Nokia 2007 Annual Report Download - page 75

Multimedia 2007 gross profit increased by 38% to EUR 4 240 million compared with EUR 3 077 million
in 2006. This represented a gross margin of 40.2% in 2007 compared with a gross margin of 39.1%
in 2006. The increase in gross profit resulted primarily from the growth of the business. The gross
margin increase reflected a greater percentage of sales of highend products.
Multimedia 2007 R&D expenses increased by 12% and were EUR 1 011 million compared with
EUR 902 million in 2006, representing 9.6% of Multimedia net sales in 2007 compared with 11.5% of
its net sales in 2006. The increase in R&D expenses was primarily due to increased investments in
Multimedia Experiences.
In 2007, Multimedia’s selling and marketing expenses increased by 18% to EUR 921 million as a result
of increase in marketing and advertising expenses primarily due to the launch of new products and
growth of the business. Selling and marketing expenses were EUR 780 million in 2006. In 2007,
selling and marketing expenses represented 8.7% of Multimedia’s net sales compared with 9.9% of
its net sales in 2006. This reflected the improved efficiency resulting from the growth in our net sales.
Multimedia 2007 operating profit increased 69% to EUR 2 230 million compared with EUR 1 319 million
in 2006, with an operating margin of 21.2% in 2007, up from 16.7% in 2006. The increase in
operating profit reflected the growth in net sales of our Multimedia products and effective cost
control.
Enterprise Solutions
The following table sets forth selective line items and the percentage of net sales that they represent
for the Enterprise Solutions business group for the fiscal years 2007 and 2006.
Year Ended
December 31,
2007
Percentage of
Net Sales
Year Ended
December 31,
2006
Percentage of
Net Sales
Percentage
Increase/
(Decrease)
(EUR millions, except percentage data)
Net sales ................. 2070 100.0% 1 031 100.0% 101%
Cost of sales .............. (1124) (54.3)% (582) (56.5)% 93%
Gross profit ............... 946 45.7% 449 43.5% 110%
Research and development
Expenses ............... (273) (13.2)% (319) (30.9)% (14)%
Selling and marketing
Expenses ............... (308) (14.9)% (306) (29.7)% 1%
Administrative and general
Expenses ............... (77) (3.7)% (75) (7.3)% 3%
Other operating income and
expenses ............... (21) (1.0)% (7) (0.6)% 200%
Operating profit............ 267 12.9% (258) (25.0)%
Enterprise Solutions business group 2007 net sales increased 101% to EUR 2 070 million compared
with EUR 1 031 million in 2006. At constant currency, Enterprise Solutions net sales would have
increased 106% in 2007. Net sales were driven primarily by very strong volume growth in the device
business of Enterprise Solutions, especially from the E65. The Nokia Eseries sold almost 7 million units
in 2007. Net sales growth was highest in AsiaPacific, Latin America, Europe and Middle East & Africa.
Net sales declined in China and North America.
In Enterprise Solutions, gross profit increased by 110% to EUR 946 million as a result of the growth of
the business as well as higher margins on Nokia Eseries devices, compared with EUR 449 million in
2006. This represented a gross margin of 45.7% in 2007 and an increase from a gross margin of
43.5% in 2006 reflecting the improved mix of highend products with higher ASPs.
In Enterprise Solutions, R&D expenses in 2007 decreased by 14% to EUR 273 million due to effective
cost control. R&D expenses in 2006 were EUR 319 million. R&D expenses represented 13.2% of
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