TIDMNOKIA 
 
   Nokia Corporation 
 
   Interim report 
 
   October 24, 2019 at 08:00 (CET +1) 
 
   Nokia Corporation Financial Report for Q3 and January-September 2019 
 
   Solid Q3 and expected strong Q4; Lowering full year 2019 and full year 
2020 outlook due to margin pressure and additional investment needs 
 
 
   -- Strong performance in Nokia Software, Nokia Enterprise and IP routing 
 
   -- 5G momentum continues; 48 deals and 15 live networks launched 
 
   -- Dividend payments paused to increase investments in 5G and strategic 
      focus areas and to strengthen cash position 
 
   -- Long term target operating margin of 12-14% supported by our end-to-end 
      portfolio, diversification and patent licensing 
 
 
 
   This is a summary of the Nokia Corporation financial report for Q3 and 
January-September 2019 published today. The complete financial report 
for Q3 and January-September 2019 with tables is available at 
https://www.globenewswire.com/Tracker?data=S7UGyGJEpVLglHNoYyuoYHlPhFyc4Sh6k-1OZdeL4t2BYIMCikgrRJnvpK-cuAgzDpSYhQOimoFpkWcJh-3Ca34JlJ501gbKo-GSkcTtBdc= 
www.nokia.com/financials. Investors should not rely on summaries of our 
financial reports only, but should review the complete financial reports 
with tables. 
 
   RAJEEV SURI, PRESIDENT AND CEO, ON Q3 2019 RESULTS 
 
 
 
 
 
   Nokia delivered a solid third quarter, with positive free cash flow; 
widespread sales growth; solid operating margin; strong performances in 
Nokia Enterprise, Nokia Software and IP Routing; and good progress 
towards meeting our 2019 cost reduction goals. We are proud to have 
launched 15 live 5G networks with customers, including Sprint, Verizon, 
AT&T and T-Mobile in the US; Vodafone Italy and Zain in Saudi Arabia; as 
well as SKT, KT and LGU+ in Korea. 
 
   Many of our businesses are performing well and we expect Q4 to be strong, 
with a robust operating margin and an increase in net cash of 
approximately EUR 1.2 billion. At the same time, some of the risks that 
we flagged previously related to the initial phase of 5G are now 
materializing. In particular, our Q3 gross margin was impacted by 
product mix; a high cost level associated with our first generation 5G 
products; profitability challenges in China; pricing pressure in early 
5G deals; and uncertainty related to the announced operator merger in 
North America. 
 
   We expect that we will be able to progressively mitigate these issues 
over the course of next year. To do so, we will increase investment in 
5G in order to accelerate product roadmaps and product cost reductions, 
and in the digitalization of internal processes to improve overall 
productivity. We will also continue to invest in our enterprise and 
software businesses, which are developing rapidly and performing well. 
Given these investments and the risks we see materializing, we are 
adjusting our targets for full-year 2019 and 2020; and we expect our 
recovery to drive improvement in our 2021 financial performance relative 
to 2020. 
 
   I am confident that our strategy remains the right one. We continue to 
focus on leadership in high-performance end-to-end networks with 
Communication Service Providers; strong growth in enterprise; 
strengthening our software business; and diversification of licensing 
into IoT and consumer electronics. 
 
   As I look to the future, it is clear to me that Nokia has some unique 
advantages. We have a powerful, end-to-end portfolio that allows us to 
benefit from 5G investments across all network domains. We have a 
demonstrated ability to drive value and cash flow through product 
leadership. We have successful diversification into enterprise and 
software well underway. We have a large patent licensing business that 
is sustainable and cash generative over time, with opportunities to 
enter new growth segments. We have meaningful opportunities to drive 
further cost reductions through digitalization and automation. 
 
   These advantages give me confidence in our ability to create value for 
our shareholders and achieve our longer-term operating margin target. 
 
 
 
 
Q3 2019 and January-September 2019 reported and non-IFRS results. Refer 
 to note 1, "Basis of Preparation", note 2, "Non-IFRS to reported reconciliation" 
 and note 13, "Performance measures", in the "Financial statement information" 
 section for details. 
                                                     Constant                                   Constant 
EUR million (except                          YoY      currency                         YoY       currency 
 for EPS in EUR)            Q3'19  Q3'18   change    YoY change  Q1-Q3'19  Q1-Q3'18   change    YoY change 
                            -----  ------  -------  -----------  --------  --------  --------  ----------- 
Net sales                   5 686   5 458       4%           1%    16 412    15 695        5%           2% 
Operating profit/(loss)       264    (54)                           (318)     (611) 
Operating margin %           4.6%  (1.0)%   560bps                 (1.9)%    (3.9)%    200bps 
EPS, diluted                 0.01  (0.02)                          (0.10)    (0.13) 
Operating profit/(loss) 
 (non-IFRS)                   478     487     (2)%                    869     1 060     (18)% 
Operating margin % 
 (non-IFRS)                  8.4%    8.9%  (50)bps                   5.3%      6.7%  (140)bps 
EPS, diluted (non-IFRS)      0.05    0.06    (17)%                   0.07      0.10     (30)% 
Net cash and current 
 financial investments(1)     344   1 879    (82)%                    344     1 879     (82)% 
                            -----  ------  -------  -----------  --------  --------  -------- 
(1) Net cash and current financial investments does not include lease 
 liabilities. 
 
 
   -- Net sales in Q3 2019 were EUR 5.7 billion, compared to EUR 5.5 billion in 
      Q3 2018. On a constant currency basis, net sales increased 1%. Our solid 
      overall topline performance was driven by improved industry demand and 
      the competitiveness of our end-to-end portfolio, with growth across four 
      out of six regions and all customer types. 
 
   -- Non-IFRS diluted EPS in Q3 2019 was EUR 0.05, compared to EUR 0.06 in Q3 
      2018, primarily driven by lower gross profit in Networks and a net 
      negative fluctuation in financial income and expenses. This was partially 
      offset by higher gross profit in Nokia Software and continued progress 
      related to Nokia's cost savings program, which resulted in lower 
      operating expenses across Networks, Nokia Software and Nokia 
      Technologies. 
 
