Nokia 2007 Annual Report Download - page 81

representing 11.5% of Multimedia net sales in 2006 compared with 14.4% of its net sales in 2005.
A restructuring charge of EUR 15 million was recorded in 2005 as a result of more focused R&D
activities.
In 2006, Multimedia’s selling and marketing expenses increased by 11% to EUR 780 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 705 million in 2005. In 2006,
selling and marketing expenses represented 9.9% of Multimedia’s net sales compared with 11.8% of
its net sales in 2005. This reflected improved productivity due to effective cost control on selling and
marketing expenses.
In 2005, other operating income and expenses included a gain of EUR 19 million related to the
divesture of the Group’s Tetra business.
Multimedia 2006 operating profit increased 58% to EUR 1 319 million compared with EUR 836 million
in 2005, with an operating margin of 16.7% in 2006, up from 14.0% in 2005. The increase in
operating profit reflected the increase in sales of our Multimedia products and effective operating
expense 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 2006 and 2005.
Year Ended
December 31,
2006
Percentage of
Net Sales
Year Ended
December 31,
2005
Percentage of
Net Sales
Percentage
Increase/
(Decrease)
(EUR millions, except percentage data)
Net sales ................. 1031 100.0% 861 100.0% 20%
Cost of sales .............. (582) (56.5)% (459) (53.3)% (27)%
Gross profit ............... 449 43.5% 402 46.7% 12%
Research and development
expenses ............... (319) (30.9)% (329) (38.2)% (3)%
Selling and marketing
expenses ............... (306) (29.7)% (221) (25.7)% 38%
Administrative and general
expenses ............... (75) (7.3)% (74) (8.6)% 1%
Other operating income and
expenses ............... (7) (0.6)% (36) (4.2)% (81)%
Operating profit............ (258) (25.0)% (258) (30.0)% —
Enterprise Solutions business group 2006 net sales increased 20% to EUR 1 031 million compared
with EUR 861 million in 2005. At constant currency, Enterprise Solutions net sales would have
increased 17% in 2006. Net sales growth was highest in China, North America, Europe, Latin America
and AsiaPacific. Net sales declined in Middle East & Africa. The Nokia Eseries sold almost 2 million
units since its introduction in the second quarter 2006.
In Enterprise Solutions, gross profit increased by 12% to EUR 449 million as a result of the growth of
the business, compared with EUR 402 million in 2005. This represented a gross margin of 43.5% in
2006 compared with a gross margin of 46.7% in 2005.
In Enterprise Solutions, R&D expenses in 2006 decreased by 3% to EUR 319 million due to effective
cost control. R&D expenses in 2005 were EUR 329 million. R&D expenses represented 30.9% of
Enterprise Solutions net sales in 2006 and 38.2% of its net sales in 2005.
In 2006, Enterprise Solutions selling and marketing expenses increased by 38% to EUR 306 million
reflecting increased sales and marketing spend primarily due to the launch of new Eseries products.
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