Nokia Corporation
Capital Market Days 2006

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By InCards
November 29, 2006

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Nokia's Revised Targets

As expected Nokia downward revised their margin guidance set in early 2005, and I think that the expectation of that was pretty much built into the share price entering today since Network margins have been a drag and Enterprise Solutions profitability is pushing out, even though Mobile Phones and Multimedia have exceeded growth targets and maintained margins reasonably well, albeit slightly below their combined margin targets ...

In their November 21 2006 CMD Preview, Gareth Jenkins and Jussi Uskola of Deutsche Bank AG (Europe) who rate Nokia a Hold with a 16.50€ price target stated ...

Targets will be most price sensitive driver over the day We believe the market has already digested the fact that Nokia will miss group margin guidance of 17%. We view Device margin guidance as key and Nokia is running at about the targeted level already (17% for 9 months YTD vs. 17% targeted). We believe Nokia is likely to roll forward its Devices guidance by a year, highlighting the CDMA wind down and single chip ramp up which should partly mitigate the ASP/gross margin dilution from emerging market mix. In summary, we do not see any surprise disasters emerging in guidance.

In their CMD preview Lehman Brothers Jeff Kvaal, Stuart Jeffrey and Tim Luke, who rate NOK 1-Overweight with a price target of US$ 24.50 gave an excellent review and breakdown of the targets Nokia achieved or beat and those they failed to achieve and summarized this way ...

We do not expect Nokia to offer any major new themes at its Capital Markets Day in Amsterdam on Nov 28/29 and thus consider the event unlikely to prove a significant catalyst for the shares. ... Mgmt may trim Device margin targets to 16-17% from 17-18% - in line with consensus ests. Enterprise breakeven may be delayed. Mgmt may refresh Nokia Siemens synergies while offering 2007 infrastructure guidance of 'moderate'. Our analysis of 2003-2005 CMD guidance reveals mgmt has been conservative on market growth and optimistic on margins.

The below is excerpted from the "Nokia Capital Market Days 2006" Press Release ...

>> Today, at its annual Capital Market Days event, Nokia presented its forecasts for the industry and its financial targets for the next one to two years ... <snip> ...

Nokia Financial Targets:

� Nokia operating margin target of 15% during the next one to two years. This target is revised from the one to two year 17% operating margin target Nokia set in December 2005, primarily due to Nokia's increased exposure to the infrastructure market following the expected start of operations of Nokia Siemens Networks.

� Device (Mobile Phones and Multimedia combined) operating margin target of 17% during the next one to two years. This target is revised from the one to two year 17%-18% device operating margin target Nokia set in December 2005.

� Nokia Siemens Networks operating margin target of 10% plus during the next one to two years. Nokia Siemens Networks maintains its target to achieve a double digit operating margin by year end 2007, before restructuring charges.

� Nokia targets an improvement in the ratio of Nokia gross margin to R&D expenses and an improvement in the ratio of Nokia gross margin to sales and marketing expenses in 2007, compared to 2006.

� Nokia expects to meet its previously stated target to reduce overall R&D expenditure to 9%-10% of net sales by the end of 2006.

Other Nokia targets:

� Share gains in devices in 2007.

Nokia Forecasts for the Industry:

� Nokia expects industry mobile device volumes in 2007 to grow by up to 10% from the approximately 970 million units Nokia estimates for 2006. We expect the volume growth in 2007 to be above 15% in Asia Pacific, China, and Middle East & Africa, and below 10% in Europe, Latin America and North America.

� Nokia expects the device industry to experience value growth in 2007, but expects some decline in industry ASPs, primarily reflecting the increasing impact of the emerging markets and competitive factors in general.

� Nokia now forecasts that the three billion mobile subscriptions mark will be reached in 2007, instead of in 2008 as Nokia forecasted previously.

� Nokia expects slight growth in the mobile and fixed infrastructure and related services market in euro terms in 2007. ###

See next post for links to the slide presentations of OPK and Rick Simonson for further detail and better yet view and listen to their presentations.

My personal vote for the best presentation of the day goes to Niklas Savander (Unleashing Innovation) which discusses Nokia hardware and software platformization -- always a key Nokia strength.

- IC -

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