$, $uch a$ v!tin0 !r dividend ri0ht$ a$$!ciated 7ith the$e 'erf!rmance $hare$4 8he $t!c& !'ti!n$ t! "e 0ranted in 2006 7i "e 'rimari 9 !ut !f the -t!c& O'ti!n ' an 2005, a''r!ved "9 the +nnua /enera )eetin0, !n +'ri 7, 20054 Each $t!c& !'ti!n 7!u d entit e the !'ti!n h! der t! $u"$cri"e f!r !ne ne7 9 i$$ued %!&ia $hare4 8he $hare $u"$cri'ti!n 'rice a'' ica" e u'!n exerci$e !f the $t!c& !'ti!n$ 7i "e determined !n a Guarter 9 !r, $u"Lect t! the =!ardH$ deci$i!n, a m!nth 9 "a$i$4 8he intenti!n i$ t! determine the exerci$e 'rice$ at fair mar&et va ue4 8he $hare $u"$cri'ti!n 'rice f!r each $u"cate0!r9 !f $t!c& !'ti!n$ t! "e i$$ued 7i eGua the trade v! ume 7ei0hted avera0e 'rice !f %!&ia $hare$ !n the (e $in&i -t!c& Exchan0e f!r the fir$t 7h! e 7ee& !f the $ec!nd m!nth !f the ca endar Guarter :i4e4

('

1e"ruar9, )a9, +u0u$t !r %!vem"er; !r, f!r the m!nth 9 'riced $t!c& !'ti!n$ that are 'riced m!nth 9, the fir$t 7h! e 7ee& !f $uch ca endar m!nth 7hen the $u"cate0!r9 !f the $t!c& !'ti!n ha$ "een den!minated4 8he $t!c& !'ti!n$ 7i have a Guarter 9 $ta00ered ve$tin0 $chedu e4 8he $u"cate0!rie$ !f $t!c& !'ti!n$ t! "e i$$ued under the ' an 7i have a ife !f a''r!ximate 9 five 9ear$, 7ith the a$t !f the $u"cate0!rie$ ex'irin0 a$ !f 6ecem"er 31, 20114 8he re$tricted $hare$ t! "e 0ranted under the 2e$tricted -hare # an 2006 7i have a three*9ear re$tricti!n 'eri!d4 8he re$tricted $hare$ 7i "e de ivered in 2009, $u"Lect t! fu fi in0 the re$tricti!n criteria4 -hare$ are n!t e i0i" e f!r an9 $hareh! der ri0ht$ !r v!tin0 ri0ht$ durin0 the re$tricti!n 'eri!d, unti tran$ferred t! ' an 'artici'ant$4 8he maximum num"er !f intended 0rant$ under the 2006 EGuit9 #r!0ram :i4e4 'erf!rmance $hare$, $t!c& !'ti!n$ and re$tricted $hare$; are de'icted in the ta" e "e !74 8he intended am!unt$ f!r 2006 are in ine 7ith th!$e a''r!ved and di$c !$ed in 20054 Nu+ber o planned grants in 2(() -nu+ber' +illions0 Plan t$pe -t!c& !'ti!n$ 2e$tricted -hare$
1 1

1nnual grants 2(() 8490 2430

/ecruit+ent and special retention needs 7490 7420

Total 16480 9450

#erf!rmance -hare$ at 8hre$h! d 4450 3465 8415 8he maximum num"er !f $hare$ t! "e de ivered at maximum 'erf!rmance i$ f!ur time$ the num"er !ri0ina 9 0ranted

:at thre$h! d;4 +$ !f 6ecem"er 31, 2005, the t!ta di uti!n effect !f %!&iaH$ $t!c& !'ti!n$, 'erf!rmance $hare$ and re$tricted $hare$ current 9 !ut$tandin0, a$$umin0 fu di uti!n, i$ a''r!ximate 9 442 < in the a00re0ate4 8he '!tentia maximum effect !f the 'r!'!$ed ne7 'r!0ram, inc udin0 the im'act !f the eGuit9 0rant$ in c!nnecti!n 7ith the acGui$iti!n !f 5nte i$9nc 5nc4, 7!u d "e a''r!ximate 9 an!ther 144<4 Stock O%ners&ip Guidelines or ":ecutive Manage+ent One !f the 0!a $ !f !ur !n0*term eGuit9 "a$ed incentive 'r!0ram i$ t! f!cu$ executive$ !n "ui din0 va ue f!r $hareh! der$4 5n additi!n t! 0rantin0 them $t!c& !'ti!n$, 'erf!rmance $hare$ and re$tricted $hare$, 7e a $! enc!ura0e $t!c& !7ner$hi' "9 !ur t!' executive$4 5n Januar9 2001, 7e intr!duced a $t!c& !7ner$hi' c!mmitment 0uide ine$ 7ith minimum rec!mmendati!n$ tied t! annua "a$e $a arie$4 1!r the mem"er$ !f the /r!u' Executive =!ard, the rec!mmended minimum inve$tment in !ur $hare$ c!rre$'!nd$ t! t7! time$ the mem"erH$ annua "a$e $a ar94 1!r )r4 Na a$vu!, 7h! ha$ a read9 met thi$ reGuirement a$ !f the end !f 2005, the =!ard !f 6irect!r$ ha$ $et a ne7 rec!mmended minimum !7ner$hi' 0uide ine !f three time$ hi$ annua "a$e $a ar94 8! meet thi$ reGuirement, a mem"er$ are ex'ected t! retain after*tax eGuit9 0ain$ in $hare$ unti the $ame minimum inve$tment eve i$ met4 Insiders8 Trading in Securities 8he =!ard !f 6irect!r$ ha$ e$ta" i$hed a '! ic9 in re$'ect !f in$ider$H tradin0 in %!&ia $ecuritie$4 Under the '! ic9, the h! din0$ !f %!&ia $ecuritie$ "9 the 'rimar9 in$ider$ :a$ defined in the '! ic9; are 'u" ic inf!rmati!n, 7hich i$ avai a" e in the

