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

Business Wire, Feb 12, 1998

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."

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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.

NOKIA TELECOMMUNICATIONS

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).