   -- Reported diluted EPS in Q3 2019 was EUR 0.01, compared to negative EUR 
      0.02 in Q3 2018, primarily driven by continued progress related to 
      Nokia's cost savings program and a gain on defined benefit plan 
      amendments, partially offset by higher income taxes. 
 
   -- In Q3 2019, net cash and current financial investments decreased 
      sequentially by approximately EUR 160 million. Within this, we generated 
      positive net cash from operating activities, which partially offset cash 
      outflows from investing and financing activities, including the payment 
      of the quarterly dividend. 
 
   -- Full year 2019 and full year 2020 outlook lowered primarily due to margin 
      pressure, additional 5G investments and additional digitalization 
      investments. 
 
 
   NOKIA'S LONGER TERM VALUE DRIVERS 
 
 
 
 
1. Unique end-to-end           Nokia's unique end-to-end portfolio will drive 
 portfolio                      stronger share of wallet with service provider 
                                and enterprise customers. Portfolio allows Nokia 
                                to benefit from virtuous 5G investment cycle in 
                                multiple capital expenditure domains (mobile access, 
                                fixed access, IP routing, optical networks and 
                                software). 
-----------------------------  -------------------------------------------------------- 
2. Value through product       Nokia has a demonstrated ability to create value 
 leadership                     and drive cash flow through product leadership. 
                                Examples include FP4-based routing and PSE-3 based 
                                optical products, best-performing 4G networks, 
                                automated services, leading small cell and fixed 
                                wireless access portfolio. 
-----------------------------  -------------------------------------------------------- 
3. Successful diversification  Nokia's successful diversification into high growth 
 strategy                       enterprise business and medium growth software 
                                business is well underway. Both are meaningfully 
                                accretive opportunities for our margins, as well 
                                as our cash position. 
-----------------------------  -------------------------------------------------------- 
4. Sustainable patent          Nokia's strong and constantly growing patent portfolio 
 licensing                      provides long-term, highly profitable and cash 
                                generative opportunities, including extension 
                                into new segments, including multiple IoT verticals 
                                and consumer electronics. 
-----------------------------  -------------------------------------------------------- 
5. Structural cost reductions  Nokia has identified additional opportunities 
                                for meaningful cost reductions spanning both cost 
                                of sales and operating expenses, which will also 
                                help to drive improved cash performance. Opportunities 
                                include: reductions enabled by digitalization 
                                and automation of processes, product cost innovation 
                                (such as System on Chip in mobile, common software 
                                foundation in Nokia Software), ongoing R&D efficiencies 
                                and related site consolidation and improved product 
                                serviceability. 
-----------------------------  -------------------------------------------------------- 
 
 
   DIVID 
 
   Beginning with the distribution for the financial year 2018, Nokia 
started paying dividends in quarterly instalments. Under the 
authorization by the Annual General Meeting held on May 21, 2019, the 
Board of Directors may resolve an aggregate maximum annual distribution 
of EUR 0.20 per share to be paid quarterly during the authorization 
period, unless the Board decides otherwise for a justified reason. On 
the same day, the Board resolved to distribute EUR 0.05 per share as the 
first instalment of the dividend. On July 25, 2019, the Board resolved 
to distribute EUR 0.05 per share as the second instalment of the 
dividend. 
 
   On October 24, 2019, the Board resolved to not distribute the third and 
fourth quarterly instalments of the dividend for the financial year 
2018, in order to: a) guarantee Nokia's ability to increase 5G 
investments, b) continue investing in growth in strategic focus areas of 
enterprise and software and c) strengthen Nokia's cash position. This is 
in accordance with Nokia's dividend policy, which states that dividend 
decisions are made taking into account Nokia's cash position and 
expected cash flow generation. Over the long term, Nokia continues to 
target to deliver an earnings-based dividend. The Board will seek a 
dividend authorization from the next Annual General Meeting, and will 
continue to review dividend distributions on a quarterly basis. The 
Board expects to resume dividend distributions after Nokia's net cash 
position improves to approximately EUR 2 billion. 
 
   OUTLOOK 
 
 
 
 
Full Year 2019               Metric 
  Non-IFRS diluted earnings  EUR 0.21 plus or minus 3 cents (updated from 
   per share                  EUR 0.25 - 0.29), which mathematically implies 
                              a Q4 2019 non-IFRS diluted EPS midpoint of approximately 
                              EUR 0.135 
                             --------------------------------------------------------- 
  Non-IFRS operating margin  8.5% plus or minus 1 percentage point (updated 
                              from 9 - 12%), which mathematically implies 
                              a Q4 2019 non-IFRS operating margin midpoint 
                              of approximately 16.5% 
                             --------------------------------------------------------- 
  Recurring free cash        Somewhat negative (updated from slightly positive), 
  flow(1)                     which mathematically implies a sequential increase 
                              in net cash to approximately EUR 1.5 billion 
                              at the end of 2019 
                             --------------------------------------------------------- 
Full Year 2020 
  Non-IFRS diluted earnings  EUR 0.25 plus or minus 5 cents (updated from 
   per share                  EUR 0.37 - 0.42) 
                             --------------------------------------------------------- 
  Non-IFRS operating margin  9.5% plus or minus 1.5 percentage points (updated 
                              from 12 - 16%) 
                             --------------------------------------------------------- 
  Recurring free cash        Positive (updated from clearly positive) 
  flow(1) 
                             --------------------------------------------------------- 
Long term (3 to 5 years) 
  Non-IFRS operating margin  12 -- 14% (new) 
                             --------------------------------------------------------- 
  Annual distribution to     An earnings-based growing dividend of approximately 
   shareholders               40% to 70% of non-IFRS diluted EPS, taking into 
                              account Nokia's cash position and expected cash 
                              flow generation. The annual distribution would 
                              be paid as quarterly dividends. 
 