((

1inni$h Centra -ecuritie$ 6e'!$itar9 and !n the c!m'an9H$ 7e"$ite4 +$ 7e , "!th 'rimar9 in$ider$ and $ec!ndar9 in$ider$ :a$ defined in the '! ic9; are $u"Lect t! a num"er !f tradin0 re$tricti!n$ and ru e$, inc udin0 am!n0 !ther thin0$, 'r!hi"iti!n$ !n tradin0 in %!&ia $ecuritie$ durin0 the three*7ee& Qc !$ed 7ind!7Q 'eri!d immediate 9 'recedin0 the di$c !$ure !f !ur Guarter 9 re$u t$ and the f!ur*7ee& Qc !$ed 7ind!7Q 'eri!d immediate 9 'recedin0 the di$c !$ure !f !ur annua re$u t$4 5n additi!n, %!&ia ma9 $et tradin0 re$tricti!n$ "a$ed !n 'artici'ati!n in 'r!Lect$4 Oe u'date !ur in$ider tradin0 '! ic9 fr!m time t! time and m!nit!r !ur in$ider$H c!m' iance 7ith the '! ic9 !n a re0u ar "a$i$4 %!&iaH$ 5n$ider #! ic9 i$ in ine 7ith the (e $in&i -t!c& Exchan0e /uide ine$ f!r 5n$ider$ and a $! $et$ reGuirement$ "e9!nd the$e 0uide ine$4 Group ":ecutive Board +t 6ecem"er 31, 2005, %!&ia had a /r!u' Executive =!ard c!n$i$tin0 !f 12 mem"er$4 Of the /r!u' Executive =!ard mem"er$, -ari =a dauf and J4 84 =er0Gvi$t cea$ed em' !9ment 7ith u$ and re$i0ned a$ mem"er$ !f the /r!u' Executive =!ard 7ith effect fr!m Januar9 31, 20054 #e&&a + a*#ieti I and ?rLM %euv! re$i0ned a$ mem"er$ !f the /r!u' Executive =!ard 7ith effect fr!m Oct!"er 1, 2005, and their em' !9ment cea$ed 7ith u$ !n 6ecem"er 31, 2005 f!r 6r4 %euv!, and Januar9 31, 2006 f!r )r4 + a*#ieti I4 8he f! !7in0 'er$!n$ 7ere a''!inted a$ ne7 mem"er$ t! the /r!u' Executive =!ard effective in 2005R 8er! OLan'erI 7a$ a''!inted a mem"er effective Januar9 1, 2005, -im!n =ere$f!rd*O9 ie fr!m 1e"ruar9 1, 2005, 2!"ert +nder$$!n and Nai Pi$tImM 7ere a''!inted mem"er$ 7ith effect fr!m Oct!"er 1, 20054 8he f! !7in0 ta" e$ $ummariDe the a00re0ate ca$h c!m'en$ati!n 'aid and the !n0*term eGuit9*"a$ed incentive$ 0ranted t! the mem"er$ !f the /r!u' Executive =!ard, inc udin0 J!rma O i a, Chairman and CEO, f!r the 9ear 20054 5t a $! $h!7$ the !n0*term eGuit9*"a$ed incentive$ 0ranted in the a00re0ate under !ur eGuit9 ' an$ in 20054 6urin0 2005, there 7ere n! 0ain$ rea iDed u'!n exerci$e !f $t!c& !'ti!n$ t! re'!rt, n!r 7ere an9 $hare*"a$ed incentive 0rant$ $ett ed f!r the mem"er$ !f the /r!u' Executive =!ard4 Ca$h c!m'en$ati!n t! the /r!u' Executive =!ard f!r 2005
,ear 2005 Nu+ber o +e+bers !ec. 7?' 2((* 12 Base salaries "./ 6 153 422
3

Cas& incentive pa$+ents ?'2 "./ 8 531 1803

1 5nc ude$ 'a9ment$ 'ur$uant t! ca$h incentive arran0ement$ f!r the 2005 ca endar 9ear4 8he ca$h incentive$ are 'aid a$ a 'ercenta0e !f annua "a$e $a ar9 "a$ed !n %!&iaH$ $h!rt*term ca$h incentive ' an4 2 Exc udin0 an9 0ain$ rea iDed u'!n exerci$e !f $t!c& !'ti!n$4 3 5nc ude$ "a$e 'a9 and "!nu$e$ t! -ari =a dauf and J484 =er0Gvi$t f!r the 'eri!d unti Januar9 31, 2005, and t! #e&&a + a*#ieti I and ?rLM %euv! unti -e'tem"er 30, 20054 8he ne7 mem"er$ enterin0 the /r!u' Executive =!ard, in 2005, -im!n =ere$f!rd O9 ie, Nai Pi$tImM and 2!"ert +nder$$!n, are inc uded f!r the 'eri!d !f their $ervice in 20054 8er! OLan'erI L!ined the /r!u' Executive =!ard effective Januar9 1, 2005, $! hi$ ca$h c!m'en$ati!n i$ fu 9 inc uded4

A!n0*term eGuit9*"a$ed incentive$ 0ranted in 2005 1

Group ":ecutive Board Per or+ance s&ares at t&res&old2 -nu+ber0 Stock options -nu+ber0 241 000 1 121 000 Ot&er e+plo$ees 4 228 000 7 431 000 Total 4 469 000 8 552 Total nu+ber o participants 12 600 4 200

(;

000 /estricted s&ares -nu+ber0 508 000 2 509 000 3 017 000 300

1 8he eGuit9*"a$ed incentive 0rant$ are 0enera 9 f!rfeited, if the u'!n $uch 'erf!rmance and !ther c!nditi!n$, a$ determined in the re evant ' an ru e$4 2 +t maximum 'erf!rmance, the $ett ement am!unt$ t! f!ur time$ the num"er !f 'erf!rmance $hare$ !ri0ina 9 0ranted :at thre$h! d;4

-ummar9 C!m'en$ati!n 8a" e

Iong ter+ "#uit$ based Incentives Granted ? Per or+ance Na+e and Principal Position in 2((* ,ear S&ares at T&res&old7 nu+ber J!rma O i a Chairman and CEO 200 5 200 4 200 3 #e&&a + a #ieti I7 Unti Oct!"er 1, 2005, #re$ident !f %!&ia C!r'!rati!n and (ead !f Cu$t!mer and )ar&et O'erati!n$ 200 5 200 4 200 3 O i #e&&a Na a$vu! +$ !f Oct!"er 1, 2005, #re$ident and COO, Unti -e'tem"er 30, 2005, E.# and /enera )ana0er !f )!"i e #h!ne$ 200 5 200 4 200 3 +n$$i .anL!&i E.# and /enera )ana0er !f )u timedia 2ichard -im!n$!n E.#, Chief 1inancia Officer 200 5 200 5 100 000 100 000 * 15 000 Per or+ance S&ares at Ma:i+u+7 nu+ber 400 000 400 000 * 60 000 =air 6alue at grant; "./ 2 370 000 2 116 000 * 355 500

