Business Wire

NOKIA In 1997: Record year of high profits and strengthened global market position

NOKIA In 1997: Record year of high profits and strengthened global market position

HELSINKI, Finland–(BUSINESS WIRE)–Feb. 12, 1998–Nokia today reports record breaking annual results for 1997. Nokia’s net sales, profits and earnings per share were the highest in the company’s 132- year history.

Net sales grew by 34% to FIM 52.6 billion and operating profit by 98% to FIM 8 454 million. Earnings per share increased by 97% to FIM 21.17. The Board will propose the highest dividend ever paid by Nokia, FIM 7.50 per share.

Commenting on the results, Nokia President and CEO Jorma Ollila pointed out, “We achieved our overall growth targets and almost doubled our net profit. With the strong commitment of our personnel, we have been able to secure a strengthened global market position in fast growing segments of the telecommunications industry, including mobile communications, fixed telecommunications in deregulated markets, as well as data communications. It is especially pleasing to me that we were able to reach these achievements with record profits and positive operating cash-flow of FIM 10.2 billion.”

“Our leadership in many new areas of telecommunications, as well as our increased global presence and visibility give us a solid base to move forward to future challenges. During the next few years, we will see the shift toward 3rd generation wireless communications, as well as the inclusion of Internet Protocol based services into public networks. We feel that we are very well prepared for both.”


Million FIM 1997 1996 Change % 4Q/97 4Q/96

Net sales 52 612 39 321 + 34 15 857 12 669

Operating profit 8 454 4 266 + 98 2 830 1 737

Operating profit, % 16.1 10.8 17.8 13.7

Profit before tax and

minority interests 8 371 3 898 +115 2 835 1 670

Profit from continuing

operations 5 998 3 044 + 97 2 018 1 426

Net profit 6 259 3 263 + 92 2 018 1 645

Earnings per share (FIM)

from continuing

operations 21.17 10.73 + 97 7.12 5.03

Geared for growth through investments in R&D, manufacturing and people Major investments were made within Nokia’s global R&D network. At the end of 1997, Nokia had 36 R&D centers in 11 countries, and a total of 10 070 employees working within R&D, approximately 27% of its total workforce. In 1997, Nokia’s R&D investments increased by 30% and totaled FIM 4 560 million (FIM 3 514 million in 1996), representing 8.7% of net sales (8.9% of net sales in 1996).

A unanimous decision was reached by ETSI in January 1998 to implement a 3rd generation wirelesss solution largely based on Nokia’s technology proposals. Earlier in 1997, Nokia proposed a new WCDMA (Wideband Code Division Multiple Access) radio technology coupled with the GSM core network for the future 3rd generation networks, and worked in close cooperation with the Japanese operator NTT DoCoMo and various other operators and telecommunications suppliers and international standardization bodies to develop an optimal technology solution. These 3rd generation networks, providing advanced wireless and multimedia services, are expected to be implemented in the early years of the next decade.

The development of data communications remains a priority for Nokia. The increase in Internet subscribers continued in 1997, resulting in growing sales of ISDN (Integrated Services Digital Network) nodes. This enhanced Nokia’s position as a market leader in developing data interfaces in access networks. In December, Nokia acquired Ipsilon Networks, Inc., a U.S.-based company that has pioneered the development of Internet Protocol switching. This acquisition is an important step in further developing Nokia’s competitiveness in IP networks. Nokia also continues to have a strong leadership position in innovative wireless data terminals, network solutions and software products.

Other major investments in 1997 included continued expansion of both infrastructure and terminal manufacturing capabilities. Total capital expenditures during 1997 amounted to FIM 2 402 million (FIM 2 028 million in 1996).

Nokia continued to invest in training and recruiting new personnel. In 1997, Nokia increased its personnel by a total of 6 626 employees worldwide, excluding the businesses sold in 1997, most of them for R&D, production and customer service positions. At year-end 1997, Nokia employed 36 647 people (31 723 at year-end 1996). The average number of personnel for 1997 was 35 490 (31 766 for 1996).

The 97% increase in earnings per share resulted in the maximum 5% bonus, based on annual base pay, for Nokia’s personnel participating in the Nokia Connecting People Bonus plan.