 
   (1) Free cash flow = net cash from operating activities - capital 
expenditures + proceeds from sale of property, plant and equipment and 
intangible assets -- purchase of non-current financial investments + 
proceeds from sale of non-current financial investments. 
 
   Key drivers of Nokia's outlook 
 
   Net sales and operating margin for Networks and Nokia Software are 
expected to be influenced by factors including: 
 
 
   -- Our expectation that we will perform approximately in-line with our 
      primary addressable market in full year 2019 and full year 2020, as we 
      further prioritize profitability and cash, while continuing to drive 
      growth in our Nokia Software and Nokia Enterprise businesses. (This is an 
      update to earlier commentary to outperform our primary addressable market 
      in full year 2019 and over the longer-term.) On a constant currency basis, 
      we expect our primary addressable market to grow slightly in full year 
      2019, and for growth to continue in full year 2020; 
 
   -- Competitive intensity has increased in some accounts as some competitors 
      seek to take share in the early stage of 5G, which is particularly 
      impacting Mobile Access. (This is an update to earlier commentary that 
      competitive intensity could increase); 
 
   -- Additional 5G investments focused on accelerating our product roadmaps 
      and cost competitiveness. Investment areas include System on Chip based 
      5G hardware, including diversifying and strengthening the related 
      supplier base (new commentary); 
 
   -- Additional digitalization investments focused on driving automation and 
      productivity, including further simplification of IT tools and 
      operational processes (new commentary); 
 
   -- Temporary capital expenditure constraints in North America related to 
      customer merger activity, as well as other potential mergers or 
      acquisitions by our customers (This is an update to earlier commentary 
      for potential mergers or acquisitions by our customers); 
 
   -- The timing of completions and acceptances of certain projects, 
      particularly related to 5G. Based on the evolving readiness of the 5G 
      ecosystem and the staggered nature of 5G rollouts in lead countries, we 
      expect full year 2019 will have seasonality characterized by a 
      particularly weak first quarter, a strong second quarter, a solid third 
      quarter and an expected strong fourth quarter (This is an update to 
      earlier commentary for an expected soft third quarter and an expected 
      particularly strong fourth quarter); 
 
   -- Some customers are reassessing their vendors in light of security 
      concerns, creating near-term pressure to invest in order to secure 
      long-term benefits; 
 
   -- Our expectation that we will improve our R&D productivity and reduce 
      support function costs through the successful execution of our cost 
      savings program; 
 
   -- Our product and regional mix, including the impact of the high cost level 
      associated with our first generation 5G products (This is an update to 
      our earlier commentary, providing additional details); and 
 
   -- Macroeconomic, industry and competitive dynamics. 
 
 
   Net sales and operating margin for Nokia Technologies is expected to be 
influenced by factors including: 
 
 
   -- The timing and value of new and existing patent licensing agreements with 
      smartphone vendors, automotive companies and consumer electronics 
      companies; 
 
   -- Results in brand and technology licensing; 
 
   -- Costs to protect and enforce our intellectual property rights; and 
 
   -- The regulatory landscape. 
 
 
   Additionally, our outlook is based on the following assumptions: 
 
 
   -- Nokia's recurring free cash flow is expected to improve over the 
      longer-term due to lower cash outflows related to restructuring and 
      network equipment swaps and improved operational results over time; 
 
   -- Non-IFRS financial income and expenses to be an expense of approximately 
      EUR 400 million in full year 2019 and approximately EUR 350 million over 
      the longer-term (This is an update to earlier commentary for non-IFRS 
      financial income and expenses to be an expense of approximately EUR 350 
      million in full year 2019); 
 
   -- Non-IFRS income taxes at a rate of approximately 28% in full year 2019 
      and approximately 25% over the longer-term, subject to the absolute level 
      of profits, regional profit mix and changes to our operating model; 
 
   -- Cash outflows related to income taxes of approximately EUR 500 million in 
      full year 2019 and approximately EUR 450 million over the longer term 
      until our US or Finnish deferred tax assets are fully utilized. (This is 
      an update to earlier commentary for cash outflows related to income taxes 
      of approximately EUR 450 million in full year 2019); and 
 
   -- Capital expenditures of approximately EUR 700 million in full year 2019 
      and approximately EUR 600 million over the longer-term. 
 
 
   NOKIA FINANCIAL RESULTS 
 
 
 