20 000

80 000

423 200

* 15 000

* 60 000

* 355 500

15 000

60 000

317 400

* 15 000 15 000

* 60 000 60 000

* 355 500 355 500

Na+e and Principal Position in 2((*

Stock ,ear 200 Options nu+ber 5 2004 2003 400 000 400 000 800 000 60 000

=air 6alue at grant*-"./0 982 675 1 035 775 2 773 442 147 401

/estrictred S&ares nu+ber 100 000 100 000 * 35 000

=air 6alue at grant*-"./0 1 205 000 1 570 000 * 421 750

3or+a Ollila, Chairman and CEO Pekka 1la2Pietil47,

200

;)

Unti Oct!"er 1, 2005, #re$ident !f %!&ia C!r'!rati!n and (ead !f Cu$t!mer and )ar&et O'erati!n$ Olli Pekka 5allasvuo, +$ !f Oct!"er 1, 2005, #re$ident and COO, Unti -e'tem"er 30, 2005, E.# and /enera )ana0er !f )!"i e #h!ne$ 1nssi 6anjoki, E.# and /enera )ana0er !f )u timedia /ic&ard Si+onson, E.#, Chief 1inacia Officer

5 2004 2003 200 5 2004 2003 200 5 200 5

80 000 170 000

207 155 589 356

35 000 *

549 500 *

160 000 60 000 120 000

407 197 155 366 416 016

70 000 35 000 *

932 050 549 500 *

60 000 60 000

155 366 155 366

35 000 35 000

421 750 421 750

7 #e&&a + a*#ieti I $erved a$ the #re$ident !f the c!m'an9 and mem"er !f the /r!u' Executive =!ard unti he re$i0ned fr!m the$e '!$iti!n$ effective Oct!"er 1, 20054 +$ !f thi$ date )r4 + a*#ieti I he d the r! e !f Executive +dvi$!r unti Januar9 31, 2006, 7hen he cea$ed em' !9ment 7ith u$4 1!r 2006, "a$ed !n the$e advi$!r9 $ervice$, )r4 + a*#ieti I received a t!ta 'a9ment !f EU2 101 7174 =a$ed !n the $ervice c!ntract, )r4 + a*#ieti I i$ entit ed t! receive a 'a9ment !f EU2 956 000 in 2006 f!r hi$ c!mmitment$ durin0 20064 8 8he am!unt inc ude$ EU2 9 646 c!m'an9 c!ntri"uti!n t! 401:&;, EU2 4 816 c!m'an9 c!ntri"uti!n t! 2e$t!rati!n and 6eferra # an and EU2 344 324 'r!vided a$ "enefit$ under %!&ia re !cati!n '! ic94 * Each executive i$ted received "enefit$ and 'erGui$ite$ in 2005 n!t exceedin0 the e$$er !f EU2 50 000 !r 10< !f the executive$ t!ta c!m'en$ati!n4

Pension arrange+ents or t&e +e+bers o t&e Group ":ecutive Board 8he mem"er$ the /r!u' Executive =!ard in 2005 'artici'ate in the !ca retirement 'r!0ram$ a'' ica" e t! em' !9ee$ in the c!untr9 7here the9 re$ide4 Executive$ in 1in and 'artici'ate in the 1inni$h 8EA 'en$i!n $9$tem, 7hich 'r!vide$ f!r a retirement "enefit "a$ed !n 9ear$ !f $ervice and earnin0$ acc!rdin0 t! the 're$cri"ed $tatut!r9 $9$tem4 Under the 1inni$h 8EA 'en$i!n $9$tem, "a$e 'a9, incentive$ and !ther taxa" e frin0e "enefit$ are inc uded in the definiti!n !f earnin0$, a th!u0h 0ain$ rea iDed fr!m eGuit9 are n!t4 8he 1inni$h 8EA 'en$i!n $cheme 'r!vide$ f!r ear 9 retirement "enefit$ at a0e 624 -tandard retirement "enefit$ are avai a" e fr!m a0e$ 63 thr!u0h 68, acc!rdin0 t! an increa$in0 $ca e4 Executive$ in the United -tate$ 'artici'ate in %!&iaH$ 2etirement -avin0$ and 5nve$tment # an4 Under thi$ 401:&; ' an, 'artici'ant$ e ect t! ma&e v! untar9 're*tax c!ntri"uti!n$ that are 100< matched "9 the c!m'an9 u' t! 6< !f e i0i" e earnin0$4 8he c!m'an9 ma&e$ an additi!na annua di$creti!nar9 c!ntri"uti!n !f u' t! 2< !f e i0i" e earnin0$4 5n additi!n f!r 'artici'ant$ earnin0 in exce$$ !f the e i0i" e earnin0 imit, the c!m'an9 !ffer$ an additi!na 2e$t!rati!n and 6eferra # an4 8hi$ ' an a !7$ em' !9ee$ t! defer u' t! 50< !f their $a ar9 and 100< !f their "!nu$ int! a n!n*Gua ified ' an4 8he c!m'an9 a $! ma&e$ an annua di$creti!nar9 c!ntri"uti!n t! thi$ n!n*Gua ified ' an !f u' t! 2< !f the earnin0$ a"!ve 401:&; e i0i"i it9 imit$4 -im!n =ere$f!rd*O9 ie 'artici'ate$ in the %!&ia 5nternati!na Em' !9ee =enefit # an :%5E=#;4 8he %5E=# i$ a defined c!ntri"uti!n retirement arran0ement 'r!vided t! $!me %!&ia em' !9ee$ !n internati!na a$$i0nment$4 8he c!ntri"uti!n$ t! %5E=# are funded t7!*third$ "9 %!&ia and !ne*third "9 the em' !9ee4 =ecau$e )r4 =ere$f!rd*O9 ie a $! 'artici'ate$ in the 1inni$h 8EA $9$tem, the c!m'an9 c!ntri"uti!n t! %5E=# i$ 143< !f annua earnin0$4