Net sales of Nokia Telecommunications for 1997 increased by 41% to FIM 18 826 million (FIM 13 333 million in 1996). Sales growth was especially strong in Europe and in China. The business group’s order inflow was FIM 23 billion (FIM 14.5 billion in 1996), an increase of 58%. Operating profit increased 36% to FIM 4 053 million (FIM 2 982 million in 1996) and operating profit margin was 21.5% (22.4% in 1996).

During 1997, Nokia continued to build on its position as the world’s second largest supplier of GSM networks and a significant supplier of fixed networks. Nokia has achieved even greater diversity in its telecommunications operations through the worldwide delivery of infrastructure equipment, such as switching platforms and through fixed and radio access solutions, wireless data, network management and Intelligent Network (IN) solutions for mobile and fixed networks, as well as related customer services.

Nokia thereby firmly established itself as a full-fledged telecommunications systems supplier and continued to strengthen its position as one of the major suppliers within mobile and fixed networks. In 1997, Nokia’s global GSM infrastructure market share increased to close to 30%. Nokia also became the leading base station supplier in Europe.

At the end of 1997, more than 30 GSM 1800 networks had been established globally. As a network supplier to 19 of these, Nokia holds the undisputed leading global position. During the year, Nokia signed eight new GSM 1800 network agreements. In GSM 900, growth was fastest in Europe and in China where Nokia signed a number of sizable expansion deals. Nokia also signed major GSM 900 network expansion agreements with Omnitel Pronto Italia, one of the fastest growing European GSM operators.

Nokia introduced a series of innovative new products for wireless data communications during 1997, such as the Nokia Artus product family, which effectively opens up the Internet to mobile users. Nokia also continued to develop ADSL (Asymmetric Digital Subscriber Line) and VDSL (Very High Speed Digital Subscriber Line) transmission, ATM (Asynchronous Transfer Mode) multiplexing and IP (Internet Protocol) processing in access nodes.

In Professional Mobile Radio (PMR) systems Nokia maintained its strong position in analog trunking networks and was the first company to sign agreements for digital Terrestrial Trunked Radio (TETRA) systems.

Nokia also continued to strengthen its position in the deregulated fixed network market. Strongly supporting open standards, Nokia introduced products with new open interface solutions for fixed networks, including the V5.1.

Sales of Nokia’s SDH transmission system, Synfonet, increased steadily, bringing the number of Nokia’s SDH customers to 73 in more than 20 countries at year-end. Nokia also complemented its SDH family by introducing the highly integrated Synfonet STM-16 and Access Node (SAN).


Net sales of Nokia Mobile Phones for 1997 increased by 28% to FIM 27 643 million (FIM 21 579 million in 1996). Operating profit increased by 168% to FIM 3 837 million (FIM 1 431 million in 1996) and operating profit margin was 13.9% (6.6% in 1996). Sales grew fastest in the increasingly digital European markets and in the U.S. Sales growth slowed in the second half of the year due to lack of competitive product in Japan, and the preparation for product transitions from the lower priced Nokia 1600 and 2100 series to the newer 3100 and 6100 series.

The strong profitability improvement was due to further development of logistics processes and efficient management of working capital. Renewal of the product range and continuous cost improvements also had an important contribution to profitability.

According to industry estimates, there were approximately 201 million mobile phone users globally at the end of 1997, up from 135 million at the beginning of the year. In 1997, the number of new subscribers was 66 million while the number of handsets sold amounted to about 101 million. Nokia’s global market share is over 21%, with 21.3 million phones sold in 1997. Nokia is the leading mobile phone manufacturer in Europe and the second largest globally.

Digital standards continued to dominate in Europe, gained momentum in the Asia-Pacific region, and made their first broad appearances in the growing Latin American market and in the multistandard U.S. environment. In 1997, digital products accounted for 70% of Nokia Mobile Phones’ total sales volume.

Nokia continued its systematic brand building activities on all continents. Nokia Mobile Phones introduced a total of 31 new phone models and wireless data products for 10 standards during 1997. The new Nokia 6100 product family, with several industry-first features including a graphical user interface, boasts unsurpassed operating times, supports all three voice codecs (Half Rate, Full Rate and Enhanced Full Rate), and incorporates personal adaptation capabilities with the Profiles function and Caller groups.

In addition to the Nokia 9000i Communicator, Nokia’s other advanced data communications devices, including the Nokia Cellular Data Suite and Nokia Cellular Card Phone, solidified Nokia’s leading position in wireless data. Nokia also announced that it is developing a common, license-free platform protocol WAP (Wireless Application Protocol) for intelligent messaging over wireless networks. Value-added wireless services, such as banking, timetables, news and ticket reservation possibilities are expected to play an increasingly important role for mobile phone users.

