Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nokia Q3 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Matt Shimao, Head of Investor Relations. Sir, you may begin.

Ladies and gentlemen, welcome to Nokia's third quarter 2012 conference call. I'm Matt Shimao, Head of Nokia Investor Relations. Stephen Elop, President and CEO of Nokia; and Timo Ihamuotila, CFO of Nokia, are here in Espoo with me today. During this call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. 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 13 through 47 of our 2011 20-F and in our quarterly results press release issued today. Please note that our quarterly results press release, the complete interim report with tables and the presentation on our website include non-IFRS results information, in addition to the reported results information. Our complete interim report with tables available on our website includes a detailed explanation of the content of the non-IFRS information and a reconciliation between the non-IFRS and the reported information. With that, Stephen, over to you.

Thank you, Matt, and thank you for joining us for the Q3 2012 earnings call. As we expected, Q3 was a difficult quarter in our Devices & Services business. However, we are pleased that Nokia Group achieved operating profitability on an underlying basis, with a Q3 non-IFRS operating margin of 1.1%. We are encouraged that we continue to make progress against the business strategy we have outlined for Nokia. Q3 represented the tough transitional quarter for our Smart Devices business as we introduced consumers to the innovation ahead with the new line of Lumia products. In our Mobile Phones business, the positive consumer response to our new Asha full touch smartphones translated into strong sales. In the Location & Commerce business, we made progress establishing our platform offering, which is in line with our plan to expand our location offering to more customers. And Nokia Siemens Networks had a remarkable quarter, in which we achieved record profitability on a non-IFRS basis, and the Nokia Siemens Networks' cash balance increased for the fourth quarter in a row. While we continue to focus on transitioning Nokia, cash management remains a priority for our team. We were pleased to complete the sale of Vertu since the end of Q3, and we will continue dispose of non-core assets. Additionally, we are moving our organization through our restructuring faster than we expected. That said, Nokia Group net sales were down sequentially. Thus, we are determined to carefully manage our financial resources, improve our competitiveness, return our Devices & Services business to positive operating cash flow as quickly as possible and, ultimately, provide more value to our shareholders. To achieve this, we are taking deliberate action across our 5 areas of revenue: Smart Devices, Mobile Phones, intellectual property rights, Location & Commerce and NSN. I will…

Thank you, Stephen. I would like to spend a bit of time taking you through the factors which impacted our cash in Q3 before providing more of an overview of the operational performance of our businesses in the third quarter. We continue to have a strong focus on cash as we execute our strategy. On cash, my 3 key areas of focus are: first, returning Devices & Services to positive operating cash flow as soon as possible; second, that NSN continues to be self-funding in all aspects of its operations; and third, continuing to pragmatically monetize non-core assets. In Q3, net cash and other liquid assets decreased by approximately EUR 630 million sequentially, including a negative EUR 130 million foreign exchange impact from translation of cash. The other major items impacting our cash balance during the quarter were: Nokia Group level net profit adjusted for non-cash items of positive EUR 168 million; a negative impact from Nokia Group level net financial expense of approximately EUR 300 million, primarily due to foreign exchange realized losses; a negative impact from the Nokia Group level working capital-related outflows of EUR 200 million, which included approximately EUR 390 million of restructuring-related cash outflows; Nokia Group level CapEx and acquisitions of EUR 110 million; and Nokia Group level cash tax expense of approximately EUR 90 million. Excluding the restructuring-related cash outflows, we generated a total of approximately EUR 190 million cash from working capital in Q3. Cash inflows from working capital, excluding restructuring in NSN and Location & Commerce, were partially offset by cash outflows from working capital, excluding restructuring in Devices & Services. Now turning to NSN. NSN generated, for the fourth quarter in a row, in Q3 a positive cash flow. NSN contributed approximately EUR 320 million to net cash from operating activities…

Thank you, Timo. [Operator Instructions] Operator, please go ahead.