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J!rma O i a and O i*#e&&a Na a$vu! can a$ 'art !f their $ervice c!ntract retire at a0e 60 7ith fu retirement "enefit, $h!u d the9 "e em' !9ed "9 %!&ia at the time4 8he fu retirement "enefit i$ ca cu ated, a$ if the executive had c!ntinued hi$ $ervice 7ith %!&ia thr!u0h the $tatut!r9 retirement a0e !f 654 )r4 O i aH$ $ervice c!ntract 7i terminate a$ !f June 1, 20064 1! !7in0 the current c!ntract, he 7i n!t "e e i0i" e t! receive an9 additi!na retirement "enefit$ fr!m %!&ia after that date4 #e&&a + a*#ieti I had an eGua retirement arran0ement durin0 hi$ em' !9ment at %!&ia and he 7i n!t receive an9 additi!na retirement "enefit$ fr!m %!&ia after terminati!n !f em' !9ment4 (a $tein )!er&, f! !7in0 hi$ arran0ement 7ith a 'revi!u$ em' !9er, ha$ a retirement "enefit !f 65< !f hi$ 'en$i!na" e $a ar9 "e0innin0 at the a0e !f 624 Ear 9 retirement i$ '!$$i" e at the a0e !f 55 7ith reducti!n$ in "enefit$4 -ervice C!ntract !f the Chairman and CEO, !f the #re$ident and COO, and !f the f!rmer #re$ident Oe have a $ervice c!ntract 7ith each !f J!rma O i a and O i*#e&&a Na a$vu!4 J!rma O i aH$ c!ntract c!ver$ hi$ current '!$iti!n a$ Chairman and CEO, and Chairman !f the /r!u' Executive =!ard4 )r4 O i aH$ em' !9ment 7i c!me t! an end !n June 1, 2006 "a$ed !n hi$ reGue$t a$ a re$u t !f 7hich the =!ard !f 6irect!r$ ha$ re ea$ed him fr!m hi$ dutie$ a$ CEO and Chairman !f the /r!u' Executive =!ard fr!m that date4 +$ !f June 1, 2006, hi$ $ervice c!ntract 7i terminate 7ith!ut an9 $everance !r !ther 'a9ment$ "9 %!&ia4 8hereafter, he 7i n! !n0er "e e i0i" e f!r incentive$, "!nu$e$, $t!c& !'ti!n$ !r !ther eGuit9 0rant$ fr!m %!&ia4 (e 7i "e entit ed t! retain a ve$ted and unve$ted $t!c& !'ti!n$ and !ther eGuit9 c!m'en$ati!n 0ranted t! him 'ri!r t! June 1, 20064 1urther, f! !7in0 hi$ current c!ntract, he 7i n!t "e e i0i" e t! receive an9 additi!na retirement "enefit$ fr!m %!&ia4 O i*#e&&a Na a$vu!H$ c!ntract c!ver$ hi$ current '!$iti!n a$ #re$ident and COO, and hi$ future '!$iti!n a$ #re$ident and CEO, and Chairman !f the /r!u' Executive =!ard, a$ fr!m June 1, 20064 )r4 Na a$vu!H$ annua t!ta 0r!$$ "a$e $a ar9, 7hich i$ $u"Lect t! an annua revie7 "9 the =!ard !f 6irect!r$, i$ EU2 750 000 $tartin0 fr!m Oct!"er 1, 2005, and 7i "e EU2 1 000 000 fr!m June 1, 20064 (i$ incentive tar0et$ under the %!&ia $h!rt*term incentive ' an are 125< $tartin0 fr!m Oct!"er 1, 2005 and 7i "e 150< fr!m June 1, 20064 5n ca$e !f terminati!n "9 %!&ia f!r rea$!n$ !ther than cau$e, inc udin0 a chan0e !f c!ntr! , )r4 Na a$vu! i$ entit ed t! a $everance 'a9ment !f u' t! 18 m!nth$ !f c!m'en$ati!n :"!th annua t!ta 0r!$$ "a$e $a ar9 and tar0et incentive;4 5n ca$e !f terminati!n "9 )r4 Na a$vu!, the n!tice 'eri!d i$ 6 m!nth$ and he i$ entit ed t! a 'a9ment f!r $uch n!tice 'eri!d :"!th annua t!ta 0r!$$ "a$e $a ar9 and tar0et incentive f!r 6 m!nth$;4 )r4 Na a$vu! i$ $u"Lect t! a 12*m!nth n!n*c!m'etiti!n !" i0ati!n after terminati!n !f the c!ntract4 Un e$$ the c!ntract i$ terminated f!r cau$e, )r4 Na a$vu! ma9 "e entit ed t! c!m'en$ati!n durin0 the n!n*c!m'etiti!n 'eri!d !r a 'art !f it4 -uch c!m'en$ati!n am!unt$ t! the annua t!ta 0r!$$ "a$e $a ar9 and tar0et incentive f!r the re$'ective 'eri!d durin0 7hich n! $everance 'a9ment i$ 'aid4 )r4 Na a$vu! i$ entit ed t! a fu $tatut!r9 'en$i!n fr!m the date he turn$ 60 9ear$ !f a0e, in$tead !f the $tatut!r9 a0e !f 654 6urin0 2005, 7e a $! had a $ervice c!ntract 7ith #e&&a + a*#ieti I, 7h! acted a$ #re$ident unti Oct!"er 1, 20054 8hereafter he acted a$ Executive +dvi$!r unti terminati!n !f em' !9ment !n Januar9 31, 20064 )r4 + a*#ieti IH$ c!ntract had 'r!vi$i!n$ f!r $everance 'a9ment$ f!r u' t! 18 m!nth$ !f c!m'en$ati!n :"!th "a$e c!m'en$ati!n and "!nu$; in the event !f terminati!n !f em' !9ment f!r rea$!n$ !ther than cau$e4

