Nokia Corporation

Interim report
January 24, 2013 at 13.00 (CET+1)

This is a summary of the fourth quarter and full year 2012 interim report published today. The complete fourth quarter and full year 2012 interim report with tables is available at http://www.results.nokia.com/results/Nokia_results2012Q4e.pdf. Investors should not rely on summaries of our interim reports only, but should review the complete interim reports with tables.

FINANCIAL AND OPERATING HIGHLIGHTS

Fourth quarter 2012 highlights:
Nokia Group non-IFRS EPS in Q4 2012 was EUR 0.06; reported EPS was EUR 0.05.
- Nokia Group achieves underlying operating profitability, with Q4 non-IFRS operating margin of 7.9%.
- Nokia Group strengthened its net cash position by approximately EUR 800 million sequentially, of which approximately EUR 650 million was generated by Nokia Siemens Networks.
- Devices & Services Q4 non-IFRS operating margin improved quarter-on-quarter to 1.3%, due to an increase in gross margin as well as a decrease in operating expenses.
- Nokia Siemens Networks non-IFRS operating margin improved quarter-on-quarter and year-on-year to a 14.4% in Q4, the highest level of underlying operating profitability since its formation in April 2007, primarily due to an increase in gross margin.

Full year 2012 highlights:
Nokia Group full year 2012 non-IFRS EPS was EUR -0.17; reported EPS was EUR -0.84.
- Nokia Group achieves underlying operating profitability, with full year 2012 non-IFRS operating margin of 0.4%.
- Nokia Group ends 2012 with a strong balance sheet and solid cash position. Gross cash was EUR 9.9 billion and net cash was EUR 4.4 billion, after incurring cash outflows related to restructuring of approximately EUR 1.5 billion and dividend payment of approximately EUR 750 million.
- To ensure strategic flexibility, the Nokia Board of Directors will propose that no dividend payment will be made for 2012 (EUR 0.20 per share for 2011). Nokia's Q4 financial performance combined with this dividend proposal further solidifies the company's strong liquidity position.

Commenting on the results, Stephen Elop, Nokia CEO, said:
"We are very encouraged that our team's execution against our business strategy has started to translate into financial results. Most notably we are pleased that Nokia Group reached underlying operating profitability in the fourth quarter and for the full year 2012.

While the first half of 2012 was difficult for Nokia Group, in Q4 2012 we strengthened our financial position, improved our underlying operating margin in Devices & Services, introduced the HERE brand to expand our mapping and location experiences, and drove record profitability in Nokia Siemens Networks.

We remain focused on moving through our transition, which includes continuing to improve our product competitiveness, accelerate the way we operate and manage our costs effectively. All of these efforts are aimed at improving our financial performance and delivering more value to our shareholders."

SUMMARY FINANCIAL INFORMATION

Note 1 relating to non-IFRS (also referred to as "underlying") results: In addition to information on our reported IFRS results, we provide certain information on a non-IFRS, or underlying business performance, basis.  Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from (i) the formation of Nokia Siemens Networks and (ii) all business acquisitions completed after June 30, 2008.  Nokia believes that our non-IFRS results provide meaningful supplemental information to both management and investors regarding Nokia's underlying business performance by excluding the above-described items that may not be indicative of Nokia's business operating results. These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure(s), but should be used in conjunction with the most directly comparable IFRS measure(s) in the reported results. See note 2 below for information about the exclusions from our non-IFRS results. More information, including a reconciliation of our Q4 2012 and Q4 2011 non-IFRS results to our reported results, can be found in our complete Q4 2012 interim report with tables on pages 18 and 20-24. A reconciliation of our full year 2012 and full year 2011 non-IFRS results to our reported results can be found in the same report on pages 40-45.  A reconciliation of our Q3 2012 non-IFRS results to our reported results can be found in our complete Q3 interim report with tables on pages 19 and 22-26 published on October 18, 2012.
 
Note 2 relating to non-IFRS exclusions:

Q4 2012 - EUR 196 million (net) consisting of:
- EUR 255 million restructuring charge and other associated item in Nokia Siemens Networks, including EUR 34 million of net charges related to country and contract exits based on new strategy that focuses on key markets and product segments,  as well  as an impairment of assets of EUR 2 million.
- EUR 9 million restructuring charge in Location & Commerce
- EUR 2 million restructuring related impairments in Devices & Services
- EUR 75 million net benefit from releases of restructuring provisions in Devices & Services
- EUR 21 million positive item from a cartel claim settlements in Devices & Services
- EUR 52 million net gain on sale of Vertu business in Devices & Services
- EUR 79 million net gain on sale of real estate in Devices & Services
- EUR 67 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions' networks assets
- EUR 87 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services

Q3 2012 - EUR 654 million (net) consisting of:
- EUR 74 million restructuring charge and other associated items in Nokia Siemens Networks, including EUR 3 million of net charges related to country and contract exits based on new strategy that focuses on key markets and product segments.
- EUR 2 million restructuring charge in Location & Commerce
- EUR 454 million restructuring charge and other associated items in Devices & Services
- EUR 67 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions' networks assets
- EUR 91 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 1 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services
- EUR 35 million positive item from a cartel claim settlement in Devices & Services

Q3 2012 taxes - EUR 157 million non-cash deferred tax expense related to corporate reorganizations arising from Location & Commerce business integration.

