Nokia Oyj (NOK) Q2 2006 Earnings Report, Transcript and Summary

Good morning. My name is Ilene and I will be your conference operator today. At this time, I would like to welcome everyone to the Nokia second quarter 2006 earnings conference call. (Operator Instructions) Mr. Seymour, you may begin your conference.

Ladies and gentlemen, welcome to Nokia's second quarter 2006 conference call. I am Bill Seymour, Head of Investor Relations. Olli-Pekka Kallasvuo, President and CEO of Nokia, and Rick Simonson, CFO of Nokia, are with me today. During this briefing and call, we will be making forward-looking statements regarding the future business and financial performance of Nokia and the mobile communications industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified these in more detail on pages 12 to 22 in our 2005 Form 20-F and our press release issued today. Our aim is to finish the call in approximately one hour. To view the supporting slides while listening to the call, please log on to nokia.com/investor. For your convenience, a replay of the call will be available beginning two hours after the call ends until 12:00 a.m. New York time on Tuesday. The call will also be archived on our website. With this, I will pass the call over to Olli-Pekka.

Thank you, Bill. Ladies and gentlemen, in the second quarter Nokia delivered another quarter of strong year-on-year growth in net sales, operating profit and EPS and, which is so critical to our success, our device product portfolio continued to steadily improve. We started volume shipments of several new products, including important ones in the mid-range and also in the Nokia Nseries multimedia computers. We started initial shipments of Nokia Eseries as well. Despite these positive developments the quarter was mixed, as Nokia networks margin development was disappointing. I will address this issue shortly. There are a number of other things to highlight for the second quarter. Estimated industry quarterly device units of 230 million were up 7% sequentially and up 26% year-on-year. Nokia quarterly device units were 78.4 million, up 4% sequentially and up 29% year-on-year. Nokia estimated device market share was 34%, down from 35% in Q1 '06 and up from 33% in Q2 2005. Nokia device ASP of 102 EUR was down from 103 EUR in the first quarter of '06. In the second quarter, Nokia made two significant strategic announcements. We announced our intention to restructure our CDMA business, following the decision not to proceed with the proposed CDMA company with Sanyo. Once completed, the restructuring is expected to have a positive impact on our operating margins. Also during the quarter, Nokia and Siemens announced a definite agreement to merge Nokia Networks business growth and Siemens carrier-related operations into a new company, creating a powerful leader of the wireless and wireline carrier market. Let's now look at the overall device market and our device business. The mobile device market continued to show healthy growth in the second quarter and continues to look strong for the balance of the year. The second quarter mobile device market was estimated…

Thanks, Olli-Pekka. In the second quarter, Nokia net sales were up a very strong 22% year-over-year. Excluding Telsim, operating profit was up 27% and diluted EPS was up 35%. Also in the second quarter, R&D was down 200 basis points year-on-year, and sales and marketing costs were down 150 basis points, both as a percentage of net sales. In the second quarter, gross margins were down sequentially 90 basis points to 33%. The decrease was driven primarily by the sequential decline in Networks’ gross margin, as Olli-Pekka just explained. Gross margins for the devices businesses were down sequentially, with the mobile phones business group contributing most of that. The decline in the mobile phones business group gross margins was partially offset by a sequential increase in the gross margins of the growing multimedia division. Sequential gross margin decline in mobile phones was primarily driven by a combination of shift in our portfolio to lower gross margin entry-level products and a later ramp-up of a few of the significant mid-range phones. These mid-range phones started volume shipments only towards the end of the second quarter and are expected to deliver good volume in the third quarter. As we said in last quarter's call, you should expect and will see some volatility from quarter-to-quarter in our device gross margins, as the second quarter demonstrated. However, we continue to believe that we have some proof points to our view that device gross margins can stabilize. Here are some of the continued drivers of gross margins, in our view: Some of the negative drivers on gross margin: Reported group operating margins were up 90 basis points sequentially to 15.3% in the second quarter. Excluding the special item, operating margins were 12.5%. The decline in operating margin, excluding the special item, was driven by the…

