Nokia Corporation Financial Report for Q4 and Full Year 2020
Financial Statement Release
4 February 2021 at 08:00 (CET +1)
Nokia Corporation Financial Report for Q4 and Full Year 2020
Solid margin performance driven by customer demand in North America
- 5% year-on-year decrease in reported net sales in Q4, primarily due to Mobile Access, as declines in network deployment and planning services were partially offset by growth in radio access products
- 1% growth in constant currency net sales in Q4
- Continued improvements in our Mobile Access portfolio; strengthening roadmaps, reducing product costs and improving product performance; commitment to invest in R&D to drive product leadership
- Increase in Mobile Access gross margin in Q4, primarily driven by improved 5G gross margin, partially offset by a project-related loss provision
- Positive operating profit, on a reported basis, in Q4 and full year 2020
- Non-IFRS operating profit in Q4 benefited by approximately EUR 250 million, due to the timing of revenue recognition and a net positive fluctuation in Nokia’s venture fund investments
- Strong free cash flow in Q4 and full year 2020 benefited from an early customer payment of approximately EUR 0.5 billion, which was expected in Q1 2021
- Derecognized EUR 2.9 billion of Finnish deferred tax assets, which are not lost
- Reiterated outlook for 2021 comparable operating margin of 7-10% and provided new outlook for net sales and free cash flow
- Board does not propose a dividend or dividend authorization for the financial year 2020
This is a summary of the Nokia Corporation financial report for Q4 and full year 2020 published today. The complete financial report for Q4 and full year 2020 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.
PEKKA LUNDMARK, PRESIDENT AND CEO, ON Q4 AND FULL YEAR 2020 RESULTS
Nokia delivered a solid Q4 to end 2020 at the high end of our Outlook range. We saw healthy gross margin and operating margin performance for both Q4 and full year 2020, supported by a regional mix shift towards the higher margin North America region and by our ongoing R&D efforts to enhance product quality and cost competitiveness.
From a business group perspective, in Q4 and full year 2020, our gross margin improvement was primarily driven by Networks, as was our full year operating margin performance. In Q4, our operating profit performance benefited by approximately EUR 250 million from two unexpected, yet significant drivers: a timing benefit of approximately EUR 150 million as we recognized net sales at the very end of the quarter, which we had expected in 2021; and we had a net positive fluctuation in Nokia’s venture fund investments of approximately EUR 100 million.
The healthy close to the year does not change our earlier communicated view for Nokia-level operating margin expected in 2021.
Net sales for Q4 were down 5% on a reported basis and up 1% in constant currency and for full year 2020 they were down 6% on a reported basis and down 4% in constant currency.
Nokia delivered strong cash performance in Q4 and full year 2020, benefitting from a large customer payment that had been expected in Q1 2021, marking the third consecutive quarter of positive free cash flow. Additionally, our liquidity position continues to be solid.
Financial improvement in Mobile Access was clear in both Q4 and full year 2020 results, reflecting our ongoing efforts to strengthen the competitiveness and cost position of our mobile radio products. Overall, we saw growth in radio access products in Q4 and full year 2020, with growth in 5G partially offset by decreases in legacy radio access products.
5G gross margin increased due to product cost reduction, partly helped by higher ReefShark shipment volumes. Our aim was to be above 35% for our KPI on shipments of our “5G Powered by ReefShark” portfolio; we ended the year at 43% and we remain on track to realize 70% by the end of 2021. This underlines the ongoing progress with our Mobile Networks turnaround and, as I said in Q3, we will invest whatever it takes to win in 5G. Completing the turnaround in Mobile Networks remains our top priority for 2021, and these visible signs of progress give me confidence that we are on the right track but there is still work to be done.
