Nokia 2005 Annual Report Download - page 48

Principal Factors Affecting our Results of Operations
Mobile Devices
Our mobile device sales are derived from the sale of mobile devices by our Mobile Phones and
Multimedia business groups and by the Mobile Devices business unit of our Enterprise Solutions
business group. Our principal customers are mobile network operators, distributors, independent
retailers and corporate customers. Our product portfolio covers all major user segments and price
points from entry-level to mid-range and high-end devices offering voice, data, multimedia and
business applications. A number of factors affect our sales and profitability, some of which are to
a certain extent outside of our control.
Our sales depend on the growth of global mobile device volumes. This growth is driven both by
the number of new subscribers as well as by the degree to which the number of existing mobile
subscribers replace their mobile devices with devices of similar or higher functionality. Industry
volume growth is influenced by, among other factors, regional economic factors; competitive
pressures; regulatory environments; the timing and success of product and service introductions
by various market participants, including network operators; the commercial acceptance of new
mobile devices, technologies and services; and operators’ and distributors’ financial situations.
Industry volumes are also affected by the level of mobile device subsidies that network operators
are willing to offer to end users. In highly penetrated markets, industry volumes are dependent on
the ability of network operators to successfully introduce services that drive the upgrade and
replacement of devices. In low penetration markets, new subscriber growth and volume growth
will be impacted by lower cost of ownership, driven by more affordable tariffs and lower cost
mobile devices.
According to Nokia’s estimates, in 2005 the global device market volume grew by 24% to
795 million units, a record for the industry, compared with 643 million units in 2004. This growth
was driven by the strong new subscriber growth in emerging markets like Middle East & Africa
and Latin America, as well as by robust replacement sales from primarily color screen and camera
devices in Western Europe and North America. The following chart sets forth, based on Nokia’s
estimates, the global mobile device market volume and year over year growth rate by geographic
area for the three years ended December 31, 2005.
Global Mobile Device Market Volume by Geographic Area
based on Nokia’s Estimates
Year ended Year ended Year ended
December 31, Change (%) December 31, Change (%) December 31,
2005 2004 to 2005 2004 2003 to 2004 2003
(units in millions, except percentage data)
Europe ................... 238 20% 198 31% 151
Middle East & Africa ........ 63 62% 39 34% 29
China .................... 100 19% 84 33% 63
Asia-Pacific ............... 149 18% 126 16% 109
North America ............. 142 16% 122 21% 101
Latin America ............. 103 39% 74 100% 37
Total .................... 795 24% 643 31% 490
In our Mobile Phones, Multimedia and Enterprise Solutions business groups, combined mobile
device volumes were up 28% in 2005, compared to 2004, reaching 265 million units—a new
annual volume record for Nokia. Based on our preliminary market estimate, Nokia’s market share
grew to 33% in 2005, compared to 32% in 2004.
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