[inaudible] Since this is my first quarterly conference as the Nokia CEO, before we close the first part of the call, I wanted to cover some things I feel are significant for Nokia going forward. First, I would like to make the point -- Nokia knows what it takes to win and we will do what it takes to win. There are a couple of good examples of actions we have taken recently to this end. Our CDMA restructuring announcement was made after final recognition that the CDMA market is simply financially untenable, and in addition has challenging growth prospects. Over the last few years, we have invested a significant amount of money into our CDMA business. While ramping down our CDMA business was a difficult decision, it is clearly positive for Nokia, as we expect to see a significant benefit to operating margins. The other major example of Nokia taking action to improve its competitive and financial position is the network's merger announcement creating Nokia Siemens networks. This move is expected to deliver value for customers, to provide scale and financial benefits to the new company, and of course the parent companies as well. The CDMA restructuring and the networks merger are the two important factors that give us confidence that we can reach the medium term Nokia operating margins target we set forth for you last year. In terms of our device business specifically, we are not complacent and we will not voluntarily cede share to the competition. We are working hard in smart and rational ways to ensure that the competition has less room to maneuver, but I need to emphasize -- we believe that increasing share and profitability are not mutually exclusive. On IPR, we are taking action to make sure we are properly compensated for…

Thanks, Olli-Pekka. We now will continue with a Q-and-A session. As a friendly reminder, please limit yourself to one question only. Operator, please go ahead.

(Operator Instructions) Your first question comes from the line of Gareth Jenkins with Deutsche Bank.

Hi, thanks. A couple of quick questions, if I can. One is just on the sub-50 EUR ASP market, can you give us a sense of what portion of your total volumes that was in the quarter? Secondly is just on the margin outlook for Networks in the second half of the year. Can you say what the trend will be H2 versus H1? Finally, just trying to quantify a bit more on the CDMA impact on the business. Can you give us a sense of how much volumes you expect to ramp down versus the ramp up in ODM? Thank you.

In terms of the below 50 EUR ASP volumes, as we said last quarter, we were at around approximately 25% and that has gone up significantly this quarter, as we said. Of course that is what accounts for the growth, largely in the overall market, so that number is significantly above the 25% level. In terms of the CDMA impact, Olli-Pekka, perhaps you wish to comment there.

Yes, I think there was a network question in between, but I will take this one as well. So the question related to our continuation in CDMA, and as we have indicated, so we will ramp down our own R&D and manufacturing in CDMA, but we do have plans to stay in the business through other arrangements, namely ODM. The target here is really to ensure continued presence in that marketplace and really participate in that business to the extent we feel makes business sense. So in that way, we will continue to be in that market. [Takes] of business plans, what are the estimated volumes and so forth, I think we need to communicate separately.

Did you have another question? We did not catch it here, sorry.

Yes, it was just on the second half network margins, what the outlook is and whether you expect to see a significant pickup versus H1.

Yes, again, we do not give quarterly estimates on margins in the different segments.

Next question, please.

Your next question comes from the line of Phil Cusick with Bear Stearns.

I wonder if we could talk about North America a little bit. You mentioned that you had a significant prepaid cancellation. How should we think about you guys coming back here, not only in the low-end but also on more high-end devices going forward?

Yes, that is right. In fact, if you look the situation in the second quarter, we had the cancellation we did talk about and that definitely had a big impact on our market share in the U.S. So in that way, the market share loss we had in the U.S. was not across the board but basically related to the cancellation here mainly. The GSM markets we do have in the U.S. basically continued to be on the same level we have had. Having said that, it is very clear that the situation and our position in the U.S. continues to be not satisfactory. We simply need to have even more focus as an organization on the U.S. and that is exactly what we are doing. We have several initiatives ongoing with different customers as we speak. Of course, one that relates to the cancellation, and I think we have taken care of that going forward. These several initiatives we do have I believe will continue to make it possible for us to improve our position. I personally continue to be extremely committed to making that happen and I will not rest until the situation in the U.S. is satisfactory.

And the U.S….

Next question, please. Excuse me, can you repeat that, please?

I am sorry, I was going to say on the U.S. cancellation, was that some particular weakness from that operator or was that them going to a different vendor, and maybe you have brought them back now?

We simply had a cancellation and we cannot then speculate what the customer then did after that point, but as I have said, we believe the business relationship with that customer is back to normal and we can continue to do business.

Thank you.

Next question, please.

Your next question comes from the line of Tim Boddy with Goldman Sachs.