 
                                                         Constant                                   Constant 
EUR million (except for                          YoY      currency                         YoY       currency 
 EPS in EUR)                    Q3'19  Q3'18   change    YoY change  Q1-Q3'19  Q1-Q3'18   change    YoY change 
------------------------------  -----  ------  -------  -----------  --------  --------  --------  ----------- 
Net sales                       5 686   5 458       4%           1%    16 412    15 695        5%           2% 
    Networks                    4 434   4 265       4%           1%    12 770    12 129        5%           2% 
    Nokia Software                677     623       9%           5%     1 898     1 775        7%           3% 
    Nokia Technologies            358     351       2%           2%     1 112     1 077        3%           2% 
    Group Common and Other        236     236       0%           0%       720       768      (6)%         (6)% 
    Non-IFRS exclusions           (2)     (4)    (50)%                   (29)      (13)      123% 
Gross profit                    1 969   2 019     (2)%                  5 614     5 684      (1)% 
Operating profit/(loss)           264    (54)                           (318)     (611)     (48)% 
    Networks                      128     178    (28)%                    (7)       258    (103)% 
    Nokia Software                156      75     108%                    286       117      144% 
    Nokia Technologies            294     290       1%                    919       856        7% 
    Group Common and Other      (100)    (56)                           (329)     (171) 
    Non-IFRS exclusions         (214)   (541)    (60)%                (1 187)   (1 671)     (29)% 
Operating margin %               4.6%  (1.0)%   560bps                 (1.9)%    (3.9)%    200bps 
                                -----  ------  -------               --------  --------  -------- 
Gross profit (non-IFRS)         2 006   2 141     (6)%                  5 765     6 120      (6)% 
Operating profit/(loss) 
 (non-IFRS)                       478     487     (2)%                    869     1 060     (18)% 
Operating margin % (non-IFRS)    8.4%    8.9%  (50)bps                   5.3%      6.7%  (140)bps 
                                -----  ------  -------               --------  --------  -------- 
Financial income and expenses    (98)    (60)      63%                  (326)     (224)       46% 
Income taxes                     (80)    (15)     433%                    108        89       21% 
Profit/(loss) for the period       87   (127)                           (545)     (752)     (28)% 
EPS, diluted                     0.01  (0.02)   (150)%                 (0.10)    (0.13)     (23)% 
                                -----  ------  -------               --------  --------  -------- 
Financial income and expenses 
 (non-IFRS)                     (113)    (48)     135%                  (291)     (247)       18% 
Income taxes (non-IFRS)         (101)   (133)    (24)%                  (161)     (275)     (41)% 
Profit/(loss) for the period 
 (non-IFRS)                       267     309    (14)%                    409       532     (23)% 
EPS, diluted (non-IFRS)          0.05    0.06    (17)%                   0.07      0.10     (30)% 
                                -----  ------  -------               --------  --------  -------- 
Results are as reported and relate to continuing operations unless 
 otherwise specified. The financial information in this report is unaudited. 
 Non-IFRS results exclude costs related to the acquisition of Alcatel-Lucent 
 and related integration, goodwill impairment charges, intangible asset 
 amortization and other purchase price fair value adjustments, restructuring 
 and associated charges and certain other items that may not be indicative 
 of Nokia's underlying business performance. For details, please refer 
 to note 2, "Non-IFRS to reported reconciliation", in the notes to the 
 Financial statement information in this report. Change in net sales 
 at constant currency excludes the effect of changes in exchange rates 
 in comparison to euro, our reporting currency. For more information 
 on currency exposures, please refer to note 1, "Basis of Preparation", 
 in the "Financial statement information" section in this report. 
 
 
   Net sales by region 
 
 
 
 
                                      Constant                                 Constant 
                              YoY      currency                        YoY      currency 
EUR million    Q3'19  Q3'18  change   YoY change  Q1-Q3'19  Q1-Q3'18  change   YoY change 
               -----  -----  ------  -----------  --------  --------  ------  ----------- 
Asia-Pacific   1 198  1 050     14%           9%     3 173     2 892     10%           6% 
Europe         1 614  1 520      6%           6%     4 725     4 573      3%           3% 
Greater China    425    540   (21)%        (23)%     1 374     1 543   (11)%        (12)% 
Latin America    341    323      6%           2%     1 005       927      8%           6% 
Middle East & 
 Africa          402    432    (7)%         (9)%     1 257     1 310    (4)%         (6)% 
North America  1 705  1 594      7%           2%     4 877     4 449     10%           4% 
Total          5 686  5 458      4%           1%    16 412    15 695      5%           2% 
               -----  -----  ------  -----------  --------  --------  ------  ----------- 
 
 
   Net sales by customer type 
 
 
 
 
                                               Constant                                 Constant 
                                       YoY      currency                        YoY      currency 
EUR million             Q3'19  Q3'18  change   YoY change  Q1-Q3'19  Q1-Q3'18  change   YoY change 
                        -----  -----  ------  -----------  --------  --------  ------  ----------- 
Communication service 
 providers              4 780  4 632      3%           0%    13 742    13 111      5%           1% 
Enterprise                333    256     30%          27%       910       796     14%          12% 
Licensees                 358    351      2%           2%     1 112     1 052      6%           4% 
Other(1)                  215    219    (2)%         (1)%       648       736   (12)%        (12)% 
Total                   5 686  5 458      4%           1%    16 412    15 695      5%           2% 
(1) Includes net sales of Alcatel Submarine Networks (ASN) and Radio 
 Frequency Systems (RFS), both of which are being managed as separate 
 entities, and certain other items, such as eliminations of inter-segment 
 revenues and certain items related to purchase price allocation. ASN 
 and RFS net sales include also revenue from communications service providers 
 and enterprise customers. 
 
 
   Our Nokia Enterprise business is performing well. Net sales to 
enterprise customers, excluding the third party integration business 
that we are exiting, grew 29% on a reported basis and 26% on a constant 
currency basis in Q3 2019, and grew 14% on a reported basis and 12% on a 
constant currency basis in the first nine months of 2019. 
 
   Nokia, Q3 2019 compared to Q3 2018, non-IFRS 
 
   Nokia non-IFRS net sales grew 4% as our customers continued to invest in 
their networks in preparation for the rise in broadband traffic driven 
by 5G. On a constant currency basis, Nokia non-IFRS net sales grew 1%. 
 
   Our solid overall topline performance in Q3 2019 reflected improved 
industry demand and the competitiveness of our end-to-end portfolio, 
with growth across four out of six regions and all customer types. In Q3 
2019, we continued to make progress with our strategy to diversify and 
grow, with strong performance in Nokia Software and with enterprise 
customers. 
 
   The strong growth in Nokia Software net sales was primarily due to the 
timing of completions and acceptances of certain projects. To a lesser 
extent, net sales also benefitted from Nokia Software's improved product 
and go-to-market capabilities, with growth in both core networks and 
applications. 
 
   The strong growth in net sales to enterprise customers was primarily 
driven by increased demand for mission-critical networking solutions in 
industries including utilities and the public sector, with continued 
momentum in private wireless solutions. Net sales also benefitted from 
the timing of completions and acceptances of certain projects. 
 
   The overall decrease in Nokia non-IFRS gross profit was primarily due to 
lower gross margin in Networks. We experienced relatively high 5G 
product costs in Networks, as well as elevated levels of deployment 
services, consistent with being in the initial phase of 5G. This was 
partially offset by net sales growth in both Networks and Nokia Software, 
as well as higher gross margin in Nokia Software. In Q3 2019, Nokia 
non-IFRS gross profit benefitted from lower incentive accruals. 
 
