Nokia 2007 Annual Report Download - page 23

Large multiyear contracts, which are typical in the networks industry, include a risk that the timing
of sales and results of operations associated with these contracts will differ from what was expected
when the contracts were entered into. Moreover, such contracts usually require the dedication of
substantial amounts of working capital and other resources, which affects our cash flow negatively, or
may require Nokia Siemens Networks to sell products, services and solutions in the future that would
otherwise be discontinued, thereby diverting resources from developing more profitable or
strategically important products. Any nonperformance by Nokia Siemens Networks under these
contracts may have significant adverse consequences for us because network operators have
demanded and may continue to demand stringent contract undertakings, such as penalties for
contract violations.
Furthermore, the number of Nokia Siemens Networks’ customers may diminish due to operator
consolidation. This could increase reliance on fewer larger customers, which may have a material
adverse effect on Nokia Siemens Networks’ bargaining position, and, in turn, our sales and results of
operations.
Our sales derived from, and assets located in, emerging market countries may be materially
adversely affected by economic, regulatory and political developments in those countries or
by other countries imposing regulations against imports to such countries. As sales from
these countries represent a significant portion of our total sales, economic or political turmoil
in these countries could materially adversely affect our sales and results of operations. Our
investments in emerging market countries may also be subject to other risks and
uncertainties.
We generate sales from and have manufacturing facilities located in various emerging market
countries. Sales from these countries represent a significant portion of our total sales and these
countries represent a significant portion of the expected industry growth. Accordingly, economic or
political turmoil in these countries could materially adversely affect our sales and results of
operations and the supply of devices and network infrastructure equipment manufactured in these
countries. Our investments in emerging market countries may also be subject to risks and
uncertainties, including unfavorable taxation treatment, exchange controls, challenges in protecting
our intellectual property rights, nationalization, inflation, currency fluctuations, or the absence of, or
unexpected changes in, regulation as well as other unforeseeable operational risks. See Note 2 to our
consolidated financial statements included in Item 18 of this annual report for more detailed
information on geographic location of net sales to external customers, segment assets and capital
expenditures.
We are developing a number of our new products, services and solutions together with other
companies. If any of these companies were to fail to perform as planned, we may not be able
to bring our products, services and solutions to market successfully or in a timely way and
this could have a material adverse effect on our sales and results of operations.
We invite the providers of technology, components or software to work with us to develop
technologies or new products, services 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, services 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, services 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. Any of these events could materially adversely affect our sales and results of
operations.
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