Thanks very much. I wanted to ask about the market outlook for the rest of the year. If we look back in previous years at this stage, you have always committed to an absolute number, if I'm right, for the signs of the market. If we believe 15%, that’s suggests a very disappointing second half, or particularly fourth quarter, progression again compared to the past. Can you help us understand how you are seeing that? When you say more than 15%, what do you really mean? Are you concerned about inventory? Is it the economy or some of the conflicts we are seeing? Or is this just the beginning of the end of the net-add surprises we have been seeing for the last several years? Thank you.

Basically, the fact that we now express our market outlook in a different way than what you were referring to -- I do not know even whether if we have had that practice, but anyhow, we express this in this way. The 15% or more over last year, and we basically reiterate that outlook with quite a lot of confidence now. In that way, the way we look at the rest of the year is basically very similar as when we made this announcement in the earlier part of this year, in the spring. I might add, I look at that number or that estimate with great confidence.

I would add that inventories are fine by our view of the industry, so there is no mystery there, Tim.

Just to be more specific, I just wanted to ask about if you roll forward your estimates for Q1, Q2 and the prediction for Q3, you end up with perhaps 15% less than a flat-to-up Q4 unit volume. That is really what the question was about. Thank you.

We seem to reiterate what we said -- 15% or more over last year.

Thank you. Next question, please.

Your next question comes from the line of Tim Long with Banc of America.

Thank you. If I could just ask a two-parter on the gross margin front. First, on the mobile phone, you said the 1110 and 1600 were twice the volumes of the old platform. I would have been expecting that to help the gross margin line a little bit more. Can you talk about the impact on gross margin there? Has there been a change to pricing for those products where the gross margin benefit is not what you were originally thinking it was? Or was it just that the volume impact overrode that? Secondly, on the enterprise side, if you could just talk about the strong sequential and year-over-year revenue growth, yet also a tick-down in the gross margin there. If you could just clarify what happened there.

Tim, let me try to address this on the gross margin. The share of new products was a little bit lower and that had an impact here. We talked about that, where we had a little slower ramp in some of that in the mid-end. That is going to come on then in Q3. I hope that helps you understand that dynamic a little bit better there. Then in the low-end, as we have talked the last two quarters, a lot of the benefit of this rotation from the 1100 platform to the new 1110, 1600, has been reflected through the quarter. Of course, at the beginning of that when the volumes are smaller in the new platform relative to the old, you have a little bit more pricing premium between the two respectively. As we move through the quarters, you start to see that separation come down a little bit. Again, as we have said, we need to look forward as well that in the second half we are going to also start shipping products off yet our newer lower-cost chipset, lower-cost build of material for the low-end. So it is in that way that you see that happening. So we are very satisfied with how the 1110 and 1600 are performing in the market and against the competition. We do get a price premium on those products against similarly spec products by every measurement that I can see. In that sense, things are as we talked about. Then in third quarter, again some of the balancing drivers that we talked about are continuing to ramp on some of these mid-end devices. The Eseries coming up to volume. Again, we are going to be competitive in all the markets, as I said, so that is kind of where the balance is. In ES, again I think there we have talked about, we have a diverse, robust product portfolio announced and launched now in the enterprise group but we only reach real scale in the second half. Given the dynamics of that business, I think trying too draw too much from quarter-on-quarter gross margin development between first and second probably, I cannot get a lot of insight out of that to give you. Let's look at third quarter and fourth quarter when we had some real volume behind the E61, the E50 and some of the other products there, if I can, Tim, and we look at it that way.

Does it take gross margins a little bit as they ramp? Could that have been the quarterly impact?

That would be one -- all other things equal, the growth in the new Eseries portfolio is going to be positive for us because again, we think we can run over all that enterprise business. They have a target of running around the 40% gross margin, and that is primarily made up of devices still, the balance of that business. Then you have some of the server and security business as well.

Okay, great. Thank you.

Thanks, Tim. Next question, please.

Your next question comes from the line of Has Malik with Citigroup.

I just wanted to try and clarify two things that you said, Olli-Pekka. The first was on meeting your public medium-term margin targets. Am I to understand that you are saying that you need the CDMA restructuring and you need the Siemens deal in order to achieve those targets? In other words, you cannot achieve them on an organic basis? The second clarification is your written statement says that you are looking for a kind of broadly flat sequential global market share in devices. It sounds from your comments early on this call that you are probably expecting the U.S. share to increase sequentially. Does that mean you are expecting in another geography to see a sequential decline in market share? Thank you.