   The decrease in Nokia non-IFRS operating profit was driven by the lower 
non-IFRS gross profit, partially offset by continued progress related to 
Nokia's cost savings program. In Q3 2019, Nokia non-IFRS operating 
profit benefitted from lower incentive accruals. 
 
   Nokia, January-September 2019 compared to January-September 2018, 
reported 
 
   Nokia net sales grew 5% in the first nine months of 2019 as our 
customers continued to invest in their networks in preparation for the 
rise in broadband traffic driven by 5G. On a constant currency basis, 
Nokia net sales grew 2% in the first nine months of 2019. Excluding 
approximately EUR 80 million of one-time licensing net sales in the 
first nine months of 2019 and EUR 20 million in the first nine months of 
2018, Nokia net sales grew 4%. 
 
   Our solid overall topline performance in the first nine months 2019 
reflected improved industry demand and the competitiveness of our 
end-to-end portfolio, with growth across four out of six regions and all 
customer types. In the first nine months of 2019, we continued to make 
progress with our strategy to diversify and grow, with strong 
performance in Nokia Software and with enterprise customers. 
 
   The overall decrease in Nokia gross profit in the first nine months of 
2019 was primarily due to lower gross margin in Networks. We experienced 
relatively high 5G product costs in Networks, as well as elevated levels 
of deployment services, consistent with being in the initial phase of 
5G. This was partially offset by lower costs related to network 
equipment swaps, net sales growth in both Networks and Nokia Software, 
as well as higher gross margin in Nokia Software. In the first nine 
months of 2019, Nokia gross profit benefitted from lower incentive 
accruals. 
 
   The decrease in Nokia operating loss in the first nine months of 2019 
was driven by continued progress related to Nokia's cost savings program, 
a gain on defined benefit plan amendments and lower restructuring and 
associated charges, partially offset by the lower gross profit. In the 
first nine months of 2019, Nokia operating loss benefitted from lower 
incentive accruals. 
 
   CASH AND CASH FLOW IN Q3 2019 
 
   In Q3 2019, Nokia's free cash flow was positive EUR 299 million, driven 
by: 
 
 
   -- Adjusted net profit of EUR 769 million; 
 
   -- Cash outflows related to net working capital primarily due to a decrease 
      in liabilities, partially offset by a decrease in receivables; 
 
   -- Continued cash outflows related to restructuring; and 
 
   -- Capital expenditures and income taxes. 
 
 
   Nokia has established a free cash flow program to ensure company-wide 
focus on free cash flow and release of working capital, including 
project asset optimization, review of contract terms & conditions, as 
well as supply chain and inventory optimization. Senior leaders of Nokia 
have a significant part of their incentives tied to free cash flow 
improvement targets in 2019 and beyond. 
 
 
 
 
 
                                                           QoQ               YTD 
EUR million, at end of period          Q3'19    Q2'19    change    Q4'18   change 
                                      -------  -------  ---------  -----  --------- 
Total cash and current financial 
 investments                            4 824    4 788         1%  6 873      (30)% 
Net cash and current financial 
 investments(1)                           344      502      (31)%  3 053      (89)% 
                                      -------  -------  ---------  -----  --------- 
(1) Net cash and current financial investments does not include lease 
 liabilities. For details, please refer to note 7, "Net cash and current 
 financial investments", and note 13, "Performance measures", in the 
 "Financial statement information" section in this report. 
 
   During the third quarter 2019, Nokia's total cash and current financial 
investments ("total cash") increased by EUR 36 million and Nokia's net 
cash and current financial investments ("net cash") decreased by EUR 158 
million. 
 
   Foreign exchange rates had an approximately EUR 30 million negative 
impact on net cash. 
 
   In the third quarter 2019, net cash from operating activities was EUR 
464 million: 
 
 
   -- Nokia's adjusted profit before changes in net working capital was EUR 769 
      million in the third quarter 2019. 
 
   -- In the third quarter 2019, Nokia generated a decrease in net cash related 
      to net working capital of approximately EUR 150 million. Excluding 
      approximately EUR 100 million of restructuring and associated cash 
      outflows, Nokia generated an approximately EUR 50 million decrease in net 
      cash related to net working capital. This decrease was due to a decrease 
      in liabilities, partially offset by a decrease in receivables. 
      Inventories were approximately flat in the quarter. 
 
          -- The decrease in receivables was approximately EUR 390 million, and 
             was primarily due to improved collections achieved through higher 
             sale of receivables. In the normal course of business, to manage 
             our credit risk and working capital cycle, Nokia sells trade 
             receivables to various financial institutions without recourse. 
 
          -- The decrease in liabilities was approximately EUR 440 million, and 
             was primarily due to a decrease in deferred revenues and advance 
             payments, a decrease in liabilities related to employee benefits 
             and a decrease in accounts payable. 
 
   -- In addition, cash taxes amounted to an outflow of approximately EUR 110 
      million. 
 
   -- The implementation of IFRS 16 positively impacted our net cash used in 
      operating activities and negatively impacted our net cash from financing 
      activities, both by approximately EUR 60 million. 
 
 
   In the third quarter 2019, net cash used in investing activities 
primarily related to capital expenditures of approximately EUR 190 
million. 
 
   In the third quarter 2019, net cash used in financing activities 
primarily related to paying the second quarterly instalment of the 
dividend and the withholding taxes related to the first instalment, 
totaling approximately EUR 320 million and lease payments of 
approximately EUR 60 million following the implementation of IFRS 16. 
 
   COST SAVINGS PROGRAM 
 
   We expect our most recent cost savings program to result in a net EUR 
500 million reduction of non-IFRS operating expenses and production 
overheads ("fixed costs") in full year 2020 compared to full year 2018, 
of which EUR 350 million is expected to come from operating expenses and 
EUR 150 million is expected to come from cost of sales. This reflects a 
EUR 150 million reduction in our expected operating expense savings and 
a EUR 50 million reduction in our expected cost of sales savings. The 
change from a net EUR 700 million reduction to a net EUR 500 million 
reduction is primarily due to our expectation to make additional 5G 
investments and additional digitalization investments. 
 
