nokia a (nok1vhe eur 1073) neutral

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					September 23, 2009

Nokia A (NOK1V.HE - EUR 10.73) Neutral
Change of Price Target
EPS upgrades but retaining Neutral view

Finland European Telecom Equipment
Stuart Jeffrey +44 20 7102 4709 stuart.jeffrey@nomura.com NI plc, London

Investment Conclusion
We retain our Neutral stance on Nokia with a new target price of EUR 11.2 that offers 5% potential upside. Handset market trends are improving, which should boost Nokia EPS on high operational leverage. However, despite a potential move to multi-touch in 2010 we still look for a fundamental improvement in Nokia's smartphone software to take until 2011, likely limiting potential margin upside through 2010.

FY Dec Currency EUR

2008A Actual

2009E Old New

2010E Old New

2011E Old New

Revenue (m) 50710.0 40005.1 40696.2 39868.5 41655.5 41294.4 43085.1 PTP (m) 5076.0 2047.8 2139.9 2546.5 2751.9 2803.3 3077.4 1.35 0.55 0.58 0.69 0.74 0.76 0.83 EPS 2.70 N/A 2.25 N/A 2.31 N/A 2.28 EV/CE 0.83 N/A 1.03 N/A 0.95 N/A 0.86 EV/Sales 5.96 N/A 13.73 N/A 10.09 N/A 8.41 EV/OR 7.9 19.5 18.5 15.6 14.5 14.1 12.9 *P/E *Calendarised Data

Summary
We raise EPS ests by 5% in '09 and 8% in '10 on higher handset market forecasts, triggered by better industry data-points and macro trends We do not recommend taking a big position into Q3 results as these are heavily driven by currency hedging into which investors have no visibility Stock on 14.4x '10 earnings, a 10% premium to the market, which seems fair given slightly higher growth outlook (28% vs 23%) Scenarios highlight high operating leverage, likely sustaining high stock volatility. New smartphone software likely key to upgrades though, and may not come through until 2011

Market Data
Market Cap (m) Units Outstanding (m) Float (%) Net Distribution Yield Convertible Shares per ADR 40183 3744.9 100 3.73 No 1

Financial Summary
Five Yr. EPS CAGR (%) Return on Equity FY08 (%) Current BVPS Net Debt (m current) N/A N/A 4.38 2368.00

Stock Overview
30 22/9/09 -2 x10 7.00 6.50 25 6.00 5.50 5.00 15 4.50 4.00 3.50 5 3.00 SOND J FMAM J J A S OND J FMAM J J A S NOKIA M:NOKP/WIEXUKL(R.H.SCALE) Source: DATASTREAM

Reuters Bloomberg ADR Performance Absolute % Rel. Market % Rel. Sector %

NOK1V.HE NOK1V FH NOK.N 1M 22 17 0 3M 0 -16 0 12M -27 -17 0

20

Stock Rating
New: Neutral Old: Neutral

Target Price
New: Old: EUR 11.20 EUR 10.20

10

Sector View: Neutral

52 Week Range 13.90 - 6.91

We are raising our Nokia forecasts this morning due to the following dynamics: • Higher handset market estimates to reflect recent data points and forecasts from our Asian handset team • Slightly higher ASPs to reflect better smartphone dynamics • Retained opex despite the higher revenues as assume that operating expenses are largely fixed in nature as management seeks to cut costs Figure 1: Forecast changes Forecast Revenue (EUR m) Changes New Old
FY 2009 FY 2010 FY 2011 40,696 41,655 43,085 40,005 39,869 41,294

D 1.7% 4.5% 4.3%

Gross margin EBIT adjusted (EUR m) New Old New Old 32.1% 33.1% 34.0% 32.1% 33.3% 33.9% 3,040 3,915 4,394 2,916 3,639 4,024

D 4.3% 7.6% 9.2%

EBIT margin (adj) EPS adjusted New Old New Old 7.5% 9.4% 10.2% 7.3% 9.1% 9.7% 0.58 0.74 0.83 0.55 0.69 0.76

D 4.5% 8.1% 9.8%

Source: Nokia reports. Nomura estimates

In this note we highlight the changes to our estimates and detail the operating leverage in Nokia’s P&L that is likely to sustain a high level of share price volatility.

ANY AUTHORS NAMED ON THIS REPORT ARE RESEARCH ANALYSTS UNLESS OTHERWISE INDICATED. PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 11 AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 12

Nomura International plc
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European Equity Research

September 23, 2009

Our fundamental view on the stock remains unchanged, namely: • Without a complete refresh of its smartphone software Nokia’s smartphone margin share is likely to remain modest • The roadmap of Nokia’s software platforms suggests that a fundamental refresh is unlikely before 2011 • Material earnings upside is thus likely dependent on margin improvements in the voice centric low end handset market • MediaTek’s high volumes (a targeted 300m in 2009) appear to be undermining some of Nokia’s scale advantage • Likely resulting in Nokia’s margins improving only slightly in the next 18 months and limiting scope for material earnings upside • On 14.4x 2010 earnings the stock is trading on a market premium of 10%, in-line with recent trading levels. Nokia’s earnings growth of 28% in 2010 compares to the market at 23% which again suggests that valuation is reasonable Our target price moves from EUR 10.2 to 11.2. Our methodology and relative multiples are unchanged (Devices and Services are still valued at a 10% premium to the market P/E), with the upside all driven by our higher earnings estimates. We continue to use a sum-ofthe-parts approach as detailed below:

Figure 2: Sum of the parts valuation
Nokia Sum of the parts valuation Revenue & earnings Devices & Services - revenue - EBITA - Net income Networks - revenue - EBITA - Net income Navteq - revenue - EBITA - Net income Nokia fair value - revenue - EBITA - Net income Source: Nomura 2009E 27,135 3,112 2,457 2010E 27,958 3,503 2,690 2011E 28,961 3,802 2,838 Multiples 2009E 2010E 1.40 12.25 15.5 1.36 10.88 14.2 2011E 1.32 10.03 13.4 Value EUR m Value per share

38,120

10.27

13,037 -6 -4

13,168 466 347

13,563 615 455

0.27 -314.9 -428.6

0.26 3.7 10.0

0.26 2.8 3.8

1,735

0.47

614 92 68

620 105 79

658 136 101

2.56 17.0 23.1

2.53 14.9 20.0

2.39 11.5 15.6

1,571

0.42

40,696 3,040 2,366

41,655 3,915 2,959

43,085 4,394 3,238

1.02 13.6 17.5

0.99 10.6 14.0

0.96 9.4 12.8

41,426

11.2

We see some upside to EUR 12.3 on a DCF basis. This is based on 1.5% revenue growth on EBITA margins that rise from 7.5% in 2009 to 12% long-term, using a WACC of 10.9% and priced at end 2009. Given the margin for error on near-term let along longer-term estimates, however, we do not believe that a DCF is the most appropriate valuation methodology at this time. HANDSET MARKET DYNAMICS We are raising our handset unit forecasts to reflect better recent trends and data-point from the supply chain. Our changes are: • A restatement of 1H09 handset numbers to tally with Gartner Group data – raising H1 estimates by 6% • Higher Q3 qoq growth of 2% vs 0.7% previously (with sell-in volume seen rising 5.4%) • Higher Q4 qoq growth of 10%, similar to before • 2009 units of 1,168m down 4.5% yoy from down 10% previously • 2010 units of 1,230m up 5.3% Please note that the change to Gartner Group data for historic data accounts for most of the 2009 growth upgrade. Q3 & Q4 trends In the past few weeks data-points on the handset market have improved, with various sources all indicating a solid improvement in handset trends. Examples include: • Brightpoint are looking for Q3 market units to be flat to up 5% and for Q4 to be up by 15% to 20% • Best Buy said demand for mobile phones picked up in the back-to-school period and are generally seeing better trends • Taiwanese PCB makers are reported to have seen order intake consistent with normal seasonal patterns, with PCB revenues expected to grow 10% qoq in Q4 Normal seasonality is a vague terms as the distribution has been broad over the years. Figure 3 below shows sequential growth rates from 2001 to 2Q09 as well as our forecasts for the rest of 2009 and 2010.