The first one, really what we have said, and I think I can repeat that, I said these actions will help us meeting the margin targets we have expressed. In that way, I think it is kind of a speculation to think about what if, what if not, simply because we feel this definitely will have a positive impact and it may help us to meet. To say that we would not be able to do that without these, I think it is unnecessary speculation, in my opinion. The important thing here is basically the fact that we have taken action -- we have taken action that will help us to meet our targets. That is the bottom line, basically. Then we have the market share question. The market share indication or estimate we gave out, it is market shares on approximately the same level. I think that gives basically a lot positive related to target even higher. This is what we feel is a good estimate to be able to keep to the market place at this point of time, approximately on the same level. As I said, that leaves a lot of room for more ambition there, to work for and to target.

Next question, please.

Your next question comes from the line of Mike Walkley with Piper Jaffray. Thomas Michael Walkley - Piper Jaffray & Co.: Thank you. I wonder if you could just talk a little more about the product portfolio. You indicated one area you need to improve on is thinness. I wonder if you can provide some color on when we might be expecting more thin products from Nokia.

Yes, I think I was very specific on that one and I really feel that we have to improve there. I think that improvement also will be an evolution. We have gotten thinner, we are becoming thinner and we will continue to do that. Of course, at some point every now and then you need to take steps that are outside the normal, take more risk and so forth. We have definitely, in the pipeline, products that we have taken a more aggressive approach when it comes to thinness in general. So it needs to be a combination of evolution on one hand and then taking bolder steps there as well. I hope we can prove in practice by producing new products that we have also been successful in that more aggressive approach, or line of action we have taken.

Thanks, Mike. Next question, please.

Your next question comes from the line of Jeffrey Schlesinger with USB.

Thank you. Two questions, if I could. One is, Rick, can you give us some color on Europe? Disappointing growth in the first quarter and here actually being down sequentially as a market in the second quarter. What is your outlook for Europe? What are the key factors that could pick up that growth in the industry? Also, if you could talk a little bit, the mobile phones gross margins have been in pretty steady decline since the end of 2004. What changes that, or stabilizes as you said? You gave a list of those factors but despite that, we have seen a steady decline. Where does this really start to bottom out and the expectation there comes with the key factors that will start to do it from a timing perspective? That would be it, thank you.

The European question, what I think is it is extremely important to note here, in many parts of Europe, is the fact that wideband CDMA as a technology, as a market is accelerating as we speak. That is basically happening in Europe. When you talk to the European operators on a daily basis, you really feel that this is something that will happen now. The industry has waited for this to happen for a long time, we all know that. But it is happening now. Definitely that is our stronghold. Our position in wideband CDMA definitely is second-to-none, by far. In that way, I feel if this will continue to happen, this definitely will improve our market position in Europe. We are really counting on that one.

In terms of gross margins, as we said, there has been that pattern but we have proof points offsetting that relates exactly to what Olli-Pekka just said in terms of growth in the WCDMA portfolio. We are leading in that evolution. We are leading the industry in the quality of the products, profitability, the gross margin in WCDMA. In converged devices, we are leading there as well in the breadth of our product portfolio, our market share. Again, the gross margins are higher there. I think then you have to look a little further out as you look to devices that really are not primarily even cellular, engine-driven devices with multiple access. I think we have other opportunity there and that is part of the dynamics that we talked about that can be some of the positive drivers. Your comment about what history has been has been correct, but this is what we are looking to do to work against that going forward.

If I may add to that, the question related especially to mobile phones, so I think when it comes to the priorities for the management in this company, really stabilizing the gross margins in mobile phones is definitely one of the key priorities, if not the priority. In that way, I think this question is very justified and good, and we are responding to that in practice.

Next question, please.

Your next question comes from the line of Larry Harris with Oppenheimer. Larry Harris - Oppenheimer & Co. : Thank you. A question with respect to CDMA is perhaps your reduced involvement in CDMA 2000. Relative to the improvement in operating margins, do you think we will see more of an improvement in gross margins, or more of a reduction in R&D? What types of changes will we see on the income statement?

