Market cap

* For banks, enterprise value is substituted with market cap. Source: Bloomberg Finance L.P.

Performance of the brand

Nokia, a Finnish multinational, is the world‘s largest manufacturer of mobile phones. Nokia sells products in over 160 countries and employs 132,000 people worldwide, including R&D centres in 16 countries. Nokia is committed to connecting more than 1.3 billion people worldwide by combining advanced mobile technology with personalised services. Through Ovi, people also enjoy access to maps and navigation on mobiles, a rapidly expanding applications store, a growing catalogue of digital music, free email and more. Nokia is divided up into three businesses, consisting of Devices & Services, NAVTEQ and Nokia Siemens Networks. Nokia’s NAVTEQ is a leader in comprehensive digital mapping and navigation services, and Nokia Siemens Networks is one of the leading providers of telecommunications infrastructure hardware, software and professional services globally.

For the full year 2010, Nokia’s net sales and profitability benefited from improved economic and financial conditions following the significant deterioration in demand during the second half of 2008 and 2009. In 2010, Nokia saw volume and value growth in the global mobile device market driven by rapid growth in converged mobile devices. At the same time, the competitive environment in mobile devices intensified, adversely impacting its competitive position in the market. Our device volumes were also adversely affected in the second half of 2010 by shortages of certain components. However, in the second quarter of 2011 (Q2/2011), Nokia saw a decrease in operating profit of 59.3% to €391 million compared to €660 million in the second quarter of 2010 (Q2/2010). At the same time, net sales decreased from €10 billion in Q2/2010 to €9.3 billion in Q2/2011.This can be related to the 20% drop in mobile device sales from 111 million units in Q2/2010 to 88.5 million units in Q2/2011. Only the Nokia Siemens Networks division saw an increase of 20% in net sales from €3.1 billion to €3.6 billion

Because of Nokia’s financial performance, the company has seen a fall in brand value of 49.4% to US$9.7 billion in 2011. At the same time, enterprise value fell from US$48.8 billion to $US 38.4 billion and Nokia lost its previous AAA- brand rating, now represented with an AA rating.

Positive Aspects

Nokia undertook various acquisitions in 2010

In April 2010, Nokia acquired MetaCarta Inc. to obtain its geographic intelligence technology and expertise, divesting Metacarta’s enterprise business to Qbase Holdings LLC in July 2010. Moreover, in April 2010, Nokia acquired Novarra Inc., whose mobile browser and services platform will be used by Nokia to deliver enhanced Internet experiences on Nokia’s Series 40-based mobile phones. In September 2010, the company also acquired Motally Inc., whose mobile analytics service enables developers and publishers to optimize the development of their mobile applications through increased understanding of how users engage.

Nokia outlines new strategy, introduces new leadership and operational structure 

On February 11, 2011, Nokia outlined its new strategic direction, including changes in leadership and operational structure designed to accelerate the company’s speed of execution in the intensely competitive mobile product market. The main elements of the new strategy include plans for a broad strategic partnership with Microsoft to build a new global mobile ecosystem, with Windows Phones serving as Nokia’s primary smartphone platform, a renewed approach to capture volume and value growth to connect “the next billion” to the internet in developing growth markets; focused investments in next-generation disruptive technologies; and a new leadership team and operational structure designed to focus on speed, accountability and results.

Nokia and Microsoft have entered into a non-binding term sheet, however, the planned partnership with Microsoft remains subject to negotiations and execution of definitive agreements by the parties and there can be no assurances that definite agreements will be entered into. The future impact to Nokia Group’s financial statements resulting from the terms of any definitive agreements will be evaluated once those terms are agreed.

Due to its implemented new strategy, Nokia expects 2011 and 2012 to be transition years, as the company invests to build the planned winning ecosystem with Microsoft. After the transition, Nokia targets longer-term Devices & Services net sales to grow faster than the market and the Devices & Services operating margin to be 10% or more, excluding special items and purchase price accounting related items.

Negative Aspects

Shift of production facilities from Germany to Romania

In 2008, Nokia closed down its factory in Bochum, Germany and shifted production to Romania where labour costs are lower. The closure resulted in 2,300 job losses. As a result, not only consumers, but also various politicians stopped using the firm’s phones and joined the calls for a national boycott. The factory closure heavily affected the image and reputation of Nokia, especially within Germany. Veli Sundbäck, Head of Nokia Germany’s supervisory board, justified the decision by claiming that “the location is not competitive internationally”. According to Sundbäck, labour costs in Germany are ten times higher than in Romania. 

 

 

Last changed September 9, 2011

League tables

Nokia appears in the following brand league tables:

Rank 11 in the Top 500 Telecom Brands 2011.
Rank 94 in the Global 500 2011.
Rank 21 in the Global 500 2010.
Rank 4 in the Top 500 Telecom Brands 2010.
Rank 13 in the Global 500 2009.
Rank 9 in the Global 500 2008.
Rank 17 in the Global 250 2007.