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Figure 3: Sequential growth trends for the handset market
20%
19% 14% 19% 16% 17% 14% 10% 5% 3% 1% 8% 5% 13% 9% 3% 13% 10% 7% 5% 6% 4% 1%2% 2% 3%4% 13%

Quarter on quarter growth rates

15% 10% 5% 0% -5% -10% -15% -20% -25%
-21%

1% 0%

2%

-3% -10% -14% -10%

-4% -9% -11% -14% -11%

Q1 2002 2003 2004

Q2

Q3 2005

Q4 2006 2007 2008 2009e 2010e

2001

Source: Gartner Group. Nomura estimates.

While average sequential growth rates are -10.2% for Q1, +30% for Q2, +6.8% for Q3 and +14.0% for Q4 there is a high degree of variance from year to year. This makes it hard to define “typical seasonality” in a narrow range. Moreover, emerging markets have grown in importance and often have a Q1 selling peak rather than the Christmas driven Q4 peak seen in most western markets. This trend is continuing and should thus moderate seasonality going forward. We are forecasting modest seasonality in 3Q09 and 4Q09, improving in 2010 due to: • A modest macro recovery driving a solid but not spectacular increase in consumer spending • Continued relative strength in emerging vs mature markets • A lack of replacement incentives as operators, which are mostly late cycle, retain control of subsidy and promotional activities and most new low end and feature phones offer few reasons to upgrade / replace older phones Our aggregate forecasts for sell-in volumes for the top 5 handset vendors give a 5% qoq growth rate for Q3, driven by Samsung with 17% growth and LG with 8% as shown in Figure 4. This compares to our forecast for a 2% overall increase in sell-through volumes and is based on a relatively small change in inventories. We are forecasting a 4% increase in Nokia units, a slight decline in market share. Motorola and Sony Ericsson are likely to remain the main market share losers in 2H09. Figure 4: Sell-in market shares Units sold (as reported by vendors) Market share QoQ growth 1Q09 2Q09 3Q09 4Q09 1Q09 2Q09 3Q09 4Q09 1Q09 2Q09 3Q09 Nokia 93.2 103.2 107.1 119.7 38.2% 37.9% 37.3% 37.1% -17.6% 10.7% 3.8% Samsung 45.9 52.3 61.0 61.0 18.8% 19.2% 21.3% 18.9% -13.1% 13.9% 16.6% LG 22.6 29.8 32.1 32.3 9.3% 11.0% 11.2% 10.0% -12.1% 31.9% 7.6% Motorola 14.7 14.8 14.0 17.0 6.0% 5.4% 4.9% 5.3% -23.4% 0.7% -5.4% Sony Ericsson 14.5 13.8 13.5 15.1 5.9% 5.1% 4.7% 4.7% -40.1% -4.8% -2.2% Others 53.2 58.2 59.2 77.8 21.8% 21.4% 20.6% 24.1% -23.7% 9.4% 1.6% Total 244.1 272.1 286.8 323.0 100% 100% 100% 100% -19.9% 11.5% 5.4% Source: Gartner Group, Nomura. Assumes 25m of inventory draw down in Q1, 14m in Q2, none in Q3 and 2m increase in Q4

4Q09 11.8% 0.0% 0.8% 21.4% 12.2% 31.5% 12.6%

There does appear to be some upside potential given comments by Brightpoint (Q4 up 15% to 20% qoq) and the Taiwanese PCB vendors (10% qoq revenue growth in Q4, with volumes likely higher still). Neither data point is complete convincing as Brightpoint distribute just 7% of global handset sales and the PCB statistics are merely reported from unnamed sources. Certainly from a sellthrough basis, we note that the market last grew by more than 15% qoq in Q4 during the 2003/04 market recovery, when year on year growth was rapidly ramping up to 30%. There was also a much stronger Christmas market exposure in 2003 / 2004 as and mature (Christmas centric) markets accounted for 55% of volumes vs about 34% now. 2010 growth seen at +5% in sell-through, +9% in sell-in volumes We see little chance of the market growing 20-30% yoy in 2011 or 2012. Any sharp rebound of 15%+ sequential growth in Q4 might point to such an outcome, and boost share prices, but is more likely to prove a one-off in our view. The issues that are likely to restrict growth in 2010 include: • Slowing subscriber growth – we forecast net new adds falling from 711m in 2009 to 504m in 2010 • The percentage of new subscribers buying a new phone is falling – driven by second hand sales and multiple SIM ownership • A modest macro recovery is likely to limit spending more than say in the 2003 / 2004 recovery
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• • • • •

There are few reasons to replace feature phones, other than due to loss or breakage, due to relatively static feature evolution Smartphones offer the most compelling reason to upgrade but remain relatively expensive and price elasticity has been high Smartphones don’t appeal to all and consumers have historically taken time to adopt new usage patterns More contract customers are on 18 to 24 month contracts, meaning fewer are able to upgrade in any particular year Replacement periods are likely to be longer in emerging than developed markets due to financial constraints

These factors combine to leave us forecasting a 25% increase in replacement sales in 2010 and 21% in 2011 compared to 26% and 69% in 2003 and 2004 respectively. Importantly, in 2003 and 2004 the replacement was driven not just by an ageing installed base of phone (most phones were from 1998, 1999 and 2000) but also by the rapid move down the price categories of colour screens, which instantly rendered black and white screen phones as ‘poor man’s phones’. We do not believe that smartphones have either the broad appeal of colour screen phones or have the ability to move down the price curve as rapidly. Finally, it’s also worth highlighting that rd growth was strongest in the 3 year after the cycle bottomed last time (i.e. 2004) which if repeated would imply growth will prove strongest in 2011 rather than 2010. Inventory moves can of course boost the market, but estimates from organisations such as Gartner Group suggest that the inventory adjustment in H1 was just 40m units. That’s equivalent to just 3.4% of full year sales. This is likely to limit the outperformance of sell-in volumes especially given the more mature profile of emerging markets which helped drive volumes so heavily in 2003 and 2004. Finally, Nokia tends to manage its inventory better than everyone else in the industry, which will likely also limit Nokia’s bounce back. Market Share We remain cautious on Nokia’s market share outlook. If we segment the market into three categories based by price we see: • Low end voice: Nokia’s margins have been under pressure for 13 months, suggesting that competitive pressures as well as the market downturn have played a role. With MediaTek looking to supply 300m handsets in 2009, Nokia’s scale advantage in manufacturing appears to be coming under pressure. Brand and distribution advantages remain, and should ensure a strong market share going forward. On balance, however, we see more downside than upside risk in this segment given Nokia’s very high market share (as high as 70% in some markets) • Mid range: this market has hollowed out, benefitting Nokia’s market share as competition was historically highest in this space. As the macro environment settles so this segment may recover, weakening Nokia’s overall market share. • High end: this market is dominated by the smartphone market. While we expect Nokia to sustain its position in low end smartphones we do not see Nokia gaining share in the high end segment until the company fundamentally upgrades Symbian and launches the next version of Maemo – we believe that neither is likely until 2011. In the smartphone market we may see some evolution in 2010 as Nokia may integrate Qt 4.6 for Symbian into its devices. Qt 4.6 potentially enables the use of multi-touch on Symbian phones for the first time. However, the Symbian roadmap shows that Qt is not fully integrated (i.e. natively) into Symbian until Symbian^4 in 2011. This means that the implementation in 2010 will almost certainly be non-native (i.e. interpretative). The downside to this approach is that an interpretative implementation tends to require more processing power. This can force vendors to use more powerful processors than in a native implementation, driving up costs and using up battery capacity. Often non-native implementations simply don’t work well enough to give a convincing user experience. Java is a good example where despite many years of work the user experience is still sub-optimal. The use of a capacitive screen the X6 suggests that Nokia is making a gradual move towards multi-touch, but whether the experience is ultimately good enough to drive positive rather than disappointed industry reviews remains uncertain. We are assuming that Nokia retains its low end market share, successfully pushes smartphones down the price curve but loses high end market share through 2010 and 2011. The roadmap for Symbian and the recently announced Maemo based N900 all suggest that Nokia will be in a position to re-establish itself in the high end smartphone space in time. Our concern is simply that this may not be until 2011. Not only might this timeline hold back sentiment in Nokia it also gives key rivals, such as Android and Apple, time to establish a defensible footprint.