[Operator Instructions] And the first question is from the line of Mike Walkley with Canaccord Genuity.

I'm just wondering if you could help us understand the sustainability of the NSN margins. I do believe this is now maybe a 5% to 10% operating margin business longer-term or is -- maybe you could discuss some of the favorable mix for the second half of 2012.

Thanks, Mike, for the question. First of all, I mean, Q3 clearly we're very pleased with the extent to which NSN performed itself and also how that contributed to the establishment of overall profitability for the Nokia Group on an operative basis. Clearly, with our guidance for NSN for Q4, we've given some indication of how we think things net out in that time period, also allowing for seasonality in Q4 and so forth. We're not updating our guidance as it relates to the long-term operating margin for NSN, which, as we've said in the past, was in the 5% to 10% range. So there's no update to that. But our overall Q4 guidance indicates that we do expect another strong quarter for NSN in Q4.

So maybe if I may, Timo here, so we had really unusually good mix both in product, as well as geography. And regarding product, we had more sales proportionately mobile broadband compared to services, which contributed in line with the NSN new strategy, as well as a better geographic mix, concentrating more on the NSN-focused markets, particularly in APAC and in Japan and Korea, so those both contributed. But I want to highlight that we have also made really good progress on improving the operations. So also the cost of goods sold and OpEx improvements are impacting here. And in that sense, that way, as I said, that we think NSN is better positioned to deal with a possible industry backdrop if that would then happen during 2013.

Your next question is from the line of Jeff Kvaal with Barclays.

Stephen, you had mentioned I think in some prior conference today that you felt that the upcoming year would be a good year to make a dent in the ecosystem battle. Could you clarify a little bit about how you feel that Windows Phone is positioned relative to the other 2 ecosystems? And then within Windows Phone, how are you feeling about your competition with Samsung and, possibly, HTC?

Great. Good questions, Jeff. Thank you. First of all, to give a strategic perspective on the ecosystem battle, and particularly as I think broadly about 2013, there's a dynamic that we're seeing and hearing about and I think is somewhat spilling out into the public discourse as well, particularly in the U.S., and that is increasing concern amongst operators about the concentration of, if you like, power that is landing with 2 particular ecosystems that are obviously quite strong out there today. And as many trends have swung from west to east in the most recent time period, I think you're going to see, and I certainly hope you will see, a similar trend where operators starting in the west begin to say, "We need a third ecosystem to really begin to happen. We really need to double down on it. We need to cause it to happen." Certain operators in the west have made those decisions in the past to combat previous changes in technology or introductions of hit products, and they've been successful in shifting things. And so we're seeing a lot more energy being applied to, as you think about 2013, how do we truly begin to shift that third ecosystem into a position of increasing strength. Now what I match that up against is that strategic imperative that we're hearing from operators against what they have seen from us. And what they have seen from us is not just the Lumia 920 and 820, which you know as the first 2 devices that we're introducing in this next generation, but what they are seeing is now the full breadth of Nokia Smart Devices efforts from the last period of time being applied over the course of 2013. In other words, what they're seeing over the course…

Your next question is from the line of Francois Meunier with Morgan Stanley.

I would like to come back first with as margins in NSN, which look, to some extent, to be true in Q3, and the guidance for Q4 is very strong as well. How sustainable do you think those margins are going to be into next year? Because obviously, as a backdrop for this sector is pretty difficult. We've seen the results of LTE at the beginning of this week, which are not very good. So how sustainable do you think those margins are, especially if you're less aggressive on footprint? The other question is actually on the Location business, and I think that's very kind of you to split the external sales from the internal sales. Could you maybe comment on the difference of profitability between external sales and internal sales for Location, please?

