Nokia 2011 Annual Report Download - page 89

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
This section begins with an overview of the principal factors and trends affecting our results of
operations. The overview is followed by a discussion of our critical accounting policies and estimates
that we believe are important to understanding the assumptions and judgments reflected in our
reported financial results. We then present an analysis of our results of operations for the last three
fiscal years.
We adopted our current operational structure during 2011 and have three businesses: Devices &
Services, Location & Commerce and Nokia Siemens Networks. As of April 1, 2011, our Devices &
Services business includes two operating and reportable segments – Smart Devices, which focuses on
smartphones, and Mobile Phones, which focuses on mass market feature phones – as well as
Devices & Services Other. Devices & Services Other includes net sales of our luxury phone business
Vertu, spare parts and related cost of sales and operating expenses, as well as intellectual property
related royalty income and common research and development expenses.
Location & Commerce focuses on the development of location-based services and local commerce.
NAVTEQ, which we acquired in July 2008, was a separate reportable segment of Nokia from the third
quarter 2008 until the end of the third quarter of 2011. As of October 1, 2011, the Location & Commerce
business was formed as a new operating and reportable segment by combining NAVTEQ and our
Devices & Services social location services operations.
For IFRS financial reporting purposes, we have four operating and reportable segments: Smart
Devices and Mobile Phones within Devices & Services, Location & Commerce and Nokia Siemens
Networks. Prior period results have been regrouped and recast for comparability purposes according to
the new reporting format that became effective on April 1, 2011 and October 1, 2011, respectively.
For a description of our organizational structure see Item 4A. “History and Development of the
Company – Organizational Structure and Reportable Segments”. Business segment data in the
following discussion is prior to inter-segment eliminations. See Note 2 to our consolidated financial
statements included in Item 18 of this annual report. The following discussion should be read in
conjunction with our consolidated financial statements included in Item 18 of this annual report,
Item 3D. “Risk Factors” and “Forward-Looking Statements”. Our financial statements have been
prepared in accordance with IFRS.
Principal Factors & Trends Affecting our Results of Operations
Devices & Services
Devices & Services is responsible for developing and managing our portfolio of mobile products, which
we make for all major consumer segments, as well as designing and developing services, including
applications and content, that enrich the experience people have with their mobile devices. Devices &
Services also manages our supply chains, sales channels, brand and marketing activities and explores
corporate strategic and future growth opportunities for Nokia.
In 2011, the global mobile device market benefited from continued strength in key growth markets,
such as the Middle East and Africa, Greater China and Latin America and, according to our estimate,
industry mobile device volumes increased by 11% during the year. Smartphones continued to capture
the major part of the volume and value growth, as well as the public focus, in the mobile device market.
We estimate that our mobile device volume market share was 26% in 2011, compared to an estimated
32% in 2010, with the decline primarily driven by market share losses in the smartphones segment.
In February 2011, we announced our new strategy for our Devices & Services business, which has
three core elements.
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