Nokia 2007 Annual Report Download - page 14

our network infrastructure business, we expect to continue making investments in enterprise mobility
infrastructure as well as managed services, systems integration and consulting businesses.
We have made, and may also make in the future, a significant portion of these investments through
strategic acquisitions. We may, however, fail to successfully complete or integrate the acquired
businesses; the acquired businesses may carry higher valuations than Nokia, which may have a
dilutive effect on our profits; the future valuations of acquired businesses may decrease from the
purchase price we have paid and result in impairment charges related to goodwill or other acquired
assets; and as a result of all or a portion of a purchase price being paid in cash, the acquisitions may
have a potential adverse effect on our cash position.
New market segments in the mobile communications industry are in different stages of development.
Accordingly, it may be difficult for us to accurately predict which new market segments are the most
advantageous for us to focus on, or we may fail to timely identify new market segments emerging in
the mobile communications industry. If the new market segments which we target and invest in
grow less than expected, we may not receive a return on our investment as soon as we expect, or at
all. We may also forego growth opportunities in new market segments of the mobile communications
industry which we choose not to focus on or fail to timely identify. Moreover, the market segments
that we target may be less profitable than we currently foresee. We may also incur shortterm
operating losses in certain of these new market segments if we are not able to generate sufficient
net sales to cover the early stage investments required to pursue these new business opportunities.
Our past performance in our established market segments does not guarantee our success in these
new market segments, particularly where significant changes to the way we do business are required
to enter or effectively compete in these segments. We may have less experience and technological
skills in the new market segments, such as consumer Internet services, compared with our
established market segments, or we may fail to reach adequate scale in these new segments, and
some of our competitors in these new segments may have more scale and experience and a stronger
market presence. Further, our success in the consumer Internet services segment also depends on the
acceptance by the market, including our mobile network operator customers, of our expanding
consumer Internet services and on the network operators’ strategies regarding their own offering of
consumer Internet services. Any of these events could materially adversely affect our results of
operations, financial condition and share price.
Our business and results of operations, particularly our profitability, may be materially
adversely affected if we are not able to successfully manage costs related to our products,
services, solutions and operations.
The products, services and solutions we offer are subject to natural price erosion over their life cycle.
In addition, the average selling price of our devices has declined during recent years and it may
continue to decline in the future. The factors impacting our average selling price include the extent to
which our product mix is weighted towards lowerpriced products and our regional mix is weighted
towards emerging markets where lowerpriced products predominate. Further, there is continuing
demand for mobile devices with new or enhanced functionalities and services while the prices of
those products must remain competitive.
In order to be profitable, we need to be able to lower our costs at the same rate or faster than the
price erosion and declining average selling price of our devices. We also need to introduce cost
efficient devices with new or enhanced functionalities and services with higher prices in a timely
manner and proactively manage the costs related to our products, services and solutions,
manufacturing, logistics and other operations and related licensing. If we are unable to do this, this
will have a material adverse effect on our business and results of operations, particularly our
profitability. We believe that our market share results in economies of scale and, therefore, in a cost
advantage for our devices when compared to our competitors. If we fail to maintain or increase our
market share and scale compared to our competitors as well as leverage our scale to the fullest
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