Our Enterprise business delivered another good set of results giving a solid foundation to build on. Q4 Enterprise net sales were up 1% in reported and 5% in constant currency. For full year 2020, they were up 11% in reported and 14% in constant currency, reflecting our leadership position in many areas, including in private wireless. We announced key partnerships with AT&T and Verizon for private wireless and won 79 new customers in Q4. We now have 260 private wireless customers. Public sector demand remains robust and we announced a US federal government cyber deal after the quarter end in mid-January.
At the end of 2020, we announced a new operating model to better align us with the needs of our customers and to better maintain and achieve technology leadership in the areas where we choose to compete.
Pleasingly we already have strong technology leadership positions in many key areas of our new business groups. In Network Infrastructure we have industry-leading FP4-based products and in Cloud and Network Services we are jointly developing transformational cloud-native 5G core solutions for CSPs and Enterprise customers. In our Mobile Networks business, together with Elisa and Qualcomm, we hold the worldwide 5G speed record.
These are encouraging results, however, as I said in Q3, we expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America.
Additionally, as I said, delivering on our new operating model for a strong and sustainable long-term business requires us to make further 5G R&D investments in 2021, meaning we will sacrifice some short-term margin to ensure leadership in 5G.
Considering these elements, we maintain our comparable operating margin outlook for 2021 and – as new items – give an outlook for net sales and free cash flow for 2021. As previously stated, we intend to provide a long-term outlook latest at Capital Markets Day on March 18.
Regarding dividend, we are pleased with Nokia’s recent operational performance and satisfied that we have strengthened our cash position. However, with the focus on increased investments in 5G and strategic areas, while continuing to establish a track record of sustainable cash generation, the Board does not propose a dividend or dividend authorization for the financial year 2020. We intend to provide an update on our dividend policy latest at Capital Markets Day.
We took important steps in 2020 to accelerate roadmaps, improve execution and create a new way of working, which will enable Nokia to return to a sustainable long-term financial performance. We know we have our work cut out for us in 2021, but the new Group Leadership Team has hit the ground running. As announced earlier, we will go deep into each of our business groups at our Capital Markets Day to discuss specific targets and action plans.
I want to conclude by thanking everyone at Nokia. This has been a year of incredible change where our personal resilience as well as technology has been tested like never before. I am extremely proud of our team, their commitment and their achievements. Thank you.
NOKIA FINANCIAL RESULTS
|EUR million (except for EPS in EUR)||Q4'20||Q4'19||YoY change||Constant currency YoY change||Q1-Q4'20||Q1-Q4'19||YoY change||Constant currency YoY change|
|Net sales||6 568||6 903||(5)%||1%||21 867||23 315||(6)%||(4)%|
|Networks||5 040||5 439||(7)%||(2)%||16 865||18 209||(7)%||(5)%|
|Nokia Software||864||870||(1)%||5%||2 658||2 767||(4)%||(1)%|
|Nokia Technologies||382||376||2%||3%||1 402||1 487||(6)%||(6)%|
|Group Common and Other||292||231||26%||26%||983||952||3%||2%|
|Gross margin %1||39.2%||38.5%||70bps||37.6%||35.4%||220bps|
|Nokia Technologies||317||320||(1)%||1 164||1 239||(6)%|
|Group Common and Other||(27)||(161)||(525)||(490)|
|Non-IFRS exclusions||(615)||(331)||(1 196)||(1 518)|
|Operating margin %||7.2%||11.6%||(440)bps||4.2%||2.1%||210bps|
|Net sales (non-IFRS)||6 569||6 903||(5)%||1%||21 870||23 344||(6)%||(4)%|
|Gross margin % (non-IFRS)||41.8%||40.0%||180bps||39.0%||36.5%||250bps|
|Operating profit (non-IFRS)||1 090||1 134||(4)%||2 114||2 003||6%|
|Operating margin % (non-IFRS)||16.6%||16.4%||20bps||9.7%||8.6%||110bps|
|Financial income and expenses||29||(15)||(106)||(341)||(69)%|
|Income taxes||(3 131)||(246)||(3 255)||(138)|
|Profit/(loss) for the period||(2 608)||563||(2 421)||18|
|Financial income and expenses (non-IFRS)||(13)||(46)||(72)%||(184)||(337)||(45)%|
|Income taxes (non-IFRS)||(286)||(288)||(1)%||(488)||(448)||9%|