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-hare !7ner$hi' 8he f! !7in0 $ecti!n de$cri"e$ the !7ner$hi', !r '!tentia !7ner$hi' intere$t in the C!m'an9 !f the mem"er$ !f !ur =!ard !f 6irect!r$ and the /r!u' Executive =!ard, either thr!u0h $hare !7ner$hi' !r thr!u0h h! din0 !f eGuit9 "a$ed incentive$, 7hich ma9 ead t! a $hare !7ner$hi' in the future4 8he mem"er$ !f the =!ard !f 6irect!r$ d! n!t receive $t!c& !'ti!n$ !r an9 !ther f!rm !f varia" e 'a9 fr!m the c!m'an9, 7ith the exce'ti!n !f J!rma O i a, Chairman and CEO4 (i$ h! din0$ !f eGuit9 "a$ed incentive$ are acc!unted f!r "e !7 under the /r!u' Executive =!ard4 6anie 24 (e$$e and Ed!uard )iche in 7ere e ected a$ ne7 mem"er$ t! the =!ard !f 6irect!r$ "9 the +nnua /enera )eetin0 !n +'ri 7, 20054 Of the /r!u' Executive =!ard mem"er$, -ari =a dauf and J484 =er0Gvi$t cea$ed em' !9ment 7ith u$ and re$i0ned fr!m the /r!u' Executive =!ard 7ith effect fr!m Januar9 31, 20054 #e&&a + a*#ieti I and ?rLM %euv! re$i0ned fr!m the /r!u' Executive =!ard 7ith effect fr!m Oct!"er 1, 20054 + a*#ieti I $erved a$ an Executive advi$!r f!r %!&ia fr!m Oct!"er 1, 2005 unti Januar9 31, 2006, 7hi e ?rLM %euv! retired at the end !f 20054 8he f! !7in0 'er$!n$ 7ere a''!inted a$ ne7 mem"er$ t! the /r!u' Executive =!ard effective in 2005R 8er! OLan'erI 7a$ a''!inted mem"er 7ith effect fr!m Januar9 1, 2005, -im!n =ere$f!rd*O9 ie fr!m 1e"ruar9 1, 2005, 2!"ert +nder$$!n and Nai Pi$tImM effective Oct!"er 1, 20054

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1ppendi: 2 Group ":ecutive Board Biograp&ies

Bio,raphy of *imon Beresford#+ylie .imon is a results$oriented business leader, with a passion for the industr , the customer, and e#ecution e#cellence. De has a reputation as a strong leader, people manager and communicator. De holds the Nokia values dearl and is committed to guiding Networks and its people to the goal of becoming the worlds leading enabler of mobilit . *efore &oining Nokia, .imon was Chief (#ecutive %fficer of Indian mobile operator 0odi 1elstra A+te. Ctd.@, a &oint venture between 2ustralias 1elstra Corporation and 0odicorp of India. 2s C(%, .imon oversaw the successful start$ up of one of Indias first 3.0 operators. +rior to that, .imon held various management positions within 1elstras Corporate and 3overnment *usiness 9nit. *efore entering the private sector, .imon worked for 2ustralian government agencies responsible for ta#ation and for industr polic . De holds degrees in economic geograph and histor from the 2ustralian National 9niversit and is a graduate of the (#ecutive )evelopment +rogram of .tanford 9niversit 5National 9niversit of .ingapore. .imon was born on 0a !4, !=:4, in the 9nited <ingdom. De is a dual 9<$ 2ustralian citiFen, is married and has two children. In his spare time, he en&o s traveling, philatel , and collecting art and anti6ues. Bio,raphy of )ary -. )cDowell 2s (#ecutive ;ice +resident and 3eneral 0anager, (nterprise .olutions, 0ar 1. 0c)owell oversees Nokia-s (nterprise .olutions business group. In this capacit 0ar is responsible for development, manufacturing and customer engagement for Nokia-s complete line of enterprise products and solutions, which includes its mobile business device range as well as securit and mobile connectivit solutions. 0ar accepted her current position at Nokia in 2774. +rior to &oining Nokia, 0ar held the position of senior vice president of .trateg and Corporate

;,

)evelopment at Dewlett +ackard, where she was responsible for the compan -s overall strategic planning process. 2s part of the strateg charter, she was in charge of D+-s business portfolio, ma&or initiatives around new markets or new products, and the valuation, negotiation and e#ecution of all corporate development activities across D+. .he also led the corporate investment activit including minorit e6uit , ac6uisitions, divestitures and venture activities. 2 !?$ ear veteran of D+$Compa6, 0ar has an impressive track record of success in building new business and is widel respected as an industr innovator. 2t D+$Compa6 she served for five ears as .enior ;ice +resident and 3eneral 0anager of Industr $.tandard .ervers, a Q? billion business and the world-s largest server franchise. In this role, 0ar had worldwide +EC responsibilit for D+-s +roCiant server business, which held the number one position in a highl competitive market for over a decade. .he also led D+$Compa6-s e#pansion into new technolog areas as well as business model transformation. +revious assignments include vice president of marketing for the server products division, director of strategic planning and director of s stems product marketing. .he &oined Compa6 as a s stems engineer in !=4>. 0ar has been a member of the 3roup (#ecutive *oard of Nokia since 2774. 2mong her man credentials, 0ar was named one of the 1op 27 Women in 1echnolog in Douston in 2777. .he serves on the *oard of ;isitors for the College of (ngineering at the 9niversit of Illinois. 0ar was born on Bul 28, !=>4. .he holds a bachelor-s degree in computer science from the 9niversit of Illinois. Bio,raphy of .allstein )oerk 2s (#ecutive ;ice +resident, Dallstein 0oerk has global responsibilit for all human resources activit including emplo ee development, management and leadership development, compensation, benefits, staffing and global diversit .De also acts as the -hosting manager- for Workplace /esources. 1his role involves helping Workplace /esources achieve their goals b being a discussion partner for W/ ;ice +resident 0ark 1amburro and his leadership team.

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De accepted the position of .enior ;ice +resident in !=== after a 22$ ear career at Dewlett$+ackard. 1here he moved through various positions from Controller, Dewlett$+ackard 25. Norwa , to 0anaging )irector, (uropean 0ulticountr /egion. +rior to this Dallstein held different positions at 1e#as Instruments in )enmark and Norwa . Dallstein has been a member of the 3roup (#ecutive *oard of Nokia since 2774. De holds a R)iplomekonomR degree from the Norwegian .chool of 0anagement. Dallstein was born on .eptember 2>, !=:8, in Dalden, Norwa . De is married and has three children. In his spare time, he en&o s sailing and outdoor activities especiall in the rough .candinavian terrain. Bio,raphy of -ero "/anper0 2s (#ecutive ;ice +resident and Chief 1echnolog %fficer, 1ero %&anperI is responsible for corporate and technolog strateg , strategic alliances and partnerships, research, standardiFation, intellectual propert rights, venturing, 0obile .oftware sales and marketing, "orum Nokia developer activities, business infrastructure and Industr /elations. 1ero has pla ed a defining role in the research and development work of Nokias business groups since &oining the compan in !==7 as a research engineer within Nokias %ulu mobile operations. 1hroughout his career 1ero has consistentl shown an abilit to balance the strong elements of his scientific background with Nokias broader business strategies. )uring 2772$2774 he headed Nokia /esearch Center, a corporate research unit driving Nokias technological competitiveness and renewal. +rior to this role, he held several senior management positions in Nokia Networks. De has been a member of the 3roup (#ecutive *oard of Nokia from Banuar 277:. 2 highl respected authorit on radio access technologies, 1ero spearheaded several radio s stems research efforts around wideband C)02, 3.0 and 9. 1)02 mobile protocols within Nokia. De also led industr $wide radio interface research and standardiFation pro&ects and initiatives, including the (9 4th "ramework +rogram pro&ect A"/20(.@, which laid the foundation for toda s

