Nokia Group achieved underlying operating profitability for the fourth consecutive quarter, with a Q2 non-IFRS operating margin of 5.3%, driven by strong performance of Nokia Siemens Networks.

Nokia Group ended Q2 with a strong balance sheet and solid cash position, with gross cash of EUR 9.5 billion and net cash of EUR 4.1 billion. Nokia Siemens Networks' contribution to Nokia Group gross and net cash was EUR 2.5 billion and EUR 1.4 billion respectively.

Nokia Siemens Networks achieved underlying profitability for the fifth consecutive quarter, with a Q2 non-IFRS operating margin of 11.8%, reflecting record non-IFRS gross margin and continued progress relative to its strategy. This exceeded the earlier expectation for Nokia Siemens Networks non-IFRS operating margin to be approximately 5%, plus or minus four percentage points.

Devices & Services achieved Q2 non-IFRS operating margin of negative 1.2%, which was consistent with the earlier expectation for approximately negative 2%, plus or minus four percentage points.

HERE achieved Q2 non-IFRS operating margin of 3.4%. This exceeded the earlier expectation for a negative non-IFRS operating margin.

Nokia Group net sales in Q2 2013 were EUR 5.7 billion, down 3% quarter-on-quarter

Nokia Siemens Networks Q2 net sales decreased 1% quarter-on-quarter to EUR 2.8 billion, reflecting Nokia Siemens Networks' focused strategy.

Devices & Services Q2 net sales decreased 6% quarter-on-quarter to EUR 2.7 billion.
- Lumia Q2 volumes increased 32% quarter-on-quarter to 7.4 million units, reflecting strong demand from customers for a broadened Lumia product range.
- Mobile Phones Q2 volumes decreased 4% quarter-on-quarter to 53.7 million units, but demonstrated some signs of recovery in the latter part of the quarter.

HERE Q2 net sales increased 8% quarter-on-quarter to EUR 0.2 billion.

January-June 2013 highlights:
Nokia Group net sales in January-June 2013 were EUR 11.5 billion

Nokia Group net sales for the first half 2013 decreased 22% year-on-year.

Reported EPS for the first half 2013 was EUR -0.13, compared to EUR -0.63 in the first half 2012.

Commenting on the second quarter results, Stephen Elop, Nokia CEO, said: "We're pleased to report an underlying operating profit for the fourth consecutive quarter on a group level. We benefited from another strong performance at Nokia Siemens Networks, which continued to deliver well against its focused strategy. With our recent announcement to purchase Siemens' 50% stake in Nokia Siemens Networks, we believe we will create value for Nokia shareholders and look forward to strengthening Nokia Siemens Networks as a more independent entity.

In Devices & Services, our Mobile Phones business unit started to demonstrate some signs of recovery in the latter part of the second quarter following a difficult start to the year. Also, towards the end of the second quarter, we started to ship the Asha 501, which brings a new design and user experience to the highly competitive sub-100 USD market. While we are very encouraged by the consumer response to our innovations in this price category, our Mobile Phones business unit is planning to take actions to focus its product offering and improve product competitiveness.

In our Smart Devices business unit, we continue to focus on delivering meaningful differentiation to consumers around the world. We are very proud of the recent creations by our Lumia team, from the Lumia 520 - our most affordable Windows Phone 8 product which has enjoyed a strong start in markets like China, France, India, Thailand, the UK, the US and Vietnam - to the Lumia 1020, our star imaging product which we unveiled to the world last week. Overall, Lumia volumes grew to 7.4 million in the second quarter, the highest for any quarter so far and showing increasing momentum for the ecosystem. During the third quarter, we expect that our new Lumia products will drive a significant part of our Smart Devices revenue."

NOKIA OUTLOOK

Nokia expects its Devices & Services non-IFRS operating margin in the third quarter 2013 to be approximately negative 2 percent, plus or minus four percentage points. This outlook is based on Nokia's expectations regarding a number of factors, including:
- competitive industry dynamics continuing to negatively affect Devices & Services;
- consumer demand for our products;
- ramp-up for our high-end Lumia smartphones and new Mobile Phones devices;
- expected increases in Devices & Services' operating expenses; and
- the macroeconomic environment.

In the third quarter 2013, supported by the wider availability of recently announced Lumia products as well as recently announced Mobile Phones products, Nokia expects higher Devices & Services net sales, compared to the second quarter 2013.

Nokia continues to target to reduce its Devices & Services non-IFRS operating expenses to an annualized run rate of approximately EUR 3.0 billion by the end of 2013.

Nokia and Nokia Siemens Networks expect Nokia Siemens Networks non-IFRS operating margin in the third quarter 2013 to be approximately positive 7 percent, plus or minus four percentage points. This outlook is based on Nokia Siemens Networks' expectations regarding a number of factors, including:
- competitive industry dynamics;
- product and regional mix;
- expected continued improvement under Nokia Siemens Networks restructuring program; and
- the macroeconomic environment.

Nokia and Nokia Siemens Networks now target to reduce Nokia Siemens Networks' non-IFRS annualized operating expenses and production overheads by more than EUR 1.5 billion by the end of 2013, compared to the end of 2011. Nokia and Nokia Siemens Networks previous target was to reduce Nokia Siemens Networks' non-IFRS annualized operating expenses and production overheads by more than EUR 1 billion by the end of 2013, compared to the end of 2011.

NOKIA TO FULLY ACQUIRE SIEMENS' STAKE IN NOKIA SIEMENS NETWORKS
On July 1, 2013, Nokia Corporation and Siemens AG announced that they have entered into a definitive agreement pursuant to which Nokia acquires Siemens' entire 50% stake in their joint venture, Nokia Siemens Networks. The acquisition has been approved by the Board of Directors of Nokia as well as the Managing and Supervisory Boards of Siemens, and is subject to the customary regulatory approval process.

The purchase price for Siemens' stake is EUR 1.7 billion and the transaction is expected to close during the third calendar quarter of 2013. Upon closing of the planned acquisition, Nokia Siemens Networks will become a wholly owned subsidiary of Nokia. Of the purchase price, EUR 1.2 billion will be paid in cash at the closing of the transaction. The balance of EUR 0.5 billion will be paid in the form of a secured loan from Siemens due one year from closing. Nokia has obtained committed bank financing for the EUR 1.2 billion cash portion.

Nokia will continue to consolidate Nokia Siemens Networks for financial reporting purposes as well as continue to strengthen the company as a more independent entity.

Nokia Corp.