Okay. Timo here. Thanks for the question. And so as I said, NSN during Q3 had an unusually good product mix. But, I also want to highlight that unusually good product mix is in line with NSN's strategy and that we are guiding for 8% positive non-IFRS operating margin for Q4. So it's important to note that NSN has also made sustained improvements in its operations in areas of quality, innovation and efficiency. And for example, NSN now has 67 LTE contracts and had very strong growth in LTE business. So I think those are the drivers you need to take into account when you look into 2013. Then on Location & Commerce, we really do not split the profitability that way on external and internal, so unfortunately, I cannot give more color on that question. We're really trying to highlight the different dynamics of these businesses from top line perspective here.

Your next question is from the line of Gareth Jenkins with UBS.

I just wondered if you could give a sense -- you've given a sense on the operator push in terms of Windows Phone 8. I wonder if you could just give a sense of the consumer pull that you see out there. I know it's early days for Windows Phone 8, but the consumer pull on Windows Phone so far has been, I guess, somewhat wanting, and I just wondered how you see that going forward. And is there enough in the new feature set do you feel to put your prices out at higher levels with higher gross margins? And then I have a follow-up, if that's okay.

Yes, with respect to the consumer pull, I mean, it's hard to judge because, of course, the devices are not in consumers' hands. And also, something that, obviously, has been a deliberate part of both our strategy and Microsoft's strategy is to expose Windows Phone 8 and our product offerings in a series of steps. For example, Windows Phone 8 was shown for the first time in June. More capabilities were shown at our press conference on September 5. And of course, there's still more to be shared in terms of the capabilities and what's going to be delivered that, clearly, we're using and will use much closer to specific device launches to continue to drive consumer end trust. One of the things that I will say is that our decision to talk quite a bit about the 920 and 820 early in September, obviously, some months before device availability, was a very deliberate decision to make sure that we were in the conversation as it relates to the range of devices that are going to be available from our competitors during this season. And I'm sure many of you have seen the reviews, the comparisons, the comparisons of photography capabilities and so forth. And clearly, we've been very, very pleased with the reviews that we're seeing there. So the signs are very positive, but of course, we have to execute in store in order to do that. Now as it relates to prices, clearly, our intention with the next generation of products and so forth is to use those to improve gross margin overall for the Smart Devices business. And you said you had a follow-up.

Yes, just I guess a follow-up is if Microsoft were to launch their own device, would you see that as a stimulant to the ecosystem or a competitor?

Well, I think it's certainly a stimulant to the ecosystem. As I said earlier, we're encouraging HTC and Samsung and Microsoft or whomever to have devices in the market and to be making whatever investments that help spur the ecosystem on. As it relates to the competitive aspects of it, of course, anyone else in the ecosystem is some form of competitor. That being said, we're very proud of the unique differentiation that we are bringing to the Windows Phone platform. And when you look closely at what we're doing with those devices, it is innovation that we've invested in for a number of years. It's not something that's easily replicated or reinvented or anything like that. This is the results of taking those unpolished gems from our R&D labs and landing them in the Lumia product. And of course, that's well protected by intellectual property and something that we would use to differentiate, regardless of who our competition might be.

Your next question is from the line of Jim Suva with Citi.

Regarding the Windows 8 phone launch, can you just maybe help us understand about the strategy or plan for the rollout, meaning, should we expect a giant global rollout or more selective regions? And will you be pushing Windows 8 completely down your entire stack to compete against -- for the low-end emerging market ASP?