third$generation A83@ technologies. 1ero is the Chairman of Nokia "oundation, supporting the development of scientific competence and educational capabilities in information and telecommunications technologies. De has held positions on several technolog organiFations and committees. De is a highl respected industr commentator and author of the book RWC)02 for 1hird 3eneration 0obile CommunicationsR A!==4@ and its second edition RWC)02' 1owards I+ 0obilit and 0obile InternetR A277!@. De has also authored several conference and &ournal papers and contributed chapters to industr reference works including R1he 0obile Communications Dandbook, second editionR A!===@. De holds a masters of science degree from the 9niversit of %ulu, "inland and a +h.) degree from )elft 9niversit of 1echnolog , 1he Netherlands. 1ero was born Nov !2, !=>>, in <orsnIs, "inland. De is married and has three children. In his spare time, he en&o s reading, sports and spending time with his famil . Bio,raphy of Niklas *a ander 2s (#ecutive ;ice +resident, 1echnolog +latforms, and a member of the Nokia 3roup (#ecutive *oard, Niklas .avander is responsible for deliver of software and technolog modules to Nokia-s mobile device business groups and e#ternal customers. In addition his organiFation is chartered with technolog management and product creation processes development across the compan . .avander is a member of the 3roup (#ecutive *oard of Nokia effective 2pril 277>. .avander &oined Nokia in !==? and has held a variet of senior business management, strateg , sales and marketing positions covering the device and network businesses. In 2778, .avander was appointed .enior ;ice +resident, 0obile )evices *usiness 9nit, (nterprise .olutions. +rior to &oining Nokia, .avander spent nine ears with Dewlett$+ackard in "inland, 3erman and .witFerland. )uring this time, he held roles ranging from the position of account manager to finall lead the compan -s 1echnical . stems

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*usiness for (urope, 0iddle (ast E 2frica. .avander serves on the boards of . mbian Ctd. and 1amfelt % &. De is also a member of the board and secretar of Waldemar von "renckells .tiftelse. De holds a 0aster-s degree in .cience from the Delsinki 9niversit of 1echnolog and a 0aster-s of *usiness 2dministration from the .wedish .chool of (conomics and *usiness 2dministration in Delsinki. De is fluent in .wedish, (nglish, 3erman and "innish. .avander was born 2ugust 4, !=>2, in Delsinki, "inland. De is married and has two children. In his spare time, he en&o s pla ing and refereeing ice$hocke , telemark skiing and golf. Bio,raphy of Richard A. *imonson 2s (#ecutive ;ice +resident and Chief "inancial %fficer, /ichard 2. .imonson has responsibilit for group "inance and Control, 1reasur , Investor /elations, Customer "inance, /isk 0anagement and 2ssurance, 0ergers E 2c6uisitions and %perating /esource .ourcing. /ick &oined Nokia in 277! as ;ice +resident, Dead of Customer "inance, negotiating and monitoring financial e#posures and was responsible for finding third$part financing solutions for Nokia customers. In this capacit /ick was also instrumental in Nokia-s worldwide effort to assure the financial strength and fle#ibilit of its four business groups going forward, while simultaneousl serving the best interests of Nokia shareholders. +rior to &oining Nokia, /ick held the ke position of 0anaging )irector, 1elecom E 0edia Investment *anking 3roup, .an "rancisco, at *arcla s Capital. *efore this /ick spent !> ears at *ank of 2merica .ecurities, where he climbed the career ladder and was appointed 0anaging )irector E Dead of 3lobal +ro&ect "inance, 3lobal Corporate E Investment *ank, .an "rancisco and Chicago, in !===. /ick has been a member of the 3roup (#ecutive *oard of Nokia since 2774. De holds a bachelor-s degree in science and mining engineering from the Colorado .chool of 0ines, and a master-s degree in business administration and finance from the Wharton .chool of *usiness at the 9niversit of +enns lvania,

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+hiladelphia. /ick was born 2ugust 2:, !=:4, in 0iddletown, %hio, 9.2. De is married and has five children. In his spare time, he en&o s &ogging, golf and downhill skiing. Bio,raphy of (eli *undback 2s (#ecutive ;ice +resident, Corporate /elations and /esponsibilit , ;eli .undbIck heads up Nokia-s government and public affairs function, and Nokia initiatives aimed at achieving sustainable development and providing access and technolog to emerging markets. 0oreover, ;eli is dedicated to advancing Nokia-s profile as a good corporate citiFen and shaping the policies that allow Nokia to function as a successful business and sociall responsible compan . ;eli &oined Nokia in !==> after a distinguished diplomatic career spanning over 2: ears. +rior to accepting his current position at Nokia, ;eli held various ministr positions in Delsinki, *russels and 3eneva, including 9nder$.ecretar of .tate for (#ternal (conomic /elations at the 0inistr for "oreign 2ffairs, !==7 to !==8, and .ecretar of .tate at the 0inistr for "oreign 2ffairs, !==8 to !==:. De was also chief negotiator for "inland-s accession to the (uropean 9nion. )uring his ears at Nokia, ;eli has been instrumental in Nokia-s efforts to ensure open competition and standards. De has served as a member of the *oard of (IC12 Athe (uropean Information and Communication 1echnolog Industr 2ssociation@, where he was well positioned to observe and influence telecom regulations. ;eli has been a member of the 3roup (#ecutive *oard of Nokia since !==>. De is chairman of the .upervisor *oard of Nokia A)eutschland@ 3mbD, *oard 0ember of "innair, a "innish airline compan , chairman of the "inland$China 1rade 2ssociation, member of the *oard and its e#ecutive committee of the Confederation of "innish Industries A(<@ and member of the *oard and its e#ecutive committee and vice chairman of 1echnolog Industries of "inland. De is also a 0ember of the *oard of 1rustees of WW" "inland. ;eli is decorated with man titles including Commander, !st Class of the %rder