3Q09 ASPs may increase quarter on quarter for only the 13th time since 1999 (in 40 quarters) due to product mix changes. The biggest impact comes from the launch and likely sale of about 2 million N97s, with further support from a number of new Eseries devices. The main dynamics include: • N97 will likely sell about 1.5 to 2.0 million units in Q3 (at Nokia World management said 2m cumulative to date at end August, which we understand was a bit of a rounding up / included September projections and of course includes 0.5m sold in Q2). If all else was unchanged, then this would likely boost aggregate ASPs by EUR 4 • If all other devices tracked the 2003 to 2007 average sequential decline of 5.7% then blended ASP would be EUR 63.3 • New Eseries phones are likely to have acted as a bit of a positive quarter on quarter • 5800 and N97 sales may have cannibalised older Nseries sales, eroding some of the ASP benefit • Historically there is no material change in the contribution of sales from emerging markets from Q2 to Q3 We are modelling ASPs up 0.9% quarter on quarter as we factor in the above dynamics, to derive an ASP of EUR 63. This does not factor in all the mathematical upside from the N97 on the basis that there are likely to be some cannibalisation effects on the rest of the Nseries range. Figure 5 below shows sequential and annual ASP trends since 1999, showing how rarely ASPs have risen qoq or yoy.

Average Selling Prices

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Figure 5: Sequential and annual ASP changes
25% 20% 15% 10% 5% ASP 0% -5% -10% -15% -20% -25%
1Q 3Q 3Q 1Q 1Q 1Q 3Q 1Q 3Q 3Q 1Q 3Q 3Q 1Q 1Q 1Q 3Q 3Q 3Q 1Q 1Q 3Q 09 E 99 00 99 00 01 01 02 03 02 03 04 05 04 05 06 06 07 08 07 08 09

Sequential change in ASP "Annual change in ASP"

Source: Nokia. Nomura estimates

For Q4 we do not expect to see any material change in product mix. 5800 volumes ramped quickly and then stabilised and with the N97 having a full quarter of sales in Q3 we do not envisage this product having a positive mix impact on Q4. The N97 mini may be able to expand the addressable market slightly, but being so closely priced to the N97 and with little obvious differentiation we believe that incremental benefits will likely prove modest as buyers pick between the two phones. The X6 and X3 may provide some positive benefit but may launch too late in the quarter to have a major impact. Product launches for the US may see too little volume to material impact Nokia’s global ASPs. Typically Q4 ASPs are surprisingly robust, proving stable on average from 2003 to 2007. Much of this has been helped by Nokia often launching phones just in time for the holiday selling season. So far this year, we have seen fewer such announcements, implying that a bit of a decline is likely. We are forecasting a 3% sequential decline. For 2010 we continue to project a 7% annual decline in ASPs as we see Nokia sustaining its strength in low end phones, aggressively converting feature phone sales into smartphone sales (but likely through lower prices) and continuing with a weak position in the higher end smartphone space as the company awaits Symbian^4 and Maemo 6 based device launches in 2011. Margin dynamics – H2 all about currency hedging, 2010 about product refresh The main incremental negative on Nokia’s gross margins in Q3 comes from currency effects. Specifically, the impact the rising Yen is having on the cost of goods sold now that many of Nokia’s hedges have unwound. This impact appears to be unquantifiable for external observers as no details of Nokia’s hedging positions are available. With most of the lower H2 margin guidance driven by this factor, we suspect that consensus in general is simply sticking as close as is reasonably possible to management guidance. This should ensure a reasonably tight forecasting range, and thus scope for surprises, but it also means that we see no reliable way to judge the upside / downside risk to Q3 estimates. In our view, this makes Q3 in particular a very difficult / dangerous quarter to take a big position into. Nokia stopped hedging its Yen position as the Yen appreciated dramatically against the Euro. While some of the was justified (the rate has recovered from a low of 116 to a current 135) it does mean that Nokia has less and less protection from the Yen as we go into H2 as many hedges expired around mid year. The currency rate has remained reasonably steady since the 2Q09 results (see Figure 6) and so there is no reason to materially change gross margin assumptions going into the Q3 results. Year on year the strength in the Yen is abating, but the impact on Nokia is seemingly from the absolute level rather than the year on year change. Figure 6: Currency movements

180 170 160 150 140 130 120 110 100
8 -0 an J
Source: Datastream Nomura Equity Research

50% 40% 30% EUR:JPY YoY change in currency 20% 10% 0% -10%
M 8 -0 ar M 8 -0 ay 8 l-0 Ju 8 -0 ep S 8 -0 ov N 9 -0 an J M 9 -0 ar M 9 -0 ay 9 l-0 Ju 9 -0 ep S

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Operating expenses Nokia has shown itself capable of managing operating expenses in the past, both in the short and long-term. Almost all the margin gains posted from the margin trough of early 2004 through to 2006 were driven by opex savings as management right sized opex to match gross margins. These gains frequently surprised in quarterly results, boosting the stock. We expect opex to increase sequentially in Q3. The company pulled back sharply on discretionary spending in Q2, based on plans set at the end of Q1. With the macro environment now looking healthier we expect some of the more extreme savings to reverse. Looking forward, we expect opex to be relatively fixed in nature. Management is continuing to target headcount reductions in some areas that should offset continued investments in core areas such as smartphone software, services and solutions. Unlike in prior downturns, Nokia’s key competitors are all doing well (i.e. Apple, Google & RIM). In our view, this will likely limit Nokia’s ability to quick right size opex relative to revenues in a bid to recapture high teens margins. Consequently, we do not expect Nokia to repeat the opex driven margin turnaround of 2005/06 in the next couple of years. Scenario Analysis Our forecast changes today highlight the high operating leverage inherent in Nokia’s business model. Relatively small changes in unit sales and ASPs have triggered an 8% upgrade to our 2010 estimates. To explore the earnings risk in greater depth, we highlight below the impact on earnings of realistically positive and negative scenarios. Figure 7: Scenarios Scenario overview
3Q09 (e) Sequential market growth Market units Nokia market share Nokia units Nokia ASP Devices & Services revenue Gross margin change qoq Opex growth (qoq) EBITA margin EPS 4Q09 (e) Sequential market growth Market units Nokia market share Nokia units Nokia ASP Devices & Services revenue Gross margin change qoq Opex growth (qoq) EBITA margin EPS 2010 (e) Annual market growth Market units Nokia market share Nokia units Nokia ASP Devices & Services revenue Gross margin change yoy Opex growth (yoy) EBITA margin EPS
Source: Nokia reports. Nomura estimates