When we have been talking about this, we have talked about our moves and what we are doing in CDMA, reflecting the op-ex equation here and really ramping down and taking out that R&D and the marketing expense associated with a product portfolio that did not meet our aspirations. It is absolutely what we are talking about there, the primary driver being on the op-ex part of the equation. Larry Harris - Oppenheimer & Co. : More so than on gross margin?

Yes. Larry Harris - Oppenheimer & Co. : All right. Thank you.

Thanks. Next question, please.

Your next question comes from the line of Sandeep Malhotra with Merrill Lynch.

Thank you. I have a question about the dynamics in the low-end of the market. Our understanding is that the brand premium that Nokia was commanding in the low-end, especially in markets like India, has shrunk from 35%, 40% down to less than 10%. Given that the industry is consolidating and Nokia and the number two competitor are essentially gaining share, do you expect that competition at the low-end to be fairly rational going forward, or should we expect a fairly competitive price war type of environment?

I think that is a very good question and nobody, of course, knows the answer there, but if I look at the market dynamics overall and look at the consolidation that is happening here, the way the two bigger players have really gained market position and market position-wise, I think this very much follows what I predicted to happen. You really need to have a market of certain level in order to have a sustainable position. If you do not have a sustainable position, really going after the market leaders in the low-end of the market is very, very difficult and has proven to be too difficult so far in the industry. If you look at the market position of Nokia in the emerging markets, there have been efforts to compete with us. There have been efforts to enter that market, but many people have failed doing that. I do not see how that dynamic really would change going forward. In that way, I basically believe the consolidation of the marketplace will benefit us going forward. This has all the time been one of the strategic reasons why we have been really investing in the low-end as well, to basically, if possible, suffocate competition in low-end.

Just a quick follow-up, if I may. On the one hand, I think selectively we are talking about the low-end essentially moving to more color, and even the low-end subscribers demanding a bit more functionality. We have seen some of your competitors announce low-end color products, you know, people like Sony Ericsson and Samsung. What does your segmentation study tell us about the low-end? Will the actual low-end move a bit up-market, so that some of the other players we have talked about will have a shot? Or do you expect continued price declines?

Of course, it is as the industry becomes more efficient, so will to the pricing as such and the low-end pricing as such has come down. We have been responding to that with lower cost, of course. When it comes to the nature of the low-end market and the segmentation and the different types of consumers that are participating there, we see the same type of segmentation being applicable there in those price points as elsewhere. People are different also there and do prefer a different type of phones. We are seeing this happen pretty low in the marketplace, in terms of the price point. Definitely this concept of affordable aspiration continues to be relevant there, meaning people continue to really be willing to spend quite a lot of their disposable income in mobile telephony. Really, they are doing that in different ways. I think we have to be even better able to apply our segmentation model in that part of the market.

Sandeep, if I may, supporting that is the fact that then this more than 50% of the market in emerging markets is going to be replacement this year, as we talked about. When you have the brand loyalty, you have the quality that goes along with that first sale. That gives us a competitive advantage when they move up. Again, linking right to your question, we do not see that we are any worse off. We are actually better off when people move up the ladder because of that brand loyalty, the value propositions you have established in the low-end -- part of the virtual cycle.

Thank you.

Thank you. Next question, please.

Your next question comes from the line of Paul Sagawa with Sanford Bernstein. Paul Sagawa - Sanford C. Bernstein & Company, Inc. : I wanted to ask a question on intellectual property rights. You noted on several calls now your intention to move from being a net payer to a net collector in intellectual property. I think most of the market seems to be highly focused on your relationship with Qualcomm and the contract that expires in April of next year. I am wondering how, or if you can dimension the issue a little bit more. Are there other companies with whom you have a significant payment obligation under your current contracts beyond Qualcomm? How many of them are there? How would your payment obligations to other companies compare to the general levels that you pay Qualcomm on an annual basis? Do those agreements have expiration dates in the foreseeable future that would give you opportunities for a renegotiation?

Of course, this field, the intellectual property rights field, is very complex. In that way, it is very difficult to, without going into very much detail and without disclosing things that I should not disclose, to assess this in more detail. It is basically we pay royalties, we receive royalties. As we have improved when it comes to our patent portfolio, obviously we have been able to collect more and we have also become more active when it comes to collection, and we have the licensing program I was referring to. We will continue to be active and aggressive enough on that front. Of course, there is the other side of the coin here. Definitely if you look at that other side, it is a well-known fact that Qualcomm is important. It really means that is by far the biggest item on that side.

