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Nokia’s (NOK) CEO Rajeev Suri on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Nokia Corporation (NYSE:NOK)

Q2 2014 Earnings Conference Call

July 24, 2014, 08:00 AM ET

Executives

Matt Shimao – Head of Investor Relations

Rajeev Suri – President and Chief Executive Officer

Timo Ihamuotila – Executive Vice President and Chief Financial Officer

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Analysts

Sandeep Deshpande – JPMorgan

Gareth Jenkins – UBS

Francois Meunier – Morgan Stanley

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Stuart Jeffrey – Nomura

Alexander Peterc – Exane BNP Paribas

Tim Long – BMO Capital Markets

Andrew Gardiner – Barclays

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Richard Kramer – Arete Research

Mike Walkley – Canaccord

Ehud Gelblum – Citigroup

Kulbinder Garcha – Credit Suisse

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Mark Sue – RBC Capital Markets

Jasmeet Chadha – Bernstein

Operator

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Good day. My name is Carmen and I will be your conference operator today. At this time, I would like to welcome everyone to the Nokia Q2 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session (Operator Instructions).

I would now like to turn the call over to Matt Shimao, Head of Investor Relations. Mr. Shimao, you may begin.

Matt Shimao – Head of Investor Relations

Ladies and gentlemen, welcome to Nokia’s second quarter 2014 conference call. I’m Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO; and Timo Ihamuotila, EVP and CFO, are here in Espoo with me today.

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During this call, we’ll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified these in more detail on the risk factors section of our 20-F for 2013 and in our Interim Report issued today.

Please note that our results press release, the complete interim report with tables and the presentation on our website include non-IFRS results information in addition to the reported results information. Our complete results report with tables available on our website includes a detailed explanation of the content of the non-IFRS information and a reconciliation between the non-IFRS and the reported information.

With that, Rajeev, over to you.

Rajeev Suri – President and Chief Executive Officer

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Thank you, Matt, and thanks to all of you for joining. It is a pleasure to speak to you today after my first quarter as CEO and after what was a very positive quarter for the company. Before I go into the details of our performance, however, I thought I would provide an update on the five priorities I set for my first 100 days and which I outlined on the call last quarter.

The first of those priorities was engaging and understanding. Since being appointed, I have met with senior customers, including the CEOs of Deutsche Telekom, Vodafone, China Mobile and SoftBank. I have talked to more than 15,000 employees in town hall meetings on three continents. I have spent time with government leaders, including the Premier of China and the Prime Minister of Finland. And I have engaged with many of our largest investors in San Francisco, Helsinki, London, representing about 30% of our shareholder base. These meetings have helped give me a perspective on how we are viewed today, our strength and weaknesses and the hopes and concerns people have for our future.

The second priority was to move rapidly from the high-level strategy and vision that we announced last quarter to bold and detailed execution plans. We will share more about the work that we are doing in this area at the Capital Markets Day that we are planning for November. But I am confident that we are heading in the right direction. Of course, we are not waiting to act. To take just one example, we have recently announced five acquisitions, Medio and Desti for HERE and Mesaplexx, SAC Wireless and a 3D geolocation solution from NICE Systems for Networks. These are the kind of deals we like, modest in size, relatively easy to integrate and providing access to new technology that we scale up or execution capabilities that bring us closer to key customers.

My third priority was to develop and implement a number of key systems across our business. I am pleased that we have already begun to implement a new operational governance model, including a company-wide performance management process. These steps will be codified into what we are calling the Nokia Business System, which is designed to ensure that we have best practices based upon common processes, spanning the whole company in a number of areas that include talent development, M&A integration, cost management and lean methodologies.

The fourth priority was culture. Today, we are taking the important step of sharing our new company values with almost 2,000 of our senior leaders, who will then help cascade those values to all employees. By September, we expect to be well on track with our overall cultural transformation, where we will focus on a common culture across the entire organization, with some differences between the businesses that reflect their unique circumstances.

Finally, I said we could not and would not lose sight of our operational performance. And I think the results of the second quarter show that we have kept our focus and discipline even during a time of significant change.

So let me now turn to those results. At the group level, we delivered net sales from continuing operations of €2.9 billion, a 44% non-IFRS gross margin and a non-IFRS operating profit of €347 million or 11.8%. Of course, the group level results reflect the performance of our three distinct businesses, and I will cover each of those today. I will spend most of my time on Networks, as I know some of you have questions about its strong margins and what they imply for the future.

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