Nokia’s expertise in developing cellular terminals and networks also positions the company at the forefront of Smart Traffic Products. Nokia cooperates with major car manufacturers in the area of these future products, integrating navigation and positioning tools, alarm systems, as well as other services into car electronics.


Net sales of Other Operations for the year 1997 increased by 39% to FIM 7 239 million (5 197 million in 1996). Operating profit increased to FIM 564 million (loss of FIM 147 million in 1996) and operating profit margin was 7.8% (- 2.8% in 1996). Sales continued to grow and profitability increased in both the Nokia Multimedia Network Terminals and Nokia Industrial Electronics divisions.

Nokia Multimedia Network Terminals

The demand for digital set-top boxes continued to increase, and Nokia received a major order from Spain’s Via Digital. The amount of digital multimedia terminal deliveries, which began in late 1996, was close to one million units in 1997.

During 1997, Nokia entered the Chinese multimedia market, and was the first manufacturer to launch a digital satellite receiver in the UK. To accommodate future growth, Nokia signed a contract with U.S.-based electronics manufacturer SCI Systems Inc., and increased multimedia related R&D in Sweden and in Finland. Nokia also entered into a cooperation agreement with Siemens for the development of semiconductor solutions for the digital terrestrial market, and joined the Swedish terrestrial operator Teracom to prepare for the launch of digital terrestrial services. Additionally, Nokia signed an agreement with the Norway-based Telenor Satellite Services for the development, manufacturing and marketing of common interface digital receivers for Scandinavia.

Nokia introduced the Nokia Mediamaster 9600S, the world’s first ‘Free to Air’ digital receiver with Common Interface, and launched three other new ‘Free to Air’ digital satellite receivers, providing a broad range of interactive, radio and TV services. Nokia also introduced its World Wide Web and data downloading features in the Nokia Mediamaster through the Multimedia Network Terminal Skybrowser concept.

Nokia Industrial Electronics

During 1997, Nokia introduced a range of new monitors, including 15″, 17″, 19″ and 21″ screen sizes and its first flat screen display, the Nokia 300Xa. Over half of Nokia’s monitors were sold under the Nokia brand name, the rest being sold to several leading PC manufacturers.

Nokia expanded its monitor sales in the Central European markets and increased monitor production in P`cs, Hungary. The R&D unit in Salo, Finland, continued to focus on monitors for professional use and on innovative monitors with video conferencing capabilities.

Responding to increased market demand, Nokia expanded production volumes of mobile phone accessories in Finland and signed an agreement to manufacture mobile phone fast chargers with a partner in Doumen, China. Nokia also opened a new factory to increase its manufacturing of mobile phone antennas in Finland.


On March 25, 1997, Nokia’s Annual General Meeting approved the issuance of FIM 2 375 000 principle amount of non-interest bearing bonds with warrants attached to key personnel worldwide as part of Nokia’s employee incentive program. The warrants confer the right to purchase up to 9 500 000 A Shares at a price of FIM 307 per share during the period from December 1, 1997 through January 31, 2003. The maximum number of new A Shares that may be issued represents 3.1% of the Company’s total share capital.

Nokia’s share capital increased in 1997 by FIM 1 510 880, to a total of FIM 1 499 260 780, as a result of the issuance of 302 176 new A Shares upon exercise of warrants issued to key personnel in 1995 and 1997. The total number of shares outstanding at December 31, 1997 was 299 852 156. As the result of these issuances, Nokia received a total of FIM 72 557 432 as additional shareholders’ equity.

On December 31, 1997, Nokia Finance International B.V., a wholly owned subsidiary of Nokia, owned a total of 13 813 384 Nokia K Shares and a total of 2 267 116 Nokia A Shares, representing an aggregate nominal value of FIM 80 402 500, and representing 5.4% of Nokia’s share capital and 13.9% of the total voting rights.

Effective September 1, 1997, Nokia’s Annual General Meeting approved a change in the company form into a public limited liability company in accordance with revised Finnish legislation. The official name was changed to Nokia Oyj in Finnish and to Nokia Abp in Swedish. The official English name, Nokia Corporation was, unchanged.


Nokia’s business is fundamentally strong. Focusing on its core telecommunications businesses and offering solutions and products for mobile communications, fixed telecommunications and data communications, Nokia is well positioned to achieve its future goals.