   Note that, since the announcement of our most recent cost savings 
program on October 25, 2018, net foreign exchange fluctuations have 
resulted in an increase in estimated full year 2020 fixed costs of 
approximately EUR 180 million, creating an additional headwind to 
achieve the earlier net reduction. 
 
   The following table summarizes the financial information related to our 
cost savings program as of the end of the third quarter 2019. 
 
 
 
 
 In EUR million, approximately(1)                                 Q3'19 
                                                                  ----- 
Balance of restructuring and associated liabilities 
 for prior programs                                                 750 
 + Charges in the quarter                                            70 
 - Cash outflows in the quarter                                     100 
 = Ending balance of restructuring and associated 
  liabilities                                                       720 
 of which restructuring provisions                                  520 
 of which other associated liabilities                              200 
 
Total expected restructuring and associated charges, related 
 to our most recent cost savings program 
 (rounded to the nearest EUR 50 million)                            900 
 - Cumulative recorded                                              440 
 = Charges remaining to be recorded                                 460 
 
Total expected restructuring and associated cash outflows 
 (rounded to the nearest EUR 50 million)                          1 550 
 - Cumulative recorded                                              340 
 = Cash outflows remaining to be recorded                         1 210 
 
 
   (1) Balances related to previous restructuring and cost savings programs 
have been included as part of this cost savings program. At the 
beginning of Q1 2019, the balance of restructuring and associated 
liabilities related to prior cost savings programs was approximately EUR 
630 million. This amount is included in the total expected restructuring 
and associated cash outflows of EUR 1 550 million, rounded to the 
nearest EUR 50 million, in addition to the approximately EUR 900 million 
of expected cash outflows related to our most recent cost savings 
program. 
 
   The table below includes future expectations related to our most recent 
cost savings program, as well as the remaining cash outflows related to 
our previous programs and network equipment swaps. Please note that we 
exclude the impact of lower incentive accruals from our definition of 
"Recurring annual cost savings". 
 
   In the first nine months of 2019, excluding the impact of the incentive 
accruals, we achieved approximately EUR 180 million of structural fixed 
costs savings, compared to the first nine months of 2018. Despite net 
foreign exchange fluctuations resulting in an increase in estimated full 
year 2019 fixed costs of approximately EUR 130 million, we are well on 
our way to meet the cost reduction targets for 2019. 
 
 
 
 
                                             Expected amounts for 
                                                                Beyond 
In EUR million, approximately                FY 2019  FY 2020   FY 2020  Total 
rounded to the nearest EUR 50 million 
 
Recurring annual cost savings                    200      300         -    500 
 - operating expenses                            150      200         -    350 
 - cost of sales                                  50      100         -    150 
Restructuring and associated charges             500      400         -    900 
Restructuring and associated cash outflows       550      450       550  1 550 
Charges related to network equipment swaps       150        -         -    150 
Cash outflows related to network equipment 
 swaps                                           150        -         -    150 
-------------------------------------------  -------  -------  --------  ----- 
 
 
   The expected timeline for the related cash outflows has been adjusted, 
with expected cash outflows in full year 2019 moving from EUR 700 
million to EUR 550 million, expected cash outflows in full year 2020 
moving from EUR 350 million to EUR 450 million and expected cash 
outflows beyond 2020 moving from EUR 500 million to EUR 550 million. The 
related restructuring charges are expected to total EUR 900 million. 
 
   OPERATIONAL HIGHLIGHTS 
 
   Nokia showed robust momentum in Q3 2019 across its key markets and 
around the globe, particularly in 5G, where Nokia's technology is now 
present in all regions in the world. 
 
   In the first pillar of our strategy, leading in high-performance, 
end-to-end networks with communication service providers: 
 
   Nokia signed multiple 5G commercial agreements during the period and the 
total number of 5G commercial agreements is now 48. Over half include 
more than radio from our end-to-end 5G portfolio. Fifteen of those 
networks are now live, including Sprint and Verizon in the US. 
 
   Nokia continued to strengthen its 5G foothold in Japan, where it was 
selected by KDDI as a primary partner to upgrade its network for 5G. 
Nokia also entered into a strategic agreement with Iliad for the 
deployment of its 5G network in France and Italy. In New Zealand, Nokia 
secured a deal with Vodafone New Zealand to deploy a 5G network in the 
country. The network, which will be launched in Auckland, Wellington, 
Christchurch and Queenstown in late 2019, will include Nokia's AirScale 
radio access network, cloud-native core as well as design services, 
providing further proof of the strength of Nokia's end-to-end portfolio. 
Nokia also deployed its 5G portfolio in Vietnam, where Viettel and Nokia 
broadcasted the country's first end-to-end 5G trial network in Ho Chi 
Minh City. 
 
   Nokia further showcased its end-to-end 5G leadership with a new Future X 
Lab in Finland. The Lab will enable customers to experience Nokia's full 
end-to-end portfolio of 5G equipment, software and services, allowing 
communications service providers, enterprises and infrastructure 
providers to learn and understand the techno-economic power of a 5G 
end-to-end network to better serve their customers and unleash new 
value. 
 
   Several 5G deals and trials, including Smart in the Philippines, 
Vodafone New Zealand and Viettel, involved IP Routing and Optical 
Networks products. 
 
   Further showcasing its market-leading technology within IP and Optical, 
Nokia completed the world's first single-carrier terabit-per-second 
field trial, setting an optical transmission capacity record over 
Etisalat's fibre network in the United Arab Emirates. 
 
   In Fixed Access, Nokia secured several Fiber To The Home (FTTH) deals 
with top-tier customers. After the end of the quarter, Nokia also 
announced it was teaming up with Telia Company to bring its 5G Fixed 
Wireless Access solution to customers across Finland. 
 
   In Q3 2019, Nokia was also recognized as a "Leader" in Managed Services 
by industry analyst firm GlobalData. 
 