|Profit for the period (non-IFRS)||811||821||(1)%||1 464||1 230||19%|
|EPS, diluted (non-IFRS)||0.14||0.15||(7)%||0.26||0.22||18%|
|1In Q4 2020, Nokia reclassified certain items of income and expenses from other operating income and expenses to the functions. The comparative reported results for Q4’19 and Q1-Q4’19 have been revised accordingly. Refer to note 1, "Basis of preparation" in the "Financial statement information" section for details.|
|Results are as reported and relate to continuing operations unless otherwise specified. The financial information in the Nokia Corporation Financial Report for Q4 and full year 2020 is unaudited. Non-IFRS results exclude intangible asset amortization and other fair value adjustments, goodwill impairments, restructuring related charges and certain other items affecting comparability. For details, please refer to note 2, "Non-IFRS to reported reconciliation", in the notes to the Financial statement information in Nokia Corporation Financial Report for Q4 and full year 2020. Change in net sales at constant currency excludes the effect of changes in exchange rates in comparison to euro, our reporting currency. For more information on currency exposures, please refer to note 1, “Basis of Preparation”, in the "Financial statement information" section in Nokia Corporation Financial Report for Q4 and full year 2020.|
In Q4 2020, reported net sales decreased 5%, primarily driven by lower net sales in Mobile Access, where a decline in network deployment and planning services was partially offset by growth in 5G radio access products. On a constant currency basis, Nokia net sales increased 1% in Q4 2020. In full year 2020, reported net sales decreased 6%, primarily due to network deployment and planning services in Mobile Access. In Nokia Enterprise, we continued to make great progress in full year 2020 and delivered 11% year-on-year growth in reported net sales. On a constant currency basis, Nokia net sales decreased 4% in full year 2020.
Reported gross margin in Q4 2020 was 39.2%, compared to 38.5% in Q4 2019. Non-IFRS gross margin was 41.8%, compared to 40.0% in Q4 2019. The improvement in gross margin was primarily driven by Mobile Access, where strong 5G gross margin expansion was partially offset by a project-related loss provision. To a lesser extent, our Q4 2020 gross margin performance was affected by mix shifts, with a higher proportion of Group Common and Other, as well as a decline in Nokia Software. In full year 2020, reported gross margin was 37.6%, compared to 35.4% in full year 2019. Non-IFRS gross margin was 39.0%, compared to 36.5% in full year 2019.
In Q4 2020, our non-IFRS and reported operating profit performance was positively affected by approximately EUR 250 million from two significant drivers: a timing benefit, as we recognized net sales at the very end of the quarter, which we had expected in 2021, and a net positive fluctuation in Nokia’s venture fund investments. Our non-IFRS and reported diluted EPS benefited by approximately EUR 0.035 from these items.
Earnings per share
Non-IFRS diluted EPS in Q4 2020 was EUR 0.14, compared to EUR 0.15 in Q4 2019, primarily due to lower operating profit, partially offset by a net positive fluctuation in financial income and expenses. In full year 2020, non-IFRS diluted EPS was EUR 0.26, compared to 0.22 in full year 2019.
Reported diluted EPS in Q4 2020 was negative EUR 0.46, compared to EUR 0.10 in Q4 2019. The change was primarily driven by a net negative fluctuation in income taxes related to the EUR 2.9 billion derecognition of Finnish deferred tax assets and, to a lesser extent, lower operating profit, partially offset by a net positive fluctuation in financial income and expenses. In full year 2020, reported diluted EPS was negative EUR 0.43, compared to 0.00 in full year 2019. The derecognition was required due to a regular assessment of our ability to utilize the tax assets in Finland in the foreseeable future that is done primarily based on our historical performance. These tax assets are not lost, and the derecognition can be reversed. They can still be utilized in the taxation and the derecognition is not expected to affect the overall taxation of the Nokia Group or its cash taxes. For further details on the derecognition of Finnish deferred tax assets, please refer to note 6, "Deferred taxes" in the "Financial statement information" section in Nokia Corporation Financial Report for Q4 and full year 2020.