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of the White /ose of "inland, Commander of the %rder of the Cion of "inland, Commander, !st Class of the %rder of the Isabel Catholic, .pain, 3rand Cross of the %rder of )anneborg, )enmark, 3rand Cross of the %rder of %range$Nassau, Netherlands, 3rand Cross of the %rder of 0erit, /epublic of Ital , 3rand Cross with .tar and .ash of the %rder of 0erit, 3erman , 3rand %fficer of the %rder of Infante dom Denri6ue, +ortugal, and 3rand Cross of the %rder of +hoeni#, 3reece. ;eli has a Cicentiate in Caw from the 9niversit of Delsinki. De is a .enior Cieutenant in the "innish arm . ;eli was born on 0a 2=, !=4>, in Delsinki, "inland. De is married and has three children. In his spare time, ;eli en&o s tennis, golf, fishing, reading and Rtr ing to understand the world better.R De is a great admirer of the arts and is a member of the board of the "innish National 1heatre. Bio,raphy of Anssi (an/oki 2s (#ecutive ;ice +resident and 3eneral 0anager of 0ultimedia, Nokia, 2nssi ;an&oki heads a business group that is responsible for offering devices and content for bringing mobile multimedia to consumers in the form of images, games, music and a range of other attractive content. 2 highl respected brand authorit with over 27 ears of marketing e#perience, 2nssi has been a driving force in Nokia-s efforts of addressing the mobile markets. Dis work has focussed on developing Nokia-s brand durabilit , lo alt and continuit , while, at the same time, advancing Nokia-s vision of a mobile world. 2nssi &oined Nokia in !==! and was named ;ice +resident, .ales, Nokia 0obile +hones, before his promotion in !==4 to .enior ;ice +resident, Nokia 0obile +hones (urope and 2frica. In !==4 he was made (#ecutive ;ice +resident, Nokia 0obile +hones (urope and 2frica and became a member of the 3roup (#ecutive *oard of Nokia. In addition, in !===, 2nssi took responsibilit for Nokia-s )igital Convergence 9nit and, in 2772, also headed up the *usiness 9nit 0anagement. De was appointed to his present position on Banuar !st 2774. +rior to &oining Nokia, 2nssi held a variet of management positions at 80

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Corporation. 2nssi is the chairman of the board of 2mer 3roup, and was a member of the 3overning Committee of the (uropean "oundation for ,ualit 0anagement 277! $ 2778. De is a <night, !st Class, of the %rder of the White /ose of "inland. 2nssi holds a master-s degree in economics from the Delsinki .chool of (conomics and *usiness 2dministration. 2nssi was born in !=:> in Delsinki, "inland. De is married and has three children. In his spare time, 2nssi en&o s basketball and is a member of "inland-s Darle )avidson owners- club. De also likes to spend time in the countr side with his famil . Bio,raphy of Dr. %ai 3ist0m4 2s (#ecutive ;ice +resident and 3eneral 0anager of 0obile +hones <ai heads the business group of Nokia, which offers a world$leading range of mobile phones for large consumer segments. <ai &oined Nokia Consumer (lectronics in !==!, and during !==!$!==: he held a number managerial and technical positions, including being stationed in the ke markets of "rance and 3erman . In !==: <ai was appointed +roduct 0anager, Nokia 0obile +hones, where he was involved with the introduction of several Nokia classic categor phones. In !==?, <ai was promoted to ;ice +resident 1)02 *usiness Cine, the ma&or mobile technolog for ke markets in the 2mericas. In 2772 <ai was named .enior ;ice +resident, Nokia 0obiles +hones, overseeing the 0obile +hones business unit. In Banuar 2774 he was appointed .enior ;ice +resident, *usiness Cine 0anagement, within the 0obile +hones business group. In this role, he has had a global business responsibilit for a unit that defines, develops and markets products to 3.0 and WC)02 markets. <ai holds a )octorate degree in technolog and a 0aster of .cience degree in (ngineering from the 1ampere 9niversit of 1echnolog . <ai was born on .eptember 2=, !=>4 in 1urku, "inland. De is married and has

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three children. In his spare time, <ai en&o s various sports including tennis, skiing and golf.

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1ppendi: J Biograp&ies o t&e !irectors o Nokia

'hairman 8"R)A "99:9A Chairman of the *oard of )irectors, Nokia Corporation since !===. 0ember since !==:. Chairman of the *oard of )irectors of /o al )utch .hell +lc. Chairman and C(%, Chairman of the 3roup (#ecutive *oard of Nokia Corporation !===$277>, +resident and C(%, Chairman of the 3roup (#ecutive *oard of Nokia Corporation !==2$!===, +resident of Nokia 0obile +hones !==7$ !==2, .enior ;ice +resident, "inance of Nokia !=4>$!=4=. Dolder of various managerial positions at Citibank within corporate banking !=?4$!=4:. 0ember of the *oard of )irectors of "ord 0otor Compan , ;ice Chairman of the *oard of )irectors of 9+0$< mmene Corporation, ;ice Chairman of the *oard of )irectors of %tava *ooks and 0agaFines 3roup Ctd. Chairman of the *oards of )irectors and the .upervisor *oards of "innish *usiness and +olic "orum (;2 and 1he /esearch Institute of the "innish (conom (1C2. Chairman of 1he (uropean /ound 1able of Industrialists. (ice 'hairman $A;9 8. '"99:N* ;ice Chairman of the *oard of )irectors, Nokia Corp since 2777. *oard member since !==4. ;ice Chairman of Citigroup Inc. !==4$2777, ;ice Chairman and member of the *oard of )irectors of Citicorp and Citibank N.2. !=44$2777. Dolder of various e#ecutive positions at Citibank within investment management, investment banking, corporate planning as well as finance and administration !=>!$!=44. 0ember of the *oards of )irectors of *3 3roup and 1he (nstar 3roup, Inc. 0ember of the .upervisor *oard of 2ctis Capital CC+. GE"RG E.RNR""-., Board )ember since 5666 0ember of the +ersonnel Committee and the 2udit Committee.