Okay. Next question, please.

Your next question comes from the line of Kulbinder Garcha with Credit Suisse.

Thank you. A question for Rick. With the segmentation, the new segmentation you are putting through in the device hat coming through, would it be fair to assume that we now start seeing some efficiency improvements when measured let’s say from an SG&A sales point of view? Not necessarily in Q3. I am just thinking the second half of the year and perhaps longer term, do we see that coming down as seen from efficiency improvements there helping profitability? The second question is, the Nokia buyback was really very low, it seems in Q2 in terms in terms of how many shares you repurchased. It would be fair to assume that accelerates from here on, or do you not intend to even fulfill half of the scheduled buyback you had authorized?

On the sales and marketing efficiency, I think is what you are getting at, and as I mentioned there, year-on-year we have had very good improvement there. What we are looking to is, as Olli-Pekka mentioned, take out some of that quarterly volatility. We think we can do that through a combination of things. One, the multimedia Nseries and the whole business going to scale. You will see less impact but importantly the same thing happening in Eseries, once we get through the initial ramps. Specific to the segmentation -- absolutely. We have been talking to you about the fact that we believe that is going to allow us to get more efficiency at any level of product launch, and get more efficiency there by grouping some of the marketing around product families rather than every individual product launch. That would be one element where we would expect to get some efficiencies and continue to have this overall sales and marketing and total SG&A showing improvement as a percentage of net sales in the medium-term. In terms of the buyback, we executed as we expected there. There's no change of plans that we have communicated. We have the flexibility, we have the approval but again, we said that the overall in the cycle that began this quarter and will end at the end of the first -- excuse me, in the four-quarter cycle that began this year, that we would expect probably to execute at a lower level in terms of the percentage of shares that we buy back compared to last year, because we wanted to accelerate that. Hopefully you see we have brought down our net cash significantly since the beginning of 2004, as we said. We are largely on track, and then it is just tactical execution quarter to quarter.

Okay, and then just one final question to strategic for Olli-Pekka. Nokia in the past made a big deal about the gap that they have versus the number two player. The number two player is clearly closing that gap versus over the first half of this year. At what point does Nokia takes some serious decisions regarding being aggressive on price, do you think? If the product portfolio is not up to scratch in the next six months, is that a risk?

I think the point you are taking up is very good here, because we have two aspects here, like you imply. On one hand, the absolute market share that we target, and then on the other hand, the distance to the number two, which currently is Motorola. Definitely I think we need to look at both. There is no way to look at only one of the two. That is what we are doing. Absolute market share is important but at the same time, we need to be aggressive enough in the marketplace also with regard to the number two. They are as well, but this does not in any way preclude the fact that I was referring to -- I do not feel market share, in the relative or absolute, is in no way contradictory to making right type of profits in the industry.

Thank you very much.

Okay, last question, please, Operator.

Your final question comes from the line of James Fawcett with Pacific Crest Securities.

Thank you very much. I wanted to quickly just touch back on emerging markets. In the past you talked about that you feel like those are good investments because of the increasing pricing that you typically see as people upgrade. I am wondering if you could shed a little light on if you continue to see that happening, particularly in light of what has been commentary of perhaps a bit weaker sell-through level in the emerging markets, and how we should expect that to impact your ASP outlook going forward? Thank you.

Basically, if I simplify now a little bit, so that three strategic reasons to be present in the low-end, or in that part of the market, are the following: one, it is good business. We are making money there. The second is the fact that you are referring to the upgrade market, basically meaning if you are there and you can respond to the brand and quality promise to the consumer, you get loyalty. That is important when these people upgrade or replace and that continues to be valid. There is nothing that will have impacted that. Then, the third reason here is one I was referring to already earlier. We just do not want to give too much space for the competition in the low-end. In that way, that market share thinking, really the ability to manage that market, not give in, in that market, gives you sustainability and is of strategic importance.

Ladies and gentlemen, this concludes our conference call. I would like to remind you that during the conference call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified these in more detail on pages 12 to 22 in our 2005 Form 20-F, and also in our press release issued today. Thank you and have a nice day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.