Q4 2020 was the third quarter in a row of positive free cash flow. During Q4 2020, net cash increased by approximately EUR 0.6 billion, resulting in an end-of-quarter net cash balance of approximately EUR 2.5 billion. During Q4 2020, total cash increased by approximately EUR 0.4 billion, resulting in an end-of-quarter total cash balance of approximately EUR 8.1 billion. Strong cash performance in Q4 and full year 2020 benefited from an early customer payment of approximately EUR 0.5 billion, which was expected in Q1 2021.
COVID-19 resulted in a net sales impact of approximately EUR 200 million in full year 2020, with the majority of these net sales expected to be shifted to future periods, rather than being lost. In addition, we had a temporary benefit of approximately EUR 250 million due to lower travel and personnel expenses related to COVID-19.
Beginning with the distribution for the financial year 2018, Nokia started paying dividends in quarterly instalments. On October 24, 2019, the Board resolved to pause dividend distributions, in order to: a) guarantee Nokia’s ability to increase 5G investments, b) continue investing in growth in strategic focus areas of enterprise and software and c) strengthen Nokia’s cash position. This was done in accordance with Nokia’s dividend policy, which states that dividend decisions are made taking into account Nokia’s cash position and expected cash flow generation.
The Board is pleased with Nokia’s recent operational performance and the track record of sustainable cash generation that Nokia is starting to build. The Board is satisfied that Nokia has strengthened its cash position. However, the Board continues to focus on ensuring Nokia’s ability to increase investments in 5G and strategic areas, while continuing to establish a track record of sustainable cash generation. Therefore, the Board does not propose a dividend or dividend authorization for the financial year 2020. After Q4 2021, the Board will assess the possibility of proposing a dividend distribution for the financial year 2021, taking into account the net cash position, as well as the outlook for 2022.
The COVID-19 pandemic has made vividly clear the critical importance of connectivity to keep society functioning. We believe we have a resilient customer base, and we feel a sense of duty to our customers and the communities they serve.
Due to significant uncertainties and risks in estimating the impact of customer-related delivery and implementation challenges, we are now focusing our COVID-19 disclosure on the impact of factory closures, which have had a net sales impact of approximately EUR 200 million in full year 2020, with the majority of these net sales expected to be shifted to future periods, rather than being lost. The EUR 200 million of negative impact in full year 2020 relates primarily to Alcatel Submarine Networks in Group Common and Other, which experienced temporary factory closures that particularly impacted Q1 2020 and Q2 2020.
COVID-19 also affected our operational costs (for example, temporary lower travel), capital expenditures (temporary delays), and cash outflows related to taxes (tax relief). In full year 2020, we had a temporary benefit of approximately EUR 250 million due to lower travel and personnel expenses related to COVID-19, of which approximately EUR 150 million benefited operating expenses and approximately EUR 100 million benefited cost of sales. In full year 2021, based on our current understanding of the COVID-19-related developments, we expect a temporary benefit of approximately EUR 150 million due to lower travel and personnel expenses related to COVID-19, of which approximately EUR 100 million is expected to benefit operating expenses and approximately EUR 50 million is expected to benefit cost of sales.
Potential risks and uncertainties continue to exist related to the scope and duration of the COVID-19 impact and the pace and shape of the economic recovery following the pandemic and it is impossible to predict with accuracy the precise impact of such risks on us, our operations and our business.