High

Low

Nomura

2003 - 2007 average (Actual) 9.7% na 34.1% na na na -1.6% 17.5%

4.9% 300 37.5% 113 65 7,468 -1.0% 6.0% 12.6% 0.18

0.0% 286 36.5% 104 61 6,508 -2.5% 0.0% 9.4% 0.11

2.0% 292 36.7% 107 63 6,895 -1.7% 2.7% 10.9% 0.14

15.0% 345 38.5% 133 63 8,568 1.0% 6.5% 15.1% 0.27

10.1% 315 36.5% 115 59 6,944 1.0% 4.0% 10.4% 0.16

12.2% 321 37.3% 120 61 7,481 0.8% 6.0% 12.2% 0.19

15.4% na 36.2% na na na -0.7% 3.1% 18.8%

10.0% 1,320 38.5% 508 61 31,840 0.8% 5.0% 14.7% 0.98

3.0% 1,191 36.0% 429 55 24,262 0.1% -1.0% 9.2% 0.49

5.3% 1,230 37.5% 461 59 27,958 0.5% 1.0% 12.5% 0.74

21.8% na 34.1% na na na -1.5% 0.6% 18.1%

The spread of potential outcomes for 2H09 and 2010 is extraordinarily wide, highlighting the scope for potential volatility in the stock. For Q3, industry commentary suggests sequential unit growth for the handset market of 0% to 5%, which frames our high and low case scenarios. If we then use a spread of just 1% in market share and EUR 4 in ASPs we can drive a EUR 1bn spread in revenues. Filtering down, this leads to an 11c to 18c range in EPS.

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For Q4, a 10% to 15% sequential growth rate in the handset market appears to frame the high and low end of expectations. Using the Q3 scenarios as a base, this again supports a wide range in EPS of 16c to 27c. For 2010 our scenarios are based on a 3% vs 10% market growth rate with a 2.5% spread in market share and EUR 6 in ASPs. The impact of this is to drive an EPS range from 49c to 98c – a full doubling in EPS. All we are trying to highlight here is: • Small changes in top line inputs can drive surprisingly big changes in EPS • The range of realistic scenarios for the next 18 months are wide, given the fundamental changes coming through in the industry These dynamics all mean that Nokia could prove to be a volatile stock over the coming 18 months as new announcements by Nokia and rivals drive potentially wide swings in investor expectations. Increased disclosure from 3Q09 It’s worth a quick reminder that Nokia plans to change its disclosure with the Q3 results. Changes should all lead to increased disclosure, with additions and changes including: • Number of active users – of solutions • Solutions net sales – consists of smartphone net sales and services sold on smartphones) • Solutions ASP • Products net sales – consists of S30 and S40 device net sales and services sold on these platforms • Products ASP This change should give investors a better sense for Nokia’s performance in smartphones and services / solutions. There may be a temptation by investors to use this disclosure to drive rising ASPs – i.e. as people forecast rising smartphone volumes, with the mix shift boosting aggregate ASPs. However, it is worth highlighting that the market has proven to be very price elastic in the past and we see no reason for this to change. This would mean that for smartphones to rise sharply as a percentage of sales their ASPs would need to fall quickly too. It may thus continue to be best to forecast aggregate ASPs on a long term view, even if the separate disclosure might prove helpful in forecasting short-term trends. At NSN Nokia also plans to increase disclosure by adding: • Services net sales • NSN contribution to Nokia operating cash flow and cash position

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FORECASTS
Financial year ended December 31 Revenue Gross Profit Gross Margin R&D Sales and Marketing Administration SG&A Other income & expenses Operating Profit (reported) Operating margin Associates Net financial income Profit before Tax Tax Minorities Net profit attributable to shareholders EPS - reported DPS Pro forma adjustments 1Q08 12,660 4,527 35.8% -1,375 -1,035 -308 -1,343 -278 1,531 12.1% 8 68 1,607 -407 22 1,222 0.32 2Q08 13,151 4,424 33.6% -1,396 -990 -338 -1,328 -226 1,474 11.2% 0 3 1,477 -394 20 1,103 0.29 3Q08 12,237 4,359 35.6% -1,466 -1,068 -293 -1,361 -63 1,469 12.0% -2 -57 1,410 -355 32 1,087 0.29 4Q08 12,662 4,063 32.1% -1,731 -1,287 -345 -1,632 -208 492 3.9% -2 -16 476 75 25 576 0.15 2008 50,710 17,373 34.3% -5,968 -4,380 -1,284 -5,664 -775 4,966 9.8% 6 -2 4,970 -1,081 99 3,988 1.05 0.40 2008 -402 35.1% -707 -1,043 -934 7,033 13.9% 7,037 -1,674 -287 5,076 1.35 1Q09 9,274 2,903 31.3% -1,500 -962 -280 -1,242 -106 55 0.6% 10 -77 -12 16 118 122 0.03 2Q09 9,912 3,227 32.6% -1,458 -1,003 -304 -1,307 -35 427 4.3% 14 -61 380 -93 93 380 0.10 3Q09E 10,085 3,195 31.7% -1,532 -1,124 -258 -1,382 -16 264 2.6% 14 -52 226 -57 85 255 0.07 4Q09E 11,425 3,719 32.6% -1,549 -1,276 -256 -1,532 -16 622 5.4% 14 -47 589 -147 26 468 0.13 2009E 40,696 13,044 32.1% -6,040 -4,366 -1,104 -5,469 -248 1,287 3.2% 52 -237 1,102 -281 133 955 0.32 0.18 2009E -98 32.3% -954 -617 0 3,040 7.5% 2,855 -758 43 2,140 0.58 2010E 41,655 13,808 33.1% -5,681 -4,176 -959 -5,135 -31 2,961 7.1% 52 -95 2,918 -730 42 2,230 0.60 0.22 2010E 0 33.1% -954 0 0 3,915 9.4% 3,872 -987 -133 2,752 0.74 2011E 43,085 14,632 34.0% -5,871 -4,306 -985 -5,291 -31 3,440 8.0% 52 -35 3,457 -899 -13 2,545 0.69 0.25 2011E 0 34.0% -954 0 0 4,394 10.2% 4,411 -1,147 -187 3,077 0.83

