Nokia 2011 Annual Report Download - page 26

• The organizational changes, including planned reductions and site closures and integration,
consume significant time, attention and resources of senior management and others within
the organization, potentially diverting their attention from other aspects of our business.
Our partnership with Microsoft is subject to risks and uncertainties.
Our partnership with Microsoft is subject to certain risks and uncertainties, which could, either
individually or together, significantly impair our ability to compete effectively in the smartphone market.
If that were to occur, our business would become more dependent on sales in the feature phone
market, which is, especially at lower price points, an increasingly commoditized and intensely
competitive market, with substantially lower growth potential and profitability compared to the
smartphone market. A further change in smartphone strategy could be costly and further adversely
affect our market share, competitiveness and profitability. Risks and uncertainties related to our
partnership with Microsoft include the following:
• The agreements with Microsoft may include terms that prove unfavorable to us.
• We may not succeed in creating a profitable business model as we transition from our royalty-
free smartphone platform to the royalty-based Windows Phone platform due to, among other
things, our inability to offset our higher cost of sales resulting from our software royalty
payments to Microsoft with new revenue sources and a reduction of our operating expenses,
particularly our research and development expenses.
• We will need to continue to innovate and find additional ways to create patentable inventions
and other intellectual property, particularly as we invest less than before into our own
development under the Microsoft partnership. As a result, we may not be able to generate
sufficient patentable inventions or other intellectual property to maintain, for example, the
same size and/or quality patent portfolio as we have historically.
• We may not be able to change our mode of working or culture to enable us to work effectively
and efficiently with Microsoft in order to realize the stated benefits of the partnership in a
timely manner.
• The implementation and ongoing fostering and development of the Microsoft partnership will
require significant time, attention and resources of our senior management and others within
the organization potentially diverting their attention from other aspects of our business.
• The implementation and ongoing fostering and development of the Microsoft partnership may
cause disruption and dissatisfaction among employees reducing their motivation, morale and
productivity, causing inefficiencies and other problems across the organization and leading to
the loss of key personnel and the related costs in dealing with such matters.
• We may not have or be able to recruit, retain and motivate appropriately skilled employees to
implement successfully our strategies in relation to the Windows Phone platform and to work
effectively and efficiently with Microsoft and the related ecosystem.
• New business models require access and sometimes possession of consumer data. If we do
not have such access within our own control, this may hinder our ability to pursue such
opportunities.
• We may be required or choose to share with Microsoft personal or consumer data that has
been made available to us, which could increase the risk of loss, improper disclosure or
leakage of such personal or consumer data or create negative perceptions about our ability to
maintain the confidentiality of such data.
• New sources of revenue expected to be generated from the Microsoft partnership, such as
leveraging the Microsoft advertising assets to build and achieve the required scale for a
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