During the COVID-19 pandemic, we have continued to advance our 5G roadmap and product evolution, as planned, and we believe that our COVID-19 mitigation actions in R&D have been successful.
Health and safety
Naturally, Nokia’s first focus during the COVID-19 pandemic is to our employees. We have in place strict protocols for Nokia facilities and provided clear advice to our employees about how they can mitigate the risks of COVID-19 in situations where they have to go about critical work. We have taken a range of steps, including banning international travel for Nokia employees, except for strictly-defined ‘critical’ reasons; closing all our facilities to all visitors, with the exception of people engaged in essential maintenance and services, and asking our staff to work from home wherever possible. We started implementing these measures in some regions already in January 2020 and have updated guidance as the situation has developed.
As the overwhelming majority of Nokia employees continue working remotely, we are providing guidance on how staff can maintain a healthy work-life balance and look after their physical and mental well-being.
Supporting the essential services our customers provide
The products and services that we provide have never been more critical in enabling the world to continue to function in an orderly way. We continue to work closely with all our customers, to ensure that the changing needs and requirements at this time are well understood and that we respond appropriately to them.
In Q4 2020, connectivity continued to bring together people isolated from each other by the COVID-19 pandemic. Remote working and schooling, robust delivery of basic services and smart deliveries are just some examples that have been enabled by our connectivity solutions. In December, we announced that, together with Vodafone India Foundation, we have deployed a Smart Agriculture solution that aims to improve the productivity of farmers in India. The pilot project is being implemented in 100 locations in the states of Madhya Pradesh and Maharashtra and will benefit over 50 000 farmers in the region by enhancing their productivity and income.
Nokia has a global manufacturing footprint designed for optimized global supply, and to mitigate against risks such as local disruptive events, transportation capacity problems, and political risks. Our supply network consists of 25 factories around the globe and six hubs for customer fulfillment. As a result, at the Nokia level, we are not dependent on one location or entity. We have also established a global command center to manage the supply chain challenges arising from the outbreak; and we are ready to activate relevant business continuity plans should the situation in any part of our organization require this.
These actions demonstrate our strong commitment to supporting global efforts to end the pandemic and overcoming the disruption and challenges we currently face.
Full Year 2021
|Net sales, adjusted for currency fluctuations||EUR 20.6 billion to EUR 21.8 billion, assuming continuation of 2020 year-end EUR/USD rate of 1.23|
|Comparable operating margin1||7 to 10%|
|Free cash flow2||Positive|
- 1 Comparable measures exclude intangible asset amortization and other fair value adjustments, goodwill impairments, restructuring related charges and certain other items affecting comparability. Refer to note 12 "Performance measures" in Nokia Corporation Financial Report for Q4 and full year 2020.
- 2 Free cash flow = net cash from/(used in) operating activities - capital expenditures + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments + proceeds from sale of non-current financial investments.