1Q08

2Q08 -132 34.6% -116 -177 0 1,767 13.4% 2,057 -549 -98 1,407 0.37

3Q08 -11 35.7% -226 -59 0 1,756 14.3% 1,697 -444 -34 1,219 0.33

4Q08 -184 33.5% -236 -343 -219 1,239 9.8% 1,223 -142 -123 958 0.26

1Q09 -61 32.0% -241 -182 -32 514 5.5% 447 -117 27 357 0.10

2Q09 -37 32.9% -241 -152 47 775 7.8% 728 -204 28 552 0.15

3Q09E 0 31.7% -236 -196 0 697 6.9% 659 -171 23 510 0.14

4Q09E 0 32.6% -236 -196 0 1,054 9.2% 1,021 -266 -35 720 0.19

Restructuring charges in Cost of Goods Sold -75 Gross margin before restructuring charges 36.4% Amortisation Restructuring Other non recurring Operating Profit (adjusted) Adjusted operating margin Profit before tax (adjusted) Tax Minorities Net profit (adjusted) EPS - adjusted Source: Nokia reports. Nomura estimates
ANNUAL GROWTH RATES Group Revenue Global handset units Nokia handset units ASPs Device revenue Service revenue Device & Services revenue Networks revenue Navteq revenue Gross Profit R&D Sales & marketing Admin SG&A Total opex EBIT - reported Net income - reported EPS - reported EBIT - adjusted Net income - adjusted EPS - adjusted Source: Nokia reports. Nomura estimates

-117 -181 0 1,829 14.4% 2,060 -515 -36 1,492 0.39

1Q08 2Q08 3Q08 4Q08 2008 1Q09 2Q09 28.4% 4.5% -5.1% -19.4% -0.7% -26.7% -24.6% 13.6% 11.9% 6.0% -4.6% 6.0% -8.6% -6.2% 26.8% 21.0% 5.5% -15.3% 7.2% -19.3% -15.4% -10.9% -18.7% -12.3% -14.8% -13.8% -18.7% -15.1% 13.0% -1.6% -7.5% -27.8% -7.6% -34.4% -28.1% 110.0% 138.0% 91.7% 97.5% 107.0% 78.6% 17.6% 13.5% -0.8% -6.9% -26.9% -6.9% -33.4% -27.5% -11.7% 18.3% -4.7% -5.3% -1.5% -12.1% -21.3% 22.5% 8.3% -0.5% 8.3% 8.9% -11.8% -9.4% 38.8% 49.0% 31.2% 76.0% 39.3% 50.6% 13.3% -18.5% -21.6% -15.3% -20.0% 90.7% -1.3% -28.6% 6.0% 7.1% 3.5% -0.7% 23.1% -2.3% 7.2% -1.0% 13.2% 11.5%

3Q09E 4Q09E 2009E -17.6% -9.8% -19.7% -5.4% 2.0% -4.5% -9.1% 5.9% -9.6% -12.6% -13.6% -15.2% -20.5% -8.5% -23.4% 27.8% 11.6% 28.9% -19.9% -8.1% -22.7% -12.3% -12.9% -14.8% -8.0% -6.5% -8.7%

2010E 2.4% 5.3% 9.0% -5.8% 2.6% 20.0% 3.0% 1.0% 1.0%

2011E 3.4% 8.8% 8.8% -5.1% 3.3% 15.0% 3.6% 3.0% 6.0% 6.0% 3.3% 3.1% 2.6% 3.0% 3.2% 16.2% 14.1% 14.1% 12.2% 11.8% 11.8%

0.6% -35.9% -27.1% -26.7% -8.5% -24.9% 5.9% 5.9% 9.1% 4.4% 4.5% -10.5% 1.2% -5.9% 0.0% -7.1% 1.3% 5.3% -0.8% -0.3% -4.4% 10.2% -9.1% -10.1% -12.0% -25.9% -14.0% -13.1% 2.2% -7.5% -1.6% 1.6% -6.1% -3.4% -6.1% 33.5% -4.9% -5.1% 1.4% -13.3% -5.2% -7.7%

20.4% -37.5% -21.1% -80.3% -37.8% -96.4% -71.0% -82.0% 26.4% -74.1% 130.0% 24.8% -61.0% -30.5% -68.6% -44.6% -90.0% -65.5% -76.5% -18.8% -76.1% 133.7% 28.0% -59.7% -27.5% -68.1% -42.9% -90.6% -65.5% -76.3% -15.9% -69.1% 85.0% 36.4% 44.8% 50.7% 17.2% -15.5% -54.5% -7.5% -71.9% -56.1% -60.3% -14.9% -56.8% 31.8% -23.7% -48.5% -13.2% -76.1% -60.8% -58.1% -24.8% -57.8% 37.4% -20.0% -46.2% -9.6% -75.4% -60.0% -57.8% -24.5% -57.1% 28.8% 28.6% 28.6%

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September 23, 2009
SEQUENTIAL GROWTH RATES Group Revenue Global handset units Nokia handset units ASPs Device revenue Service revenue Device & Services revenue Networks revenue Navteq revenue Source: Nokia reports. Nomura estimates 1Q08 -19.5% -10.8% -13.5% -4.1% -17.0% 5.0% -16.9% -25.8% -20.9% 2Q08 3Q08 3.9% -7.0% 3.6% 1.2% 5.6% -3.4% -7.5% -2.0% -2.3% -5.4% 41.7% -3.4% -1.9% -5.3% 19.6% -13.9% 8.5% -3.9% 4Q08 2008 1Q09 3.5% -0.7% -26.8% 2.0% 6.0% -14.5% -4.0% 7.2% -17.6% -2.1% -13.8% -8.4% -6.0% -7.6% -24.6% 37.4% 107.0% -5.1% -5.4% -6.9% -24.2% 23.8% -1.5% -31.1% 31.4% 8.9% -35.6% 2Q09 6.9% 6.3% 10.7% -3.3% 7.0% -6.7% 6.7% 7.0% 11.4% 3Q09E 1.7% 2.0% 3.8% 0.9% 4.7% 5.0% 4.7% -4.0% -2.4% 4Q09E 13.3% 10.0% 11.8% -3.2% 8.2% 20.0% 8.5% 23.0% 33.6% 2009E -19.7% -4.5% -9.6% -15.2% -23.4% 28.9% -22.7% -14.8% -8.7% 2010E 2.4% 5.3% 9.0% -5.8% 2.6% 20.0% 3.0% 1.0% 1.0% 2011E 3.4% 8.8% 8.8% -5.1% 3.3% 15.0% 3.6% 3.0% 6.0%

Divisional P&Ls DEVICES & SERVICES Global handset market (m) Nokia market share Nokia units (m) Nokia ASP (EUR) Devices Revenue Services Revenue Devices & Services Revenue Gross margin R&D Sales & marketing Admin SG&A Other income & expenses Reported EBIT EBIT margin Amortisation Restructuring Adjusted EBIT EBIT margin (adjusted) NETWORKS Revenue Gross Profit Gross margin Gross margin adjusted for restructuring costs R&D Sales & marketing Admin SG&A Other income & expenses Reported EBIT EBIT margin Amortisation Restructuring Adjusted EBIT EBIT margin (adjusted) NAVTEQ Revenue Gross profit Gross margin R&D Sales & marketing Admin Other income & expenses Reported EBIT EBIT margin Amortisation Restructuring Adjusted EBIT EBIT margin (adjusted) Source: Nokia reports. Nomura estimates

1Q08

2Q08

3Q08

4Q08

2008

1Q09

2Q09

3Q09E

4Q09E

2009E

2010E

2011E

294 39.2% 116 79.5 9,179 84 9,263 38.5% -766 -696 -110 -806 -114 1,883 20.3% 0 -81 1,964 21.2%

305 40.0% 122 73.5 8,971 119 9,090 36.1% -741 -630 -115 -745 -227 1,565 17.2% 0 -259 1,824 20.1%

309 38.2% 118 72.1 8,490 115 8,605 36.5% -719 -684 -110 -794 -26 1,602 18.6% 0 0 1,602 18.6%

