Nokia Oyj ADR NOK
Q3 2011 Earnings Call Transcript

Operator: Kulbinder Garcha, Credit Suisse.

Kulbinder Garcha - Credit Suisse: I have a question and a clarification to Timo. Just in the clarification – just what you mentioned there on the impact of the Windows agreement or with Microsoft agreement. So, just to be clear, there is a positive impact in gross margin of Smart Devices for Windows because Microsoft are giving you some cash payments. If you stop paying the licensee fee, what is the net of those two do you think in the fourth quarter. I'm trying to understand whether that would be help your gross margins and Smart Devices expand. Then the question really more fundamentally for Stephen is regarding Windows, you're talking about only launching this product in a few markets and my question is, I guess why because if this going to be a flagship product with other Windows going through it, why wouldn't Nokia do the kind of global launches we've historically seen where you ramp it very successfully and very quickly. Is it because of components? Is it because concerns around the experience? Is it because of carrier reluctance? What is the thinking I guess behind? How quickly could Nokia based upon your best estimation now ramp this Windows platform into the massive market of smartphones? Is that still a 12 to 18-month horizon do you think?

Timo Ihamuotila - EVP and CFO: So, first on the Microsoft payment dynamics. So, what I simply wanted to highlight to you is how the accounting here works from two perspectives. First, the Windows Phone related royalty expenses will be booked in our Smart Devices cost of goods sold, and we will be recognizing a portion of the platform support payment as benefit to our Smart Devices cost of goods sold. I wanted to highlight that the cash flow dynamics in this case can be different from the accounting dynamics, but we are not giving any exact number or gross margin guidance here regarding the Windows Phone margin. I mean, we are not giving product-specific margins regarding our guidance.

Stephen Elop - President and CEO: Regarding the ramp-up plans; first of all, we're very pleased with the degree of operator support with the early signs of commitment and all of those other factors, it's very positive, so we're encouraged by that. But we are being very deliberate in the sequence in which we roll things out because it is a significant shift for the organization in how we sell, how we manufacture; all of those different elements. So, whether it is the need to introduce new language variance, to establish marketplace capabilities in new countries to support Windows Phone, whether it is activating operator billing, on and on and on, there is quite a long list of things we have to do to ensure we have robust launches in each country in which we operate. As well, various countries have different requirements for different radio variance, be it TD-SCDMA requirements in China, CDMA in China, or the U.S.; LTE initially in the U.S. and elsewhere. So there is quite a range of things that we have to do to shift to a complete rollout. So, we're being very deliberate, starting in certain markets, expanding again, continuing to expand and really having it blossom through the course of 2012. Then I think the second part of your second question that you had there, related to moving down the price bands and so forth and how we estimate that; first of all, we aren't providing specific timing guidance on that, but what you should expect to see is a repeatable pattern of cascading series of devices that increasingly span the price bands and that's both up and down, and so there's an opportunity to do that over time. That also requires engineering work and planning and sequencing with the other products that we have moving very successfully in various markets, because of course, we're very thoughtful about where and how we first launched Windows Phone relative to where Symbian is strong and so forth so we get the right balance and the right transition dynamics as we go through that process.