|Nokia intends to provide a long-term outlook, latest at Capital Markets Day on March 18, 2021|
|In connection with the work on long term financial targets, Nokia will also assess its dividend policy, and intends to provide an update, latest at Capital Markets Day on March 18, 2021|
- In full year 2021, we expect our net sales, adjusted for currency fluctuations, to be affected by:
- A significant decline in Mobile Networks, due to not converting all of its 4G footprint into 5G footprint in North America in 2020, as well as price erosion in North America (new);
- Net sales growth, primarily in Network Infrastructure and Nokia Technologies (new);
- Mobile Networks is expected to deliver comparable operating margin of around zero percent in full year 2021, and significant improvement over the longer term;
- Network Infrastructure is expected to deliver comparable operating margin in the high single digit range in full year 2021, and gradual improvement over the longer term;
- Cloud & Network Services is expected to deliver comparable operating margin in the mid-single digit range in full year 2021, and significant improvement over the longer term;
- Nokia Technologies is expected to deliver a slight improvement in comparable operating profit in full year 2021, relative to full year 2020, and stable performance over the longer term;
- Group Common and Other is expected to deliver a comparable operating loss of approximately EUR 200 million in full year 2021, and stable performance over the longer term;
- In full year 2021, Nokia expects the free cash flow performance of Nokia Technologies to be approximately EUR 600 million lower than its operating profit, primarily due to prepayments we received from certain licensees;
- Comparable financial income and expenses are expected to be an expense of approximately EUR 250 million in full year 2021 and over the longer-term (new);
- Comparable income tax expenses are expected to be approximately EUR 450 million in full year 2021 and over the longer-term, subject to regional profit mix, net sales subject to withholding tax and the timing of patent licensing cash flow (new);
- Cash outflows related to income taxes are expected to be approximately EUR 350 million in full year 2021 and over the longer term until our US or Finnish deferred tax assets are fully utilized (new);
- Capital expenditures are expected to be approximately EUR 700 million in full year 2021 and EUR 600 million over the longer-term (new); and
- Rule of thumb related to currency fluctuations: Assuming our current mix of net sales and total costs (refer to Note 1, “Basis of Preparation” in the “Financial statement information” section for details in Nokia Corporation Financial Report for Q4 and full year 2020), we expect that a 10% increase in the EUR/USD exchange rate would have an impact of approximately negative 4 to 5% on net sales and an approximately neutral impact on operating profit (new).
Nokia and its business are exposed to a number of risks and uncertainties which include but are not limited to:
- Competitive intensity, which is particularly impacting Mobile Networks and is expected to continue at a high level in full year 2021, as some competitors seek to take share in the early stages of 5G;
- Our ability to accelerate our product roadmaps and cost competitiveness through additional 5G investments in full year 2021, thereby enabling us to drive product cost reductions and maintain the necessary scale to be competitive;
- Some customers are reassessing their vendors in light of security concerns, creating near-term pressure to invest in order to secure long-term benefits;
- Developments in North America following the conclusion of the C-band auction, including the potential for temporary capital expenditure constraints or the acceleration of 5G deployments;
- Customer demand could weaken and risk could increase further in India, after the country’s Supreme Court upheld a ruling that telecoms companies must pay retroactive license and spectrum fees;
- Potential risks and uncertainties related to the scope and duration of the COVID-19 impact and the pace and shape of the economic recovery following the pandemic;
- Our ability to procure certain standard components;
- The timing of completions and acceptances of certain projects;
- Our product and regional mix;
- Macroeconomic, industry and competitive dynamics;
- The timing and value of new and existing patent licensing agreements with smartphone vendors, automotive companies and consumer electronics companies;
- Results in brand and technology licensing; costs to protect and enforce our intellectual property rights; and the regulatory landscape for patent licensing;
as well as the risk factors specified under “Forward-looking Statements” of this release, and our 2019 annual report on Form 20-F published on March 5, 2020 under "Operating and financial review and prospects-Risk factors" as supplemented by the form 6-K published on April 30, 2020 under the header “Risk Factors”.
ANALYST CONFERENCE CALL
Nokia's analyst conference call will begin on February 4, 2021 at 3 p.m. Finnish time. A link to the webcast of the conference call will be available at www.nokia.com/financials. Media representatives can listen in via the link, or call +1-412-717-9224.
FINANCIAL CALENDAR 2021
- Nokia plans to publish its "Nokia in 2020" annual report, which includes the review by the Board of Directors and the audited annual accounts, in week 9 of 2021. The annual report will be available at www.nokia.com/financials.
- Nokia's Capital Markets Day is planned to be held on March 18, 2021.
- Nokia's Annual General Meeting 2021 is planned to be held on April 8, 2021.
- Nokia plans to publish its first quarter 2021 results on April 29, 2021.
- Nokia plans to publish its second quarter and half year 2021 results on July 29, 2021.
- Nokia plans to publish its third quarter and January-September 2021 results on October 28, 2021.