315 35.9% 113 70.6 7,983 158 8,141 33.8% -901 -837 -94 -931 -153 766 9.4% 0 -217 983 12.1%

1,223 38.3% 468 73.9 34,623 476 35,099 36.3% -3,127 -2,847 -429 -3,276 -520 5,816 16.6% 0 -557 6,373 18.2%

269 34.6% 93 64.6 6,023 150 6,173 33.8% -755 -575 -96 -671 -112 547 8.9% -2 -93 642 10.4%

286 36.1% 103 62.5 6,446 140 6,586 34.0% -733 -599 -106 -705 -40 763 11.6% -2 -37 802 12.2%

292 36.7% 107 63.0 6,748 147 6,895 32.3% -797 -728 -97 -825 0 605 8.8% -2 -146 754 10.9%

321 37.3% 120 61.0 7,304 176 7,481 33.1% -799 -821 -90 -911 0 766 10.2% -2 -146 915 12.2%

1,168 36.2% 423 62.7 26,521 613 27,135 33.3% -3,084 -2,723 -388 -3,112 -152 2,681 9.9% -8 -423 3,112 11.5%

1,230 37.5% 461 59.0 27,222 736 27,958 33.8% -2,908 -2,684 -363 -3,047 0 3,495 12.5% -8 0 3,503 12.5%

1,339 37.5% 502 56.0 28,115 846 28,961 34.5% -3,041 -2,780 -376 -3,157 0 3,794 13.1% -8 0 3,802 13.1%

3,401 958 28.2% 30.4% -607 -338 -154 -492 67 -74 -2.2% -120 -35 81 2.4%

4,067 1,146 28.2% 31.4% -653 -359 -188 -547 7 -47 -1.2% -120 -201 274 6.7%

3,503 1,080 30.8% 31.1% -586 -334 -141 -475 -20 -1 0.0% -118 -59 176 5.0%

4,338 1,132 26.1% 30.3% -654 -390 -206 -596 -61 -179 -4.1% -116 -286 223 5.1%

15,309 4,316 28.2% 30.8%

2,990 703 23.5% 25.6%

3,199 860 26.9% 28.0% -566 -349 -149 -498 16 -188 -5.9% -121 -69 2 0.1%

3,071 845 27.5% 27.5% -576 -342 -114 -456 0 -187 -6.1% -116 -50 -21 -0.7%

3,777 1,077 28.5% 28.5% -589 -398 -120 -518 0 -30 -0.8% -116 -50 136 3.6%

13,037 3,484 26.7% 27.5% -2,308 -1,421 -538 -1,959 -65 -767 -5.9% -469 -292 -6 0.0%

13,168 3,819 29.0% 29.0% -2,116 -1,285 -421 -1,706 0 -3 0.0% -469 0 466 3.5%

13,563 4,069 30.0% 30.0% -2,174 -1,315 -434 -1,749 0 146 1.1% -469 0 615 4.5%

-2,500 -577 -1,421 -332 -689 -155 -2,110 -487 -7 -81 -301 -361 -2.0% -12.1% -474 -581 754 4.9% -116 -123 -122 -4.1%

156 138 88.5%

205 180 87.0%

361 318 88.1%

132 115 87.1%

147 126 85.7%

144 123 86.0%

192 167 87.0%

614 531 86.5%

620 540 87.0%

658 572 87.0%

-158 -174 -332 -168 -158 -158 -161 -645 -655 -653 -50 -59 -109 -55 -55 -54 -57 -221 -207 -211 -13 -17 -30 -12 -15 -13 -12 -52 -50 -49 3 -3 0 0 2 -1 -1 0 0 0 -80 -73 -153 -120 -100 -103 -64 -388 -372 -341 -51.3% -35.6% -42.4% -90.9% -68.0% -71.9% -33.6% -63.1% -59.9% -51.8% -120 -5 28 17.9% -228 -5 52 25.4% -123 -2 80 22.2% -118 -2 5 3.8% -118 0 19 12.9% -118 0 15 10.3% -477 -3 54 28.0% 0 0 92 15.0% 0 0 105 17.0% 0 0 136 20.7%

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September 23, 2009

Balance Sheet
Financial year ended December 31 Intangible Assets Tangible Assets Investments Other Total Fixed Assets Inventories Receivables Pre-paid expenses & accrued income Cash & short term investments Other current assets Total Current Assets Total Assets Creditors Short-term debt Other financial liabilities Accrued expenses Provisions Total current liabilities Interest-bearing long-term liabilities Long term liabilities Capital & reserves Minorities Total Equity Total Liabilities 1Q08 4,146 1,813 676 1,716 8,351 2,793 10,440 3,230 10,366 504 27,333 35,684 5,589 1,107 0 6,919 3,778 17,393 173 1,096 14,453 2,569 17,022 35,684 2Q08 4,074 1,862 735 1,711 8,382 2,763 11,084 3,277 7,981 293 25,398 33,780 5,914 1,189 0 6,791 4,134 18,028 169 1,134 11,945 2,504 14,449 33,780 3Q08 10,022 2,047 827 1,964 14,860 3,246 10,772 3,741 7,232 425 25,416 40,276 6,369 4,112 526 7,686 3,508 22,201 174 1,956 13,590 2,355 15,945 40,276 4Q08 10,414 2,090 608 2,000 15,112 2,533 9,444 4,538 6,820 1,135 24,470 39,582 5,225 3,591 924 7,023 3,592 20,355 861 1,856 14,208 2,302 16,510 39,582 2008 10,414 2,090 608 2,000 15,112 2,533 9,444 4,538 6,820 1,135 24,470 39,582 5,225 3,591 924 7,023 3,592 20,355 861 1,856 14,208 2,302 16,510 39,582 1Q09 10,575 2,080 632 2,168 15,455 2,292 8,931 4,561 8,114 614 24,512 39,967 5,223 2,710 373 6,806 3,509 18,621 3,076 1,740 14,375 2,155 16,530 39,967 2Q09 9,842 2,011 519 2,174 14,606 1,973 8,725 4,571 6,994 406 22,669 37,275 5,276 1,446 152 6,580 3,297 16,751 4,079 1,577 12,783 2,085 14,868 37,275 3Q09E 9,595 1,946 519 2,174 14,234 2,217 9,088 4,571 6,979 406 23,260 37,494 5,300 1,446 152 6,580 3,297 16,775 4,079 1,577 13,038 2,085 15,123 37,554
60

4Q09E 9,348 1,908 519 2,174 13,949 2,260 9,416 4,571 7,818 406 24,471 38,420 5,758 1,446 152 7,248 3,297 17,901 4,079 1,577 12,838 2,085 14,923 38,480
60

2009E 9,348 1,908 519 2,174 13,949 2,260 9,416 4,571 7,818 406 24,471 38,420 5,758 1,446 152 7,248 3,297 17,901 4,079 1,577 12,838 2,085 14,923 38,480
60

2010E 8,379 1,796 519 2,174 12,868 2,225 9,586 4,571 10,061 406 26,850 39,718 5,493 1,446 152 7,396 3,297 17,785 4,079 1,577 14,252 2,085 16,337 39,778
60

2011E 7,410 1,799 519 2,174 11,902 2,302 9,797 4,571 12,587 406 29,663 41,566 5,613 1,446 152 7,508 3,297 18,015 4,079 1,577 15,869 2,085 17,954 41,626
60