The Nokia Board of Directors will propose to the Annual General Meeting on March 24, 1998 that a dividend of FIM 7.50 per share (FIM 3.50 per share for 1996) be paid on K and A shares.


Nokia’s results for the final quarter of 1997 showed continued growth and excellent profitability, resulting in another record year for Nokia. We have every reason to be pleased with the very strong growth in sales achieved by Nokia Telecommunications, outstanding operational efficiencies in Nokia Mobile Phones and the overall positive developments in our performance.

We achieved our overall growth targets and almost doubled our net profit. With the strong commitment of our personnel, we have been able to secure a strengthened global market position in fast growing segments of the telecommunications industry, including mobile communications, fixed telecommunications in deregulated markets as well as data communications. It is especially pleasing to me that we were able to make these achievements with record profits and positive operating cash-flow of FIM 10.2 billion. Never in the history of Nokia has our financial position been so solid.

Our infrastructure business order inflow grew by 58% in 1997. We continued to supply solutions to our existing customers and gained a total of 72 new network customers, including 35 operators within fixed networks. This clearly reflects our renowned competence. We have continuously strived to both anticipate and accelerate technology changes in order to offer value-added and industry-first solutions to our customers.

Another reason to be pleased is the excellent level of operational efficiency in Nokia Mobile Phones. Enhanced capacity utilization, high productivity, renewal of the product range and continuous cost improvements had an overall positive impact on the profits. Towards the end of the year, we prepared for the global launch of the innovative Nokia 6100 phone family, which will become available in a range of technologies during 1998. In Japan, we believe that we will see improved sales with our new PDC phone which will be on the market in the second quarter of 1998.

With 101 million units sold worldwide in 1997, the handset business has become one of the world’s largest consumer electronics businesses. While technology continues to be a key source of added value, an increasing portion of the added value is created by effective marketing and the strength of the Nokia brand. Continuous and consistent building of the Nokia brand has already given us a solid base in our markets. Our market research shows, for example, that during the past 12 months, an additional 40 million Americans became familiar with the name Nokia. We are well positioned to leverage our marketing and brand building efforts across all markets and technologies, giving us greater economies of scale. In 1998, we will continue to build our marketing strength and the Nokia brand through the effective use of advertising, sponsorship and other activities.

In 1997 a total of 59% of our sales originated from Europe, 23% from the Asia-Pacific region and 18% from the Americas. Sales continued to grow, especially in China, which became our third largest market in terms of sales. As previously reported, growth in certain Southeast Asian markets slowed as a result of the economic turbulence. These markets are, however, relatively small in the global perspective and the effect of the slowdown was matched by strong performance in other regions of the world.

While the impact of the Southeast Asian economic turbulence is difficult to forecast, it is our firm belief that these countries, as they emerge from the present financial crisis, will play an increasingly important role in the global telecommunications market. We therefore intend to continue to invest in these markets with the aim of securing and strengthening our future market position.

Our leadership in many new areas of telecommunications, as well as our increased global presence and visibility give us a sound base to face future challenges. During the next few years, we will see the shift toward 3rd generation wireless communications, as well as the inclusion of Internet Protocol based services into public networks. We feel that we are very well prepared for both developments.

We have been instrumental in the creation of future 3rd generation standards. The technology decision made by ETSI in late January is largely based on proposals presented by Nokia and gives us an excellent opportunity to be among the first companies to introduce new 3rd generation digital solutions and products. Commensurate with these developments and continued strong demand for our products and systems, we will increase our capital expenditure and our investments in R&D in 1998.

In the past years we have emphasized Nokia’s openness to change to ensure competitiveness in the rapidly evolving telecommunications industry. We believe our team of dedicated and skilled professionals will enable us to also continue our good performance in the future. For 1998, we reiterate our previously stated targets of continued strong growth, good profitability and positive operating cash-flow.




