Nokia 2007 Annual Report Download - page 21

business, the undisturbed functioning of large mobile and fixed telecommunications networks may
depend on the proper functioning of our products.
Defects and other quality issues may result from, among other things, failures in our own product
creation and manufacturing processes or failures of our suppliers to comply with our supplier
requirements. Prior to the shipment, quality issues may cause delays in shipping products to
customers and related additional costs or even cancellation of orders by customers. After shipment,
products may fail to meet marketing expectations set for them, may malfunction or may contain
security vulnerabilities, and thus cause additional repair, product replacement, recall or warranty costs
to us and harm our reputation. Although we endeavor to develop products that meet the appropriate
security standards, including privacy protection, for each product segment, we or our products may,
due to our market position, be subject to hacking or other unauthorized modifications or illegal
activities that may cause potential security risks to our customers or endusers of our products. In
case of issues affecting a product’s safety or regulatory compliance or product security, we may be
subject to damages due to product liability, or defective products or components may need to be
replaced or recalled. Any actual or alleged defects or other quality issues in our products, services and
solutions, or even in their unlawful copies, could materially adversely affect our sales, results of
operations, reputation and the value of the Nokia brand.
Our sales and results of operations could be materially adversely affected if we fail to
efficiently manage our manufacturing and logistics without interruption, or fail to ensure that
our products, services and solutions meet our and our customers’ quality, safety, security and
other requirements and are delivered on time and in sufficient volumes.
Our manufacturing and logistics are complex, require advanced and costly equipment and include
outsourcing to third parties. These operations are continuously modified in an effort to improve
efficiency and flexibility of our manufacturing and logistics and to produce and distribute
continuously increased volumes. We may experience difficulties in adapting our supply to meet the
demand for our products, ramping up or down production at our facilities as needed, maintaining an
optimal inventory level, adopting new manufacturing processes, finding the most timely way to
develop the best technical solutions for new products, managing the increasingly complex
manufacturing process for our highend products, particularly the software for these highend
products, or achieving manufacturing efficiency and flexibility, whether we manufacture our products
and solutions ourselves or outsource to third parties. We may also experience challenges caused by
third parties or other external difficulties in connection with our efforts to modify our operations to
improve the efficiency and flexibility of our manufacturing and logistics, including, but not limited to,
strikes, purchasing boycotts, public harm to the Nokia brand and claims for compensation resulting
from our decisions on where to locate our manufacturing facilities and business. Such difficulties may
have a material adverse effect on our business and results of operations and may result from, among
other things, delays in adjusting or upgrading production at our facilities, delays in expanding
production capacity, failure in our manufacturing and logistics processes, failures in the activities we
have outsourced, and interruptions in the data communication systems that run our operations. Such
failures or interruptions could result in our products, services and solutions not meeting our and our
customers’ quality, safety, security and other requirements, or being delivered late or in insufficient
volumes compared to our own estimates or customer requirements, which could have a material
adverse effect on our sales, our results of operations, reputation and the value of the Nokia brand.
We depend on a limited number of suppliers for the timely delivery of sufficient amounts of
fully functional components and subassemblies and for their compliance with our supplier
requirements, such as our and our customers’ product quality, safety, security and other
standards. Their failure to do so could materially adversely affect our ability to deliver our
products, services and solutions successfully and on time.
Our manufacturing operations depend to a certain extent on obtaining sufficient amounts of
adequate supplies of fully functional components and subassemblies on a timely basis. In mobile
devices, our principal supply requirements are for electronic components, mechanical components and
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