Interest bearing assets Interest bearing liabilities Working capital Working capital to sales Working capital to 12m trailing sales Inventory turns Receivable days Payable days Capital employed Fixed assets Stocks Debtors Other creditors Capital employed Short-term debt Long-term debt Shareholders' funds Cash Capital employed Period average capital employed Liquidity Current ratio Quick ratio Gearing Gross cash & short term investments Gross interest bearing debt Net Cash/(Net debt) Gearing (new debt / equity) Net cash per share Net debt / equity Returns Return on equity (4 Qs trailing) Return on capital employed Other ratios Book value per share

10,366 1,280 7,644 15.1% 14.2% 18.1 75.0 62.5

7,981 1,358 7,933 15.1% 14.6% 19.0 76.7 61.7

7,232 4,286 7,649 15.6% 14.2% 15.1 80.1 73.6

6,820 4,452 6,752 13.3% 13.3% 20.0 67.9 55.3

6,820 4,452 6,752 13.3% 13.3% 20.0 68.0 55.8

8,114 5,786 6,000 16.2% 12.7% 16.2 87.6 74.6

6,994 5,525 5,422 13.7% 12.3% 20.1 80.1 71.8

6,979 5,525 6,004 14.9% 14.3% 18.2 82.0 70.0

7,818 5,525 5,918 12.9% 14.5% 20.2 75.0 68.0

7,818 5,525 5,918 14.5% 14.5% 18.0 84.5 74.1

10,061 5,525 6,319 15.2% 15.2% 18.7 84.0 72.0

12,587 5,525 6,487 15.1% 15.1% 18.7 83.0 72.0

8,351 2,793 10,440 -8,774 12,810 4,885 1,269 17,022 -10,366 12,810 12,142

8,382 2,763 11,084 -9,135 13,094 5,323 1,303 14,449 -7,981 13,094 12,952

14,860 3,246 10,772 -10,415 18,463 7,620 2,130 15,945 -7,232 18,463 15,779

15,112 2,533 9,444 -7,499 19,590 7,183 2,717 16,510 -6,820 19,590 19,027

15,112 2,533 9,444 -7,499 19,590 7,183 2,717 16,510 -6,820 19,590 15,532

15,455 2,292 8,931 -7,227 19,451 6,219 4,816 16,530 -8,114 19,451 19,521

14,606 1,973 8,725 -7,031 18,273 4,743 5,656 14,868 -6,994 18,273 18,862

14,234 2,217 9,088 -7,055 18,483 4,743 5,656 15,123 -6,979 18,543 18,408

13,949 2,260 9,416 -8,181 17,444 4,743 5,656 14,923 -7,818 17,504 18,024

13,949 2,260 9,416 -8,181 17,444 4,743 5,656 14,923 -7,818 17,504 18,547

12,868 2,225 9,586 -8,065 16,615 4,743 5,656 16,337 -10,061 16,675 17,090

11,902 2,302 9,797 -8,295 15,706 4,743 5,656 17,954 -12,587 15,766 16,221

1.57 1.41

1.41 1.26

174.00 1.00

1.20 1.08

1.20 1.08

1.32 1.19

1.35 1.24

1.39 1.25

1.37 1.24

1.37 1.24

1.51 1.38

1.65 1.52

10,366 1,280 9,086 53.4% 2.4 53%

7,981 1,358 6,623 45.8% 1.7 46%

7,232 4,286 2,946 18.5% 0.8 18%

6,820 4,452 2,368 14.3% 0.6 14%

6,820 4,452 2,368 14.3% 0.6 14%

8,114 5,786 2,328 14.1% 0.6 14%

6,994 5,525 1,469 9.9% 0.4 10%

6,979 5,525 1,454 9.6% 0.4 10%

7,818 5,525 2,293 15.4% 0.6 15%

7,818 5,525 2,293 15.4% 0.6 15%

10,061 5,525 4,536 27.8% 1.2 28%

12,587 5,525 7,062 39.3% 1.9 39%

43.8% 39.5%

39.6% 33.4%

32.9% 26.7%

24.2% 11.6%

24.2% 25.0%

17.5% 0.1%

14.6% 6.1%

8.8% 3.7%

8.2% 9.8%

6.4% 4.4%

13.7% 12.8%

14.2% 15.8%

4.45

3.81

4.27

4.43

4.38

4.45

4.01

4.07

4.02

4.02

4.40

4.84

Source: Nokia reports. Nomura estimates

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September 23, 2009

Cash Flow
Financial year ended December 31 Operating income Depreciation Amortisation Net interest & Associates Tax paid Change in Inventories Change in Receivables Change in Payables Other Cash flow from operations Acquisitions Capex Capitalised R&D Disposal of fixed assets & businesses Net proceeds from sale of other assets Other Investing cash flows Dividends Share issuance Share buy-backs Debt issuance Other Financing cash flows Foreign exchange adjustment Other Net cash inflow / outflow Opening cash and cash equivalents Closing cash and cash equivalents Free Cash Flow FCF / EBITDA FCF / dividend 1Q08 1,531 230 117 98 -407 83 760 -1,485 -170 757 -205 -179 -24 15 2,044 -746 905 0 0 -1,371 48 0 -1,323 -24 0 315 6,850 7,165 554 27% 2Q08 1,474 218 116 23 -394 30 -644 325 -450 698 99 -45 3 78 -1,503 561 -807 -1,999 5 -11 -182 0 -2,187 2 24 -2,270 7,165 5,210 656 33% 3Q08 1,469 264 226 -27 -355 -483 312 455 180 2,041 -5,357 -441 -56 32 3,630 -401 -2,593 -11 46 -1,739 3,131 0 1,427 -2 -2 871 5,210 5,766 1,544 76% 4Q08 492 210 236 7 75 713 1,328 -1,144 -2,216 -299 -499 -224 -54 -20 472 -85 -410 -38 2 0 574 0 538 -49 2 -218 5,766 5,548 1,639 113% 2008 4,966 910 707 103 -1,081 343 1,756 -1,849 -2,656 3,197 -5,962 -889 -131 105 4,643 -671 -2,905 -2,048 53 -3,121 3,571 0 -1,545 -73 24 -1,302 6,850 5,548 4,393 55% 2.9 1Q09 55 221 241 51 16 241 513 -2 -1,060 276 -19 -144 -18 3 237 -143 -84 -29 0 0 1237 0 1,208 6 30 1,436 5,548 6,984 114 16% 2Q09 427 202 241 46 -93 319 206 53 -685 716 0 -137 11 79 171 -978 -854 -1,490 0 0 -240 0 -1,730 14 -30 -1,884 6,984 5,100 590 60% 3Q09E 264 216 236 47 -57 -244 -363 24 0 125 0 -151 11 0 0 0 -140 0 0 0 0 0 0 0 0 -15 5,100 5,085 -15 -2% 4Q09E 622 209 236 -7 -147 -43 -328 458 0 999 0 -171 11 0 0 0 -160 2009E 1,287 848 954 -52 -281 273 28 533 -1745 1,846 -19 -604 15 82 408 -1,121 -1,239 2010E 2,961 821 954 -1 -730 34 -170 -265 0 3,604 0 -708 15 0 0 0 -693 -668 0 0 0 0 -668 0 0 2,243 5,653 7,896 2,911 61% 3.6 2011E 3,440 772 954 4 -899 -76 -211 119 0 4,103 0 -776 15 0 0 0 -761 -816 0 0 0 0 -816 0 0 2,526 7,896 10,423 3,343 65% 3.6