10-12/97 10-12/96 1-12/97 1-12/96


Net sales 15 857 12 669 52 612 39 321

Cost of goods sold -9 722 -8 677 -33 999 -28 029

Research and development expenses -1 529 -1 061 -4 560 -3 514

Selling, general and administrative

expenses -1 776 -1 194 -5 599 -3 512

Operating profit 2 830 1 737 8 454 4 266

Share of results of

associated companies 21 -14 54 37

Financial income and expenses -16 -53 -137 -405

Profit before tax

and minority interests 2 835 1 670 8 371 3 898

Tax -724 -261 -2 274 -856

Minority interests -93 17 -99 2

Profit from continuing operations 2 018 1 426 5 998 3 044

Discontinued operations – 219 261 219

Net profit 2 018 1 645 6 259 3 263

Earnings per share (FIM):

Continuing operations 7.12 5.03 21.17 10.73

Depreciation 1 008 734 2 762 2 236

Average number of shares

(1 000 shares) 283 319 283 269 283 282 283 561

Currency rate December 31, 1997, 1 FIM = 0.187 USD



Financial year ended 31 December, MFIM 1997 1996


Fixed assets and other non-current assets

Intangible assets 2 061 1 455

Property, plant and equipment 6 240 5 662

Investments 789 901

Long-term loan receivables 160 138

Other non-current assets 195 253

9 445 8 409

Current assets

Inventories 7 314 6 423

Accounts receivable 12 732 10 898

Short-term investments 9 363 5 886

Bank and cash 2 884 1 659

32 293 24 866

Total assets 41 738 33 275


Shareholders’ equity

Share capital 1 499 1 498

Other restricted equity 5 542 5 298

Treasury shares -654 -657

Untaxed reserves 1 279 1 516

Retained earnings 13 858 8 270

21 524 15 925

Minority interests 195 29

Long-term liabilities

Long-term debt 1 348 2 117

Other long-term liabilities 295 297

1 643 2 414

Current liabilities

Short-term borrowings 3 008 3 404

Current portion of long-term debt 285 555

Accounts payable and accrued liabilities 14 541 10 610

Advance payments 542 338

18 376 14 907

Total shareholders’ equity and liabilities 41 738 33 275

Interest bearing liabilities 4 640 6 076

Currency rate December 31, 1997, 1 FIM = 0.187 USD



10-12/97 10-12/96 1-12/97 1-12/96

Nokia Telecommunications 6 368 4 199 18 826 13 333

Nokia Mobile Phones 7 505 7 139 27 643 21 579

Other Operations 1) 2 302 1 569 7 239 5 197

Inter-business group eliminations -318 -238 -1 096 -788

Nokia Group 15 857 12 669 52 612 39 321

1) of which Discontinued and

Divested Operations – 77 – 589



1997 % of 1996 % of

MFIMnet sales MFIMnet sales

Nokia Telecommunications 4 053 21.5 2 982 22.4

Nokia Mobile Phones 3 837 13.9 1 431 6.6

Other Operations 564 7.8 -147 -2.8

Nokia Group 8 454 16.1 4 266 10.8

Currency rate December 31, 1997, 1 FIM = 0.187 USD




31.12.1997 31.12.1996


Pension fund liability

Liability of pension funds 2 2

Liability for bills of exchange 3 1


As security for loans

For own debts 45 254

As security for other commitments

For own commitments 13 37

Assets pledged

As security for own debts 107 62


Guarantees for loans

As security for loans of

associated companies 6 6

As security for loans of other companies 341 82

Other guarantees and commitments

As security for own commitments 1 198 991

Leasing obligations 1 339 1 181


31.12.1997 31.12.1996


Foreign exchange forward contracts 2) 3) 57 228 30 714

Currency options bought 7 945 5 796

Currency options sold 8 299 5 827

Interest rate forward and

futures contracts 2) 5 695 25 519

Interest rate swaps 575 1 645

Interest rate options bought 187 1 139

Interest rate options sold – 342

1) The notional amounts of derivatives summarized here do not

represent amounts exchanged

by the parties and, thus are not a measure of the exposure of Nokia

caused by its use of derivatives.

2) Notional amounts outstanding include positions, which have been

closed off.

3) As at December 31, 1997 notional amount includes contracts

amounting to 5.2 billion FIM used to hedge the shareholders’ equity

of foreign subsidiaries and as at December 31, 1996 respectively

2.1 billion FIM.

Currency rate December 31, 1997, 1 FIM = 0.187 USD


31.12.1997 31.12.1996

Nokia Telecommunications 17 168 13 475

Nokia Mobile Phones 13 371 11 329

Other operations 6 108 6 919

Nokia Group 36 647 31 723

Finland 19 779 17 866

Other Europe 8 249 8 012

Americas 4 676 3 403

Asia-Pacific 3 943 2 435

Other Countries – 7

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