Tel. +358 10 448 4900
Katja Antila, Head of Media Relations
Nokia Investor Relations
Tel. +358 40 803 4080
We create the critical networks and technologies to bring together the world’s intelligence, across businesses, cities, supply chains and societies.
With our commitment to innovation and technology leadership, driven by the award-winning Nokia Bell Labs, we deliver networks at the limits of science across mobile, infrastructure, cloud, and enabling technologies.
Adhering to the highest standards of integrity and security, we help build the capabilities we need for a more productive, sustainable and inclusive world.
For our latest updates, please visit us online www.nokia.com and follow us on Twitter @nokia.
It should be noted that Nokia and its businesses are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements regarding: A) expectations, plans or benefits related to our strategies, growth management and operational key performance indicators; B) expectations, plans or benefits related to future performance of our businesses (including the expected impact, timing and duration of that impact of COVID-19 on our businesses, our supply chain and our customers’ businesses) and any future dividends including timing and qualitative and quantitative thresholds associated therewith; C) expectations and targets regarding financial performance, cash generation, results, the timing of receivables, operating expenses, taxes, currency exchange rates, hedging, cost savings, product cost reductions and competitiveness, as well as results of operations including targeted synergies, better commercial management and those results related to market share, prices, net sales, income and margins; D) expectations, plans or benefits related to changes in organizational and operational structure; E) expectations regarding competition within our market, market developments, general economic conditions and structural and legal change globally and in national and regional markets, such as China; F) our ability to integrate acquired businesses into our operations and achieve the targeted business plans and benefits, including targeted benefits, synergies, cost savings and efficiencies; G) expectations, plans or benefits related to any future collaboration or to business collaboration agreements or patent license agreements or arbitration awards, including income to be received under any collaboration or partnership, agreement or award; H) timing of the deliveries of our products and services, including our short term and longer term expectations around the rollout of 5G, investment requirements with such rollout, and our ability to capitalize on such rollout; I) expectations and targets regarding collaboration and partnering arrangements, joint ventures or the creation of joint ventures, and the related administrative, legal, regulatory and other conditions, as well as our expected customer reach; J) outcome of pending and threatened litigation, arbitration, disputes, regulatory proceedings or investigations by authorities; K) expectations regarding restructurings, investments, capital structure optimization efforts, uses of proceeds from transactions, acquisitions and divestments and our ability to achieve the financial and operational targets set in connection with any such restructurings, investments, capital structure optimization efforts, divestments and acquisitions, including our current cost savings program; L) expectations, plans or benefits related to future capital expenditures, reduction of support function costs, temporary incremental expenditures or other R&D expenditures to develop or rollout software and other new products, including 5G, ReefShark and increased digitalization; M) expectations regarding our customers' future actions, including our customers’ capital expenditure constraints and our ability to satisfy customer’s needs and retain their business; and N) statements preceded by or including “believe”, “expect”, “expectations”, “deliver”, “maintain”, “strengthen”, “target”, “estimate”, “plan”, “intend”, “assumption”, “focus”, “continue”, “should", "will” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from such statements. These statements are based on management’s best assumptions and beliefs in light of the information currently available to them. These forward-looking statements are only predictions based upon our current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Factors, including risks and uncertainties that could cause these differences include, but are not limited to: 1) our strategy is subject to various risks and uncertainties and we may be unable to successfully implement our strategic plans, sustain or improve the operational and financial performance of our business groups, correctly identify or successfully pursue business opportunities or otherwise grow our business; 2) general economic and market conditions, general public health conditions (including its impact on our supply chains) and other developments in the economies where we operate, including the timeline for the deployment of 5G and our ability to successfully capitalize on that deployment; 3) competition and our ability to effectively and profitably invest in existing and new high-quality products, services, upgrades and technologies and bring them to market in a timely manner; 4) our dependence