0 -1,519 0 0 0 0 0 997 0 -0.3828 0 -522 0 0 839 5,085 5,924 839 66% 20 0 105 5,548 5,653 1,257 32% 1.9

Source: Nokia reports. Nomura estimates

Analyst Certification: I, Stuart Jeffrey, hereby certify (1) that the views expressed in this Company Note accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Company Note, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Company Note and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company. Other Team Members: Harchandani, Amit (NI plc, London) Plagge, Gunnar (NI plc, London) Windsor, Richard (Industry Specialist) +44 20 7102 0083 +44 20 7102 7451 +44 20 7521 1895 amit.harc@nomura.com gplagge@nomura.com richard.windsor@uk.nomura.com

Industry Specialists are senior employees within Nomura who are responsible for the sales and trading effort in the sector for which they have coverage. Company Description: Nokia is the world's largest mobile handset vendor and the second-largest supplier of wireless infrastructure in the GSM/WCDMA technology family. The company also has a material position in the wireline infrastructure market and is investing heavily in services and applications for mobile users. The infrastructure activities are housed in a JV that is 50% owned by Siemens, although Nokia consolidated the Nokia Siemens financials.

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September 23, 2009

Important Disclosures: Nokia A (NOK1V.HE)
Rating and Price Target Chart:

EUR 10.73 (21-Sep-2009)

Neutral / Neutral

Currency=EUR Date Closing Price 17-Jul-09 9.36 17-Apr-09 11.42 14-Apr-09 10.53 24-Feb-09 7.79 23-Jan-09 9.50 23-Jan-09 9.50

Rating

Price Target 10.20 10.80 9.50 8.70 9.50

Date 08-Dec-08 18-Nov-08 18-Nov-08 25-Jan-08 18-Apr-07

Closing Price 11.15 10.43 10.43 24.20 17.55

Rating Buy Buy Neutral

Price Target 12.00 13.00

Neutral

FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.

Valuation Methodology: Our EUR 11.2 target price is based on a sum-of-the-parts model. The devices and services division is valued on 14.2x 2010E net income of EUR 2.7bn (a 10% premium to the market P/E, relative to a six-year average premium of 20%); a 10x earnings multiple for NSN's net income of EUR 347m, and a 20x multiple on Navteq's net income of EUR 79m. The Benchmark Index for this stock is Dow Jones STOXX® 600 Technology. Risks Which May Impede the Achievement of the Price Target: Our forecasts may be negatively affected by a change in handset subsidy policies, a material further delay in the roll-out of new applications and technologies, higher capacity utilisation and thus prices for components. In addition, it is possible that independent software vendors capture an increasing share of the value in the handset market, while chipset suppliers may offer standard modules that negate Nokia's economy of scale advantages.

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September 23, 2009

Important Disclosures Continued: Ericsson (ERICb.ST)
Rating and Price Target Chart:

SEK 73.40 (18-Sep-2009)

Buy / Neutral

Currency=SEK Date Closing Price 24-Jun-09 76.70 24-Apr-09 76.50 23-Mar-09 68.10 24-Feb-09 69.00 22-Jan-09 62.80

Rating

Price Target 96.00 91.00 75.00 78.00 75.00

Date 22-Jan-09 18-Nov-08 18-Nov-08 19-Apr-07

Closing Price 62.80 52.00 52.00 134.50

Rating Buy Reduce Buy

Price Target 55.00

FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.

Valuation Methodology: Our SEK 96 target price is based on a sum-of-the-parts approach. Core Ericsson is valued at 12.9x 2010E earnings of SEK 24bn (10% above market levels to reflect a strong balance sheet and a relatively high resilience in the current macro environment), Sony Ericsson is valued at 0x sales to reflect the risk that further capital injections are needed. We value ST Ericsson at 0.5x 2010E sales of USD 2.9bn, and we add 30% of Ericsson's net cash position after deducting the pension deficit, which while valuable is likely excessive given that most rivals are in a net debt position. The benchmark index for this stock is Dow Jones STOXX® 600 Technology. Risks Which May Impede the Achievement of the Price Target: Our forecasts assume that operator spending remains broadly robust into the current macroeconomic slowdown and that recent market share trends are sustained. We also assume that most mobile operators will transition to LTE in the move to 4G and retain their GSM and WCDMA/HSPA networks in the medium term.

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Important Disclosures Continued: Company Name Nokia A Mentioned Company Ericsson Ticker NOK1V.HE Ticker ERICb.ST Price EUR 10.73 Price SEK 73.40 Price Date 21-Sep-2009 Price Date 18 Sep 2009 Stock / Sector Rating Neutral / Neutral Stock / Sector Rating Buy / Neutral

All share prices mentioned are closing prices unless otherwise stated.

ISSUER SPECIFIC REGULATORY DISCLOSURES Online availability of research and additional conflict-of-interest disclosures: Nomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM, REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe, Japan and elsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG. Important disclosures may be accessed through the left hand side of the Nomura Disclosure web page http://www.nomura.com/research or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email researchportal@nomura.co.uk for technical assistance. The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities. Distribution of Ratings: Nomura Global Equity Research has 1613 companies under coverage. 36% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 33% of companies with this rating are investment banking clients of the Nomura Group*. 41% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 61% of companies with this rating are investment banking clients of the Nomura Group*. 21% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 6% of companies with this rating are investment banking clients of the Nomura Group*. As at 30 June 2009. *The Nomura Group as defined in the Disclaimer section at the end of this report. Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America for ratings published from 27 October 2008: The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to price target defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. Stocks: • A rating of "1", or “Buy”, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. • A rating of "2", or “Neutral”, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. • A rating of "3", or “Reduce”, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. • A rating of “RS-Rating Suspended” indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://www.nomura.com/research); Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Sectors: A "Bullish" stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A "Neutral" stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A "Bearish" stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX® 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia. Explanation of Nomura’s equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January 2009: Stocks:

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Stock recommendations are based on absolute valuation upside (downside), which is defined as (Price Target – Current Price) / Current Price, subject to limited management discretion. In most cases, the Price Target will equal the analyst’s 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. • A rating of "1", or "Buy" recommendation indicates that potential upside is 15% or more. • A rating of "2", or "Neutral" recommendation indicates that potential upside is less than 15% or downside is less than 5%. • A rating of "3", or "Reduce" recommendation indicates that potential downside is 5% or more. • A rating of "RS" or "Rating Suspended" indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. • Stocks labeled as "Not rated" or shown as "No rating" are not in Nomura's regular research coverage. Sectors: A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin America published prior to 27 October 2008): Stocks: • A rating of "1", or "Strong buy", indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months. • A rating of "2", or "Buy", indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months. • A rating of "3", or "Neutral", indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months. • A rating of "4", or "Reduce", indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months. • A rating of "5", or "Sell", indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months. • Stocks labeled "Not rated" or shown as "No rating" are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein. Sectors: A "Bullish" stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months. A "Neutral" stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months. A "Bearish" stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months. Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector — Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia. Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008: Stocks: Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. • A rating of "1", or "Strong buy" recommendation indicates that upside is more than 20%. • A rating of "2", or "Buy" recommendation indicates that upside is between 10% and 20%. • A rating of "3", or "Neutral" recommendation indicates that upside or downside is less than 10%. • A rating of "4", or "Reduce" recommendation indicates that downside is between 10% and 20%. • A rating of "5", or "Sell" recommendation indicates that downside is more than 20%. Sectors: A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
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Price targets Price targets, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any price target may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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