Nokia 2006 Annual Report Download - page 23

We are developing a number of our new products and solutions together with other
companies. If any of these companies were to fail to perform, we may not be able to bring
our products and solutions to market successfully or in a timely way and this could have a
material adverse effect on our sales and profitability.
We invite the providers of technology, components or software to work with us to develop
technologies or new products and solutions. These arrangements involve the commitment by each
company of various resources, including technology, research and development efforts, and
personnel. Although the objective of these arrangements is a mutually beneficial outcome for each
party, our ability to introduce new products and solutions that meet our and our customers’ quality,
safety, security and other standards successfully and on schedule could be hampered if, for example,
any of the following risks were to materialize: the arrangements with the companies that work with
us do not develop as expected; the technologies provided by the companies that work with us are
not sufficiently protected or infringe third parties’ intellectual property rights in a way that we
cannot foresee or prevent; the technologies, products or solutions supplied by the companies that
work with us do not meet the required quality, safety, security and other standards or customer
needs; our own quality controls fail; or the financial condition of the companies that work with us
deteriorates.
Our operations rely on complex and highly centralized information technology systems and
networks. If any system or network disruption occurs, this reliance could have a material
adverse impact on our business and results of operations.
Our operations rely to a significant degree on the efficient and uninterrupted operation of complex
and highly centralized information technology systems and networks, which are integrated with
those of third parties. Any failure or disruption of our current or future systems or networks could
have a material adverse effect on our operations, sales and operating results. Furthermore, any data
leakages resulting from information technology security breaches could also adversely affect us.
All information technology systems are potentially vulnerable to damage or interruption from a
variety of sources. We pursue various measures in order to manage our risks related to system and
network disruptions, including the use of multiple suppliers and available information technology
security. However, despite precautions taken by us, an outage in a telecommunications network
utilized by any of our information technology systems, attack by a virus or other event that leads to
an unanticipated interruption of our information technology systems or networks could have a
material adverse effect on our business and results of operations.
Our sales, costs and results are affected by exchange rate fluctuations, particularly between
the euro, which is our reporting currency, and the US dollar, the Chinese yuan, the UK pound
sterling and the Japanese yen, as well as certain other currencies.
We operate globally and are therefore exposed to foreign exchange risks in the form of both
transaction risks and translation risks. Our policy is to monitor and hedge exchange rate exposure,
and we manage our operations to mitigate, but not to eliminate, the impacts of exchange rate
fluctuations. Our sales and results may be materially affected by exchange rate fluctuations. Similarly,
exchange rate fluctuations may also materially affect the US dollar value of any dividends or other
distributions that are paid in euro. For more information, see ‘‘Item 5.A Operating Results—Certain
Other Factors—United States Dollar,’’ ‘‘Item 5.A Operating Results—Results of Operations—Exchange
Rates’’ and ‘‘Item 11. Quantitative and Qualitative Disclosures About Market Risk.’’
Providing customer financing or extending payment terms to customers can be a competitive
requirement and could adversely and materially affect our results of operations, financial
condition and cash flow.
Customers in some markets sometimes require their suppliers, including us, to arrange or provide
financing in order to obtain sales or business. Moreover, they may require extended payment terms.
In some cases, the amounts and duration of these financings and trade credits, and the associated
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