on the development of the industries in which we operate, including the cyclicality and variability of the information technology and telecommunications industries and our own R&D capabilities and investments; 5) our dependence on a limited number of customers and large multi-year agreements, as well as external events impacting our customers including mergers and acquisitions and the possibility of our customers awarding business to our competitors; 6) our ability to maintain our existing sources of intellectual property-related revenue through our intellectual property, including through licensing, establishing new sources of revenue and protecting our intellectual property from infringement; 7) our ability to manage and improve our financial and operating performance, cost savings, competitiveness and synergies generally, expectations and timing around our ability to recognize any net sales and our ability to implement changes to our organizational and operational structure efficiently; 8) our global business and exposure to regulatory, political or other developments in various countries or regions, including emerging markets and the associated risks in relation to tax matters and exchange controls, among others; 9) our ability to achieve the anticipated benefits, synergies, cost savings and efficiencies of acquisitions; 10) exchange rate fluctuations, as well as hedging activities; 11) our ability to successfully realize the expectations, plans or benefits related to any future collaboration or business collaboration agreements and patent license agreements or arbitration awards, including income to be received under any collaboration, partnership, agreement or arbitration award; 12) Nokia Technologies' ability to protect its IPR and to maintain and establish new sources of patent, brand and technology licensing income and IPR-related revenues, particularly in the smartphone market, which may not materialize as planned, 13) our dependence on IPR technologies, including those that we have developed and those that are licensed to us, and the risk of associated IPR-related legal claims, licensing costs and restrictions on use; 14) our exposure to direct and indirect regulation, including economic or trade policies, and the reliability of our governance, internal controls and compliance processes to prevent regulatory penalties in our business or in our joint ventures; 15) our reliance on third-party solutions for data storage and service distribution, which expose us to risks relating to security, regulation and cybersecurity breaches; 16) inefficiencies, breaches, malfunctions or disruptions of information technology systems, or our customers’ security concerns; 17) our exposure to various legal frameworks regulating corruption, fraud, trade policies, and other risk areas, and the possibility of proceedings or investigations that result in fines, penalties or sanctions; 18) adverse developments with respect to customer financing or extended payment terms we provide to customers; 19) the potential complex tax issues, tax disputes and tax obligations we may face in various jurisdictions, including the risk of obligations to pay additional taxes; 20) our actual or anticipated performance, among other factors, which could reduce our ability to utilize deferred tax assets; 21) our ability to retain, motivate, develop and recruit appropriately skilled employees; 22) disruptions to our manufacturing, service creation, delivery, logistics and supply chain processes, and the risks related to our production sites; 23) the impact of litigation, arbitration, agreement-related disputes or product liability allegations associated with our business; 24) our ability to re-establish investment grade rating or maintain our credit ratings; 25) our ability to achieve targeted benefits from, or successfully implement planned transactions, as well as the liabilities related thereto; 26) our involvement in joint ventures and jointly-managed companies; 27) the carrying amount of our goodwill may not be recoverable; 28) uncertainty related to the amount of dividends and equity return (if any) we are able to distribute to shareholders for each financial period; 29) pension costs, employee fund-related costs, and healthcare costs; 30) our ability to successfully complete and capitalize on our order backlogs and continue converting our sales pipeline into net sales; 31) risks related to undersea infrastructure; and 32) the scope and duration of the COVID-19 impact on the global economy and financial markets as well as our customers, supply chain, product development, service delivery, other operations and our financial, tax, pension and other assets, and the shape of the economic recovery following the pandemic as well as the risk factors specified in our 2019 annual report on Form 20-F published on March 5, 2020 under "Operating and financial review and prospects-Risk factors" as supplemented by the form 6-K published on April 30, 2020 under the header “Risk Factors” and in our other filings or documents furnished with the U.S. Securities and Exchange Commission. Other unknown or unpredictable factors or underlying assumptions subsequently proven to be incorrect could cause actual results to differ materially from those in the forward-looking statements. We do not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.