   In the second pillar of our strategy, expanding network sales to select 
vertical markets needing high-performing, secure networks: 
 
   Nokia continued to strengthen its position with enterprises. Nokia 
worked with Telefónica Peru to enable automated, digital mining 
operations for Minera Las Bambas, one of the world's largest copper 
mines. The five-year contract will see Nokia build, deploy and support a 
private LTE network 4 600 meters above sea level. 
 
   Nokia, NTT DOCOMO, INC. and OMRON Corporation agreed to conduct joint 
field trials using 5G at their plants and other production sites. As 
part of the trial, the partners will leverage 5G connectivity to prove 
the feasibility of a layout-free production line with Autonomous Mobile 
Robots (AMRs) as well as real-time coaching using AI/IoT. 
 
   Nokia was selected by RigNet to upgrade its microwave communications 
network which supports the mission-critical communication needs of its 
multiple oil and gas customers located in the Gulf of Mexico, covering 
more than 55,000 square miles. The network upgrade will see RigNet 
customers offered 4G LTE services with support for 5G services in the 
future. 
 
   In the third pillar of our strategy, developing a strong software 
business at scale: 
 
   Three UK and Nokia launched the world's first 5G-ready fully integrated 
cloud core network. The new 5G-ready core network, which sits in a 
virtual environment, offers increased security, flexibility and cost 
savings, allowing Three to scale more quickly and efficiently and is a 
critical building block for Three to deliver the UK's fastest 5G 
network. 
 
   Nokia also secured deals with major operators in North America as well 
as MTN of South Africa, Orange of France and Telefonica Brazil. 
 
   Just after the quarter ended, Analysys Mason ranked Nokia as the top 
telecom software provider by market share. According to Analysys Mason's 
findings, Nokia is significantly improving its 5G-ready mobile network 
management offering by evolving it to be cloud-native and including 
value features that communication service providers find valuable, while 
also expanding the capabilities and commercial customers for its leading 
platforms. 
 
   In the fourth pillar of our strategy, now focused primarily on 
licensing: 
 
   Shortly after the quarter ended, Nokia announced it has declared more 
than 2 000 patent families to the European Telecommunications Standards 
Institute (ETSI) as essential for the 5G standard, reflecting its 
continuing leadership in cellular technology R&D and standardization. 
 