Thank you for your comments. So in terms of the launch itself, we are starting very deliberately in select markets with select operators. So I think we talked about this a quarter or 2 ago when we said one of the things we had learned from our first efforts with Lumia is going too broad too early tends to dilute the efforts. And so we're being very deliberate. And of course, as I said a few minutes ago, that translates into the ability to leverage more money from our operator and Microsoft discussions, by having a smaller number of concentrated efforts. So we like that a lot. Now as it relates to price points for the devices, yes, it is our intent to push price points of devices lower and lower with Windows Phone. That relates to my comment earlier about the Lumia 920 and 820 being only the first 2 devices of the next generation of devices, and clearly, part of what we'll be doing is pushing price points lower. But I also want to relate this to the other really important part of our Devices & Services business, which is the Mobile Phones business. The Asha full touch products that we've introduced, of which we sold 6.5 million in Q3 alone, are really doing well, and they're doing well as smartphones. Consumers in emerging markets are using those devices to connect to Facebook, to browse the Internet, to take advantage of what they perceive a smartphone needs to do. But one of the unique capabilities of those Asha products is they've been deliberately engineered for cost-conscious consumers. In other words, when you're browsing the Web, the compression capabilities that we've built into our proxy browser can reduce the data traffic by as much as 90%. The result is less money being spent on data plans. In the western markets with a Lumia product, with an Android product, with an Apple product, people aren't quite as sensitive to that as they are in many of these markets. So we're approaching that market differently. GfK designated those products as smartphones in recognition of how they're being used, but they are a very different proposition that can compete effectively at those lower price points.

Your next question comes from the line of Stuart Jeffrey with Nomura.

To follow up on that last Asha question actually. In the second half of last year, you did really well with your [ph] SIM and some of your first Asha products. And then the momentum went out a little bit as you went through 2012, certainly in the first half. I'm just a bit concerned that a similar dynamic might be coming now. We've got Asha doing very well with the all-touch platforms, but we've got a significant ramp in very cheap Android phones coming out, with third-party proxy browsers available on those as well. And so I was hoping you could perhaps just give a bit more detail as to why you think -- as the price difference perhaps between Android and Asha full touch starts to contract, how you keep that product going and we don't get a repeat of some of the issues that hit us in the first half of this year.

Yes, thank you, and I think the commentary in the first half of this year is quite germane because when you look at that closely, a key driver of that was the fact that we were working on full touch. This part of the price point bands were moving to full touch and full-touch Android devices and so forth, and we weren't there with the products at that moment of transition. We were a quarter or 2 later than that. And I think that explains some of what happened there, and we recognize that. The work that we're doing in the Mobile Phones group, from an R&D perspective, is very much focused on the innovation that we think is necessary in this space to continue to stay ahead and differentiate. So it is the case that you will see over the course of the next year and beyond a number of new products and new innovation introduced to specifically tackle this market and to compete on different terms with Android in those lower price points. And so while full touch itself is innovation and it's good work at those price points, there is still some remarkable work ahead that will land in new products coming in the Asha product range. And a lot of this has to do with how you operate in those lower price points and what capabilities you provide. You highlighted the proxy browser, for example. Sure, there are third-party proxy browsers if the user can get their hands on them. But our technology actually goes a step beyond that. It's not just the browsing capability that's subject to the proxy effect and the reduction in traffic, but it's the social interaction as well. So when you're using the Facebook app, for example, you're getting data compression and other things, and there's a wide array of examples like that, where built into the operating system, from the beginning of Series 40, was this whole concept that the battery's got to last 5 days. The data costs have to be remarkably low. That's something inherent in how the products have been designed as opposed to trying to take older versions of Android and cram them on cheaper hardware platforms.

Your next question is from the line of Mark Sue with RBC Capital Markets.

Stephen and Timo, the big investor concern is that Nokia might run out of cash before Windows Phone builds a successful following. With the exclusivity and strong ties you point to with Microsoft, do you think they might double down and help you increase their platform payments to Nokia? If I look at the net of platform payments and your royalty commitments, I think it's only incremental, and it's particularly coming at a time when you need a lot of sales and marketing to ensure success of your new Lumias.

So I wouldn't want to speculate on the future of the agreement with Microsoft or anything like that. I mean, our relationship with Microsoft is going very well. We're actually...

Does it get stronger, Stephen?

Well, I think...

Does it get stronger or does it stay the same?

