Nokia 2012 Annual Report Download - page 113

is still to be determined, we currently anticipate cumulative charges in Devices & Services of
approximately EUR 1.6 billion before the end of 2013. We also expect the total cash outflows related to
our Devices & Services restructuring activities to be approximately EUR 1.4 billion of which
approximately EUR 1.1 billion had been incurred as of December 31, 2012.
Operating Margin
Devices & Services reported an operating loss of EUR 1 100 million in 2012, compared with an
operating profit of EUR 884 million in 2011. Devices & Services operating margin in 2012 was negative
7.0%, compared with positive 3.7% in 2011. The year-on-year decrease in operating margin in 2012
was driven primarily by the lower net sales and gross margin compared to 2011 in both Smart Devices
and Mobile Phones.
Smart Devices
The following table sets forth selective line items for Smart Devices for the fiscal years 2012 and 2011.
Year Ended
December 31,
2012
Change
2011 to 2012
Year Ended
December 31,
2011
Net sales (EUR millions)(1) ........... 5446 (50)% 10 820
Smart Devices volume (millions
units) ........................... 35.1 (55)% 77.3
Smart Devices ASP (EUR) ........... 155 11% 140
Gross margin (%) ................... 8.8% 23.7%
Operating expenses (EUR millions) .... 2018 (32)% 2 974
Contribution margin (%) ............. (28.6)% (3.8)%
(1) Does not include IPR income. IPR income is recognized in Devices & Services Other net sales.
Net Sales
Smart Devices net sales decreased 50% to EUR 5 446 million in 2012, compared to
EUR 10 820 million in 2011. The year-on-year decline in our Smart Devices net sales in 2012 was
primarily due to significantly lower volumes, partially offset by higher ASPs.
Volume
Smart Devices volume decreased 55% to 35.1 million units in 2012, compared to 77.3 million units in
2011. The year-on-year decrease in our Smart Device volumes in 2012 was driven by the strong
momentum of competing smartphone platforms relative to our Symbian devices. On a geographical
basis, the decrease in volumes was due to lower volumes in Greater China, Europe, Asia Pacific,
Middle East & Africa and Latin America, partially offset by slightly higher volumes in North America.
Average Selling Price
Smart Devices ASP increased 11% to EUR 155 in 2012, compared to EUR 140 in 2011. The year-on-
year increase in our Smart Devices ASP in 2012 was primarily due to a positive mix shift towards sales
of our Lumia devices, which had a higher ASP, a positive impact related to deferred revenue on
services sold in combination with our devices as well as the net positive impact related to foreign
currency fluctuations, partially offset by general price erosion and our pricing actions.
Gross Margin
Smart Devices gross margin was 8.8% in 2012, down from 23.7% in 2011. The year-on-year decline in
our Smart Devices gross margin in 2012 was primarily due to greater price erosion than cost erosion
due to the competitive environment, inventory related allowances of EUR 220 million in the second
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