   RISKS AND FORWARD-LOOKING STATEMENTS 
 
   It should be noted that Nokia and its businesses are exposed to various 
risks and uncertainties and certain statements herein that are not 
historical facts are forward-looking statements. These forward-looking 
statements reflect Nokia's current expectations and views of future 
developments and include statements regarding: A) expectations, plans or 
benefits related to our strategies and growth management; B) 
expectations, plans or benefits related to future performance of our 
businesses and any expected future dividends; C) expectations and 
targets, and any mathematical analysis derived from such expectations 
and targets, regarding financial performance, results, the timing of 
receivables, operating expenses, taxes, currency exchange rates, hedging, 
cost savings and competitiveness, as well as results of operations 
including targeted synergies and those related to market share, prices, 
net sales, income and margins; D) expectations, plans or benefits 
related to changes in organizational and operational structure; E) 
expectations regarding competition within our market; market 
developments, general economic conditions and structural change globally 
and in national and regional markets, such as China; F) our ability to 
integrate acquired businesses into our operations and achieve the 
targeted business plans and benefits, including targeted benefits, 
synergies, cost savings and efficiencies; G) expectations, plans or 
benefits related to any future collaboration or to business 
collaboration agreements or patent license agreements or arbitration 
awards, including income to be received under any collaboration or 
partnership, agreement or award; H) timing of the deliveries of our 
products and services, including our short term and longer term 
expectations around the rollout of 5G, investment requirements with such 
rollout, and our ability to capitalize on such rollout; as well as the 
overall readiness of the 5G ecosystem; I) expectations and targets 
regarding collaboration and partnering arrangements, joint ventures or 
the creation of joint ventures, and the related administrative, legal, 
regulatory and other conditions, as well as our expected customer reach; 
J) outcome of pending and threatened litigation, arbitration, disputes, 
regulatory proceedings or investigations by authorities; K) expectations 
regarding restructurings, investments, capital structure optimization 
efforts, uses of proceeds from transactions, acquisitions and 
divestments and our ability to achieve the financial and operational 
targets set in connection with any such restructurings, investments, 
capital structure optimization efforts, divestments and acquisitions, 
including our current cost savings program; L) expectations, plans or 
benefits related to future capital expenditures, temporary incremental 
expenditures or other R&D expenditures to develop or rollout of software 
and other new products, including 5G; M) expectation regarding our 
customers' future capital expenditure constraints; and N) statements 
preceded by or including "believe", "expect", "expectations", "commit", 
"anticipate", "foresee", "see", "target", "estimate", "designed", "aim", 
"plan", "intend", "influence", "assumption", "focus", "continue", 
"project", "should", "is to", "will" or similar expressions. These 
forward-looking statements are subject to a number of risks and 
uncertainties, many of which are beyond our control, which could cause 
actual results to differ materially from such statements. These 
statements are based on management's best assumptions and beliefs in 
light of the information currently available to it. These 
forward-looking statements are only predictions based upon our current 
expectations and views of future events and developments and are subject 
to risks and uncertainties that are difficult to predict because they 
relate to events and depend on circumstances that will occur in the 
future. Factors, including risks and uncertainties that could cause 
these differences include, but are not limited to: 1) our strategy is 
subject to various risks and uncertainties and we may be unable to 
successfully implement our strategic plans, sustain or improve the 
operational and financial performance of our business groups, correctly 
identify or successfully pursue business opportunities or otherwise grow 
our business; 2) general economic and market conditions and other 
developments in the economies where we operate, including the timeline 
for the deployment of 5G and our ability to successfully capitalize on 
that deployment; 3) competition and our ability to effectively and 
profitably invest in existing and new high-quality products, services, 
upgrades and technologies and bring them to market in a timely manner; 
4) our dependence on the development of the industries in which we 
operate, including the cyclicality and variability of the information 
technology and telecommunications industries and our own R&D 
capabilities and investments; 5) our dependence on a limited number of 
customers and large multi-year agreements, as well as external events 
impacting our customers including mergers and acquisitions; 6) our 
ability to maintain our existing sources of intellectual 
property-related revenue through our intellectual property, including 
through licensing, establish new sources of revenue and protect our 
intellectual property from infringement; 7) our ability to manage and 
improve our financial and operating performance, cost savings, 
competitiveness and synergies generally, expectations and timing around 
our ability to recognize any net sales and our ability to implement 
changes to our organizational and operational structure efficiently; 8) 
our global business and exposure to regulatory, political or other 
developments in various countries or regions, including emerging markets 
and the associated risks in relation to tax matters and exchange 
controls, among others; 9) our ability to achieve the anticipated 
benefits, synergies, cost savings and efficiencies of acquisitions; 10) 
exchange rate fluctuations, as well as hedging activities; 11) our 
ability to successfully realize the expectations, plans or benefits 
related to any future collaboration or business collaboration agreements 
and patent license agreements or arbitration awards, including income to 
be received under any collaboration, partnership, agreement or 
arbitration award; 12) Nokia Technologies' ability to protect its IPR 
and to maintain and establish new sources of patent, brand and 
technology licensing income and IPR-related revenues, particularly in 
the smartphone market, which may not materialize as planned, 13) our 
dependence on IPR technologies, including those that we have developed 
and those that are licensed to us, and the risk of associated 
IPR-related legal claims, licensing costs and restrictions on use; 14) 
our exposure to direct and indirect regulation, including economic or 
trade policies, and the reliability of our governance, internal controls 
and compliance processes to prevent regulatory penalties in our business 
or in our joint ventures; 15) our reliance on third-party solutions for 
data storage and service distribution, which expose us to risks relating 
to security, regulation and cybersecurity breaches; 16) inefficiencies, 
breaches, malfunctions or disruptions of information technology systems, 
or our customers' security concerns; 17) our exposure to various legal 
frameworks regulating corruption, fraud, trade policies, and other risk 
areas, and the possibility of proceedings or investigations that result 
in fines, penalties or sanctions; 18) adverse developments with respect 
to customer financing or extended payment terms we provide to customers; 
19) the potential complex tax issues, tax disputes and tax obligations 
we may face in various jurisdictions, including the risk of obligations 
to pay additional taxes; 20) our actual or anticipated performance, 
among other factors, which could reduce our ability to utilize deferred 
tax assets; 21) our ability to retain, motivate, develop and recruit 
appropriately skilled employees; 22) disruptions to our manufacturing, 
service creation, delivery, logistics and supply chain processes, and 
the risks related to our geographically-concentrated production sites; 
23) the impact of litigation, arbitration, agreement-related disputes or 
product liability allegations associated with our business; 24) our 
ability to re-establish investment grade rating or maintain our credit 
ratings; 25) our ability to achieve targeted benefits from, or 
successfully implement planned transactions, as well as the liabilities 
related thereto; 26) our involvement in joint ventures and 
jointly-managed companies; 27) the carrying amount of our goodwill may 
not be recoverable; 28) uncertainty related to the amount of dividends 
and equity return we are able to distribute to shareholders for each 
financial period; 29) pension costs, employee fund-related costs, and 
healthcare costs; 30) our ability to successfully complete and 
capitalize on our order backlogs and continue converting our sales 
pipeline into net sales; and 31) risks related to undersea 
infrastructure, as well as the risk factors specified on pages 60 to 75 
of our 2018 annual report on Form 20-F published on March 21, 2019 under 
"Operating and financial review and prospects-Risk factors" and in our 
other filings or documents furnished with the U.S. Securities and 
Exchange Commission. Other unknown or unpredictable factors or 
underlying assumptions subsequently proven to be incorrect could cause 
actual results to differ materially from those in the forward-looking 
statements. We do not undertake any obligation to publicly update or 
revise forward-looking statements, whether as a result of new 
information, future events or otherwise, except to the extent legally 
required. 
 
   This financial report was authorized for issue by management on October 
24, 2019. 
 
   --Nokia plans to publish its fourth quarter and full year 2019 results 
on February 6, 2020. 
 
   Media Enquiries: 
 
   Nokia 
 
   Communications 
 
   Tel. +358 (0) 10 448 4900 
 
   Email: 
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press.services@nokia.com 
 
   Katja Antila, Head of Media Relations 
 
   Investor Enquiries: 
 
   Nokia Investor Relations 
 
   Tel. +358 4080 3 4080 
 
   Email: 
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investor.relations@nokia.com 
 
   About Nokia 
 
   We create the technology to connect the world. We develop and deliver 
the industry's only end-to-end portfolio of network equipment, software, 
services and licensing that is available globally. Our customers include 
communications service providers whose combined networks support 6.1 
billion subscriptions, as well as enterprises in the private and public 
sector that use our network portfolio to increase productivity and 
enrich lives. 
 
   Through our research teams, including the world-renowned Nokia Bell Labs, 
we are leading the world to adopt end-to-end 5G networks that are faster, 
more secure and capable of revolutionizing lives, economies and 
societies. Nokia adheres to the highest ethical business standards as we 
create technology with social purpose, quality and integrity. 
https://www.globenewswire.com/Tracker?data=S7UGyGJEpVLglHNoYyuoYBPoZJm3rexPV4X3-GOtf1wOKiSN3dY25-dnUdQ11PQCvMTcLUe24pq0-rveXVKZFQ== 
www.nokia.com 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Attachment 
 
 
   --  Nokia Corporation Financial Report for Q3 and January-September 2019 
      https://ml-eu.globenewswire.com/Resource/Download/a7e66648-0cf5-4610-bb29-fd827ae86d53 
 
 
 
 
 
 
 

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October 24, 2019 01:00 ET (05:00 GMT)

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