I think what you should expect to see is -- I don't know how to characterize stronger, but it certainly gets better with each step that we take. And what I mean by that is we now have a lot more experience working with them. Now we've been their development partner through the full software cycle associated with Windows Phone 8. We are continuing that. The planning process is now well underway for each of the subsequent versions. We're working in lockstep with them on that, as well as on the location-based services side, where I think one of the things that's interesting to note in the industry is the perceived importance of geospatial on location-based services has clearly gone up. And that's not just because of what happens on various other platforms, with map quality and so forth. It's the recognition that these location-based services matter a great deal in resolving search, in delivering great user experiences and so forth. And remembering that Microsoft has a critical dependency on us for location-based services, highlights the importance of this relationship working well in both directions. So it's a relationship that is very, very high volume, very intense, very connected. And at the end of the day, we're proud with -- we're proud of the work that's being done. They love our devices. We love the work that they're doing with the operating system, and we're working with them every day to make it better.

Your next question is from the line of Didier Scemama with Merrill Lynch.

My question, gentlemen, I just would like to ask you about basically the outlook for the feature phone business on the medium-term basis. Clearly, you're putting a lot of investments in the Asha product line, and I was just wondering given that -- thinking that [ph] all your competitors are going out of the market outside of the wet box [ph] market, how do you see the outlook in terms of volume and value on a 5-year basis for this industry? And I have a quick follow-up.

Okay, thank you for the question. Timo here. So clearly, if we look at 5 years out, that is a long time, but that's what we've said. We expect that, that market will continue to be a significant market. I think we have said 2015 out over EUR 20 billion market. And if you have a very strong market share, as we are having currently from that market, that is a large business. On top of that, we need to take the possibility that we build further innovation on top of the Asha platform on the full touch and then push, all the time, the boundary higher as much as we can with the technology and innovation we bring to the market. So I think that's as much as we can say about longer term. But when you look at the market drivers, they only continue to be innovation but also the efficiency. I mean, having 77 million of volumes will continue to give us also benefits on the efficiency side of the equation.

Just on the cash flow side, I was just wondering, if I add the cash contribution from NSN and also take off the EUR 200 million subsidy for the platform coming from Microsoft, it looks like Nokia has burned about EUR 1 billion-plus of cash during the quarter. Is that the right number?

No, I don't think that's the right way to look at it. So basically, if you look at the net cash from operations and NSN contribution to that, which is EUR 320 million, so we end up kind of like outside NSN being about minus EUR 750 million. Out of that, a big part is FX, finance and tax, so you could say EUR 200 million to EUR 250 million. We have about EUR 200 million of restructuring, and then the negative operating results is about EUR 260 million. So I think that's more the right way to look at it. And then if you further split it to networking capital, we see it may be a EUR 50 million to EUR 100 million change in networking capital in Devices & Services.

Your next question comes from the line of Richard Kramer with Arquete [ph] (sic) [Arete].

It's Richard Kramer from Arete. Stephen, I'd like to challenge this notion that operators can shift consumers towards a third ecosystem given they're really facing cash constraints in many markets, and as you move west to east, most of the markets are prepaid and less influenced by operators. So my question is how do you draw the line between what's -- from what you've just said, it seems to be an S40 offering that you're going to put up against low-end Android in some markets. The new efforts you've described about bringing low-cost Win Phone 7.5 products out and the initial Win Phone 8 pricing, which doesn't seem to be significantly under-rivaled [ph] platforms? Will S40 be your third ecosystem or Win Phone or both? And how would you manage that in terms of the different price points you need to hit in the market?

