Nokia’s 2016 Annual Report shows interesting things about the company

For anyone wanting to learn more about Nokia and the business Nokia is conducting, the 2016 annual report is good literature in which the financial and other states of the company are well depicted. The annual report, apart from pure financial numbers, shows interesting tidbits about the company, like info on the workforce, factories, ownership structure, and more.

But first, let’s start with some general financial numbers related to the company in 2016.

• Revenue: €23.6 billion
  • Nokia Networks: €21.8 billion
  • Nokia Technologies: €1.05 billion
• Operating profit: (-)€1.1 billion (loss)
  • Networks: (+)€1.9 billion
  • Technologies: (+)€580 million
  • Group common and Other: (-)€342 million
  • Alcatel acquisition and integration: (-)€3.2billion
• Profit: (-)€912 million (loss)
  • Margin: -4.7%
• Dividend: €0.17 per share (€972 million)

The general financial info clearly shows that the Alcatel acquisition and integration had a great financial impact on the performance of the company. It’s a positive news that Nokia declared 2017 “The Year of Performance” meaning the most cost of the integration of Alcatel-Lucent is behind them.

I cannot say that it is fair to compare the 2016 results to those from 2015, because Nokia practically doubled its size with the acquisition of Alcatel-Lucent. But it’s interesting to note how the acquisition impacted the revenue by region. Nokia saw a 341% revenue increase in North America thanks to the acquisition of ALU, which is the most notable detail in the regional revenue segment of the report that can be seen down below.

Nokia divided its business into two big parts: Networks and Technologies. The Networks segment consists of four parts: Mobile Networks, Fixed Networks, Applications & Analytics, and IP/Optical Networks.

In the Networks segment, Nokia sees Ericsson and Huawei as the main competitors, with Juniper, Cisco, Ciena, Adtran and Calix as competitors in some segments. It’s interesting that Nokia sees a potential threat in HP and other Cloud companies in the future, because of the networks market transition to cloud services.

For most Nokia lovers the most interesting part of the company is Nokia Technologies. The Technologies department covers patent & brand licensing, Digital Health, and Digital Media. To say it simple, Technologies cooperates with HMD on the new Nokia Devices, license patents to other Companies, develops digital Health Products like smart watches, body scales etc., and innovates in VR with Nokia OZO.

Nokia Technologies operated with €1.053 billion in 2016, with €579 million profit or 55%. The results are almost the same as those in 2015. In 2015, Samsung made a one-time payment to Nokia for patent (Standard Essential) usage, and now pays regularly for SEP license. Also, Nokia and Apple entered into a patent war that will cost Nokia €100 million annually, and Nokia lost about €150 million euros in patent payments because Apple stopped paying for the license. Technologies saw an increase in operating expenses mainly because of higher R&D expenses and Withings.

For Research and Development, Nokia spent €4.9 billion in 2016, with the number of employees being above 100,000. The Company has a €4 billion debt, and €9 billion of cash and assets, making the net cash close to €5.3 billion as of December 31, 2016. Nokia owns 12 manufacturing facilities around the world for the development of network gear.

Nokia was under the Finnish law obligated to share information about their shares owners registered in Finland, that own 17.46% of all shares. It is interesting that 3% of Nokia is owned by Finland’s governmental bodies, and more than 7.6% by Finnish households.

 

The annual report is definitely a recommended read for everyone wanting to go deeper into how Nokia does business. The document can be found here.

If you stumble across any interesting information in the report, you can freely post it in the comment section down below. 🙂