Q4 2011 - EUR 1 432 million (net) consisting of:
- EUR 1 090 million partial impairment of goodwill in Location & Commerce
- EUR 25 million restructuring charge in Location & Commerce
- EUR 119 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 100 million restructuring charge and EUR 36 million associated impairments in Devices & Services
- EUR 2 million of intangible assets amortization and other purchase price related items arising from the acquisition of Novarra, MetaCarta and Motally in Devices & Services
- EUR 86 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola Solutions' networks assets
- EUR 23 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 49 million benefit from a cartel claim settlement
 
Note 3 relating to non-IFRS Nokia EPS:
Nokia taxes were unfavorably impacted by Devices & Services taxes as no tax benefits are recognized for certain Devices & Services deferred tax items. If Nokia's earlier estimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS would have been approximately 0.5 Euro cent higher in Q4 2012. Going forward on a non-IFRS basis, until a pattern of tax profitability is reestablished, Nokia expects to record quarterly tax expense of approximately EUR 50 million related to its Devices & Services business and approximately EUR 50 million related to its Nokia Siemens Networks business. Nokia expects to continue to record taxes related to its Location & Commerce business at a 26% rate.
 
Note 4 relating to Nokia net cash and other liquid assets: Calculated as total cash and other liquid assets less interest-bearing liabilities. For selected information on Nokia Group interest-bearing liabilities, please see the table on page 53 of the complete Q4 2012 interim report with tables
 
Note 5 relating to operational and reporting structure: We adopted our current operational structure during 2011 and have three businesses: Devices & Services, Location & Commerce and Nokia Siemens Networks and four operating and reportable segments: Smart Devices and Mobile Phones within Devices & Services, Location & Commerce and Nokia Siemens Networks. Smart Devices focuses on smartphones and Mobile Phones focuses on mass market mobile devices, including Asha full touch smartphones. Devices & Services also contains Devices & Services Other which includes net sales of our luxury phone business Vertu through October 12, 2012, spare parts and related cost of sales and operating expenses, as well as intellectual property related income and common research and development expenses. In October 2012, we completed the divestment of Vertu to EQT VI, a European private equity firm.  Location & Commerce focuses on the development of location-based services and local commerce. On November 13, 2012, Nokia introduced HERE, the new brand for its location and mapping service. For financial reporting purposes, the Location & Commerce business will be renamed as the HERE business, starting with the first quarter 2013. Nokia Siemens Networks is one of the leading global providers of telecommunications infrastructure hardware, software and services. Nokia Siemens Networks completed the acquisition of Motorola Solutions' networks assets on April 30, 2011. Accordingly, the results of Nokia Siemens Networks for 2012 are not directly comparable to 2011.
 
Note 6 relating to average selling prices (ASP): Mobile device ASP represents total Devices & Services net sales (Smart Devices net sales, Mobile Phones net sales, and Devices & Services Other net sales) divided by total Devices & Services volumes. Devices & Services Other net sales includes net sales of Nokia's luxury phone business Vertu through October 12, 2012, spare parts, as well as intellectual property income. Smart Devices ASP represents Smart Devices net sales divided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phones net sales divided by Mobile Phones volumes.

NOKIA OUTLOOK

- Nokia expects its Devices & Services non-IFRS operating margin in the first quarter 2013 to be approximately negative 2 percent, plus or minus four percentage points. This outlook is based on Nokia's expectations regarding a number of factors, including:
- competitive industry dynamics continuing to negatively affect the Mobile Phones and Smart Devices business units;
- the first quarter being a seasonally weak quarter;
- consumer demand, particularly for our Lumia and Asha smartphones;
- continued ramp up for our new Lumia smartphones;
- expected cost reductions under Devices & Services' restructuring program; and
- the macroeconomic environment.

- Nokia continues to target to reduce its Devices & Services non-IFRS operating expenses to an annualized run rate of approximately EUR 3.0 billion by the end of 2013.
- Nokia expects Location & Commerce non-IFRS operating margin in t