Thanks for the question. Of course, at the end of the day, to your opening comment, consumers get to decide. But of course, having operators support the training, the incentives with sales people, the live devices in their hands and so forth can help to influence that and our studies have made that pretty clear. So of course, time will tell, but the consumers do ultimately get to decide. As it relates to the different platforms, our clear focus for a broad ecosystem offering is with Windows Phone. That's what we're doing. The offering with Series 40, I tend not to think about it as the same breadth of ecosystem or capability that you would see with either a fully functional Android device or fully functional Windows Phone devices. You get down to those lower and lower price points. The actual capability tend to diminish. Or actually said from a consumer perspective, the things that they're trying to do, the focus areas of their interaction, tend to narrow somewhat, in large part because of data constraints. So for example, Facebook, simple Internet browsing, messaging of some form, if you're on a BlackBerry device, it might be BBM, it might be WhatsApp and so forth. And so what we actually expect to see is, yes, windows Phone prices will be pushed down and you'll see product offerings that take us lower and lower in price point. But we also think across the low band of prices, we have an opportunity for very cost-conscious consumers to give them a beautifully designed device at significantly lower prices, that gives them some of the basic smartphone capabilities, as well as the ability to download certain forms of apps and so forth. But at those price points, it's still quite a while at the lowest price points before things like true multitasking and other things that typify either Android or Windows Phone come into play. So there's a lot of different dynamics there to consider. Final comment on your question, you're right that the tendency from west to east is that operators have less influence. However, in the vast majority of countries, the trend is towards more and more operator influence. We're seeing more of that in virtually every country. And that is certainly the case. I've used China as an example, where over the last 18 months, the operators have significantly changed the dynamics, particularly at lower price points, as they have driven programs to increase the number of subscribers at the expense of profitability.

Could I have one quick follow-up on the U.S. market? You had 300,000 phones in North America last quarter. I mean, at what point do you say there's just simply not enough volume there for Nokia to sustain the investment you need to make with the operators?

We think the United States is a very, very important market for signaling purposes. It's where much of the innovation is being experimented with, where it's being driven from and so forth. We also think the operators in the United States are the furthest along in their experiences with the other operating system partners, and therefore, are the most likely to be making investments in the third ecosystem. So we think it's a really, really important market. And we do over-index in our investments on that market. Clearly, we're in a transition quarter, where having spent most of the quarter explaining to the U.S. population about the great innovations that are coming in Q4, one could reasonably expect that, that would impact sales in Q3.

Today's final question will come from the line of Tim Long with Bank of Montreal.

I just wanted to get to -- quite a comment in the outlook. You talked about lower seasonality in Q4, I think referring to Smart Devices. Could you just let us know what is causing that? Do you see that as an industry issue, competitive issue? And also how do you see seasonality in the mobile phone market into the fourth quarter? Do you see the same type of issues, or do you think it's more seasonable because of where the product set is?

Okay, Timo here. Thank you for the question. So when you look at our guidance for Q4, we commented that we expect a lower-than-normal benefit from industry seasonality and smart device volumes in Q4 compared to the 6.3 million units of smart device volume we had in Q3. And in Q4, we are in ramp-up regarding the new Windows Phone products, so it's important to point that we expect to continue to ship also significant volumes in Windows Phone 7.5, as well as Symbian. So we need to take that into account when we look at it. But clearly, we would expect, if you just take that 6.3 million as some kind of a sort of fixed point, then Symbian to go down, which would mean that Lumia would go up on totality. And then on mobile phone seasonality, yes, we would expect to see some seasonality regarding the Mobile Phones business given the holiday season [ph] .

Okay. And if I can just close on the call, I think just starting overall, we see it as an important milestone for the Nokia Group overall to achieve profitability on an operative basis. We think that's an important milestone. Clearly, we have more important milestones ahead. So even though, while Q3 was a difficult quarter in Devices & Services, we're encouraged that we're making progress through this transition. Moving forward, we're very focused on managing our financial resources, improving our competitiveness, returning Devices & Services to positive operating cash flow and, ultimately, providing more value to all of you, our shareholders. So thank you for your participation today, and we look forward to your comments in the days ahead.

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 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 13 through 47 of our 2011 20-F and in our quarterly results press release issued today. Thank you.

Ladies and gentlemen, thank you for joining today's call. You may now disconnect.