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+resident and C(% of 0etra Corporation !==!$2777, +resident and C(% of Coh&a Corporation !=?=$!==!. Dolder of various e#ecutive positions at WIrtsilI Corporation within production and management !=>:$!=?=. Chairman of the *oard of )irectors of .ampo plc. ;ice Chairman of the *oard of )irectors of /autaruukki Corporation, member of the *oard of )irectors of % <arl "aFer 2b and .andvik 2* Apubl@. ;ice Chairman of the *oards of )irectors of 1he /esearch Institute of the "innish (conom (1C2 and "innish *usiness and +olic "orum (;2. DAN:E9 R. .E**E, Board )ember since 5667 Chairman and Chief (#ecutive %fficer (0*2/, Corporation C(% of .print Communication, Cocal 1elecommunications )ivision 277:$277>, Chairman, +resident and C(% of 1erabeam 2777$2774, +resident and C(% of 21E1 Wireless .ervices !==?$2777, (#ecutive ;ice +resident of 21E1 !==?$ 2777. ;arious managerial positions in 21E1, !=??$!==?. 0ember of the *oard of )irectors of ;" Corporation. 0ember of the National *oard of 3overnors of the *o s E 3irls Clubs of 2merica. DR. BENG- ."9)*-R"), Board )ember since <!!! +aul 2. .amuelson +rofessor of (conomics at 0I1, &oint appointment at the 0I1 .loan .chool of 0anagement. 0ember of the *oard of )irectors of <uusakoski % . 0ember of the 2merican 2cadem of 2rts and .ciences and "oreign 0ember of 1he /o al .wedish 2cadem of .ciences. $ER %AR9**"N, Board member since 5665 Independent Corporate 2dvisor (#ecutive )irector, with mergers and ac6uisitions advisor responsibilities, at (nskilda 0E2, (nskilda .ecurities ACondon@ !=4>$!==2, Corporate strateg consultant at the *oston Consulting 3roup ACondon@ !=?=$!=4>. *oard member of I<2N% Doldings ..2.

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DA)E )AR8"R:E *'ARD:N", Board )ember since 566< Chief (#ecutive and member of the *oard of )irectors of +earson plc. Chief (#ecutive of 1he (conomist 3roup !==8$!==?, +resident of the North 2merican %perations of 1he (conomist 3roup !=4:$!==8, law er !=?>$!=4: and publisher of 1he 3eorgia 3aFette newspaper !=?4$!=4:. %E:8" *;:9A, Board )ember since 566= +resident and C(% of "innair % & !===$277:. Dolder of various e#ecutive positions, including ;ice Chairman and (#ecutive ;ice +resident, at DuhtamIki % &, Ceaf 3roup and Ceaf (urope during !=4:$!==4. Chairman of oneworld airline alliance 2778$2774 and member of various international aviation and air transportation associations !===$277:. ;ice Chairman of the *oard of )irectors of <esko Corporation, and ;ice Chairman of the .upervisor *oard of the "innish "air Corporation. (E*A (A:N:", Board )ember since <!!> Chairman !==4$!=== and 2777$2772 and ;ice Chairman !===$2777 of the *oard of )irectors of Nordea 2* Apubl@, Chairman of the (#ecutive *oard and C(% of 0erita *ank Ctd and C(% of 0erita Ctd !==2$!==?. +resident of < mmene Corporation !==!$!==2. Dolder of various other e#ecutive positions in "innish industr !=?2$!==!. Chairman of the *oard of )irectors of 9+0$< mmene Corporation.

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1ppendi: J Co++ittees o t&e Board o !irectors

5udit Committee
1he 2udit Committee is established b the *oard primaril for the purpose of overseeing the accounting and financial reporting processes of the compan and audits of the financial statements of the compan . 1he Committee is responsible for assisting the *oard-s oversight of A!@ the 6ualit and integrit of the compan -s financial statements and related disclosure, A2@ the e#ternal auditor-s 6ualifications and independence, A8@ the performance of the e#ternal auditor sub&ect to the re6uirements of "innish law, A4@ the performance of the compan -s internal controls and risk management and assurance function, and A:@ the compan -s compliance with legal and regulator re6uirements. 1he Committee also maintains procedures for the receipt, retention and treatment of complaints received b the compan regarding accounting, internal controls, or auditing matters and for the confidential, anon mous submission b emplo ees of the compan of concerns regarding accounting or auditing matters. 9nder "innish law, our e#ternal auditor is elected b our shareholders at the 2nnual 3eneral 0eeting. 1he Committee makes a recommendation to the shareholders in respect of the appointment of the e#ternal auditor based upon its evaluation of the 6ualifications and independence of the auditor to be proposed for election or re$election. 1he Committee meets at least four times per ear based upon a schedule established at the first meeting following the appointment of the Committee. 1he Committee meets separatel with the representatives of Nokia-s management and the e#ternal auditor at least twice a ear. 1he 2udit Committee convened five times in 277:.

Personnel Committee
1he primar purpose of the +ersonnel Committee is to oversee the personnel policies and practices of the compan . It assists the *oard in discharging its 1)

responsibilities relating to all compensation, including e6uit compensation, of the compan -s e#ecutives and the terms of emplo ment of the same. 1he Committee has overall responsibilit for evaluating, resolving and making recommendations to the *oard regarding A!@ compensation of the compan -s top e#ecutives and their emplo ment conditions, A2@ all e6uit based plans, A8@ incentive compensation plans, policies and programs of the compan affecting e#ecutives, and A4@ other significant incentive plans. 1he Committee is responsible for ensuring the above compensation programs are performance based, properl motivate management, support overall corporate strategies and are aligned with shareholders- interests. 1he Committee is responsible for the review of senior management development and succession plans. 1he +ersonnel Committee convened three times in 277:.

Corporate :o%ernance and Nomination Committee

1he Corporate 3overnance and Nomination Committee-s purpose is A!@ to prepare the proposals for the general meetings in respect of the composition of the *oard along with the director remuneration to be approved b the shareholders, and A2@ to monitor issues and practices related to corporate governance and to propose necessar actions in respect thereof. 1he Committee fulfills its responsibilities b Ai@ activel identif ing individuals 6ualified to become members of the *oard, Aii@ recommending to the shareholders the director nominees for election at the 2nnual 3eneral 0eetings, Aiii@ monitoring significant developments in the law and practice of corporate governance and of the duties and responsibilities of directors of public companies, Aiv@ assisting the *oard and each committee of the *oard in its annual performance self$evaluations, including establishing criteria to be used in connection with such evaluations, and Av@ developing and recommending to the *oard and administering the Corporate 3overnance 3uidelines of the compan . 1he Corporate 3overnance and Nomination Committee convened three times in 277:.

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