Seagate said in its recent fiscal second-quarter earnings report that it expects the flooding in Thailand to result in a continued hard drive shortage throughout 2012. The company originally reported issues after flooding affected its factories in October, 2011. In addition, analysts have suggested that the floods could increase laptop and desktop PC prices, and hurt overall sales for major computer vendors. Seagate said that it shipped 47 million hard drives during the second fiscal quarter of 2012, which was down just 4% from the same quarter last year. The company confirmed in its earning statement that it has already secured long-term deals to make sure prices don’t inflate further. 

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Microsoft reported its earnings for the quarter ended December 31st, 2011 Thursday and noted record revenue for its second fiscal quarter. Revenue of $20.89 billion was up 5% from the same period last year. “We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services,” said Steve Ballmer, chief executive officer at Microsoft. “Coming out of the Consumer Electronics Show, we’re seeing very positive reviews for our new phones and PCs, and a strong response to our new Metro style design that will unify consumer experiences across our phones, PCs, tablets, and television in 2012.” Microsoft’s business division reported $6.28 billion in revenue for the quarter, up 3% from the same period last year. Its Server & Tools business recorded $4.77 billion in revenue, up 11% from the same period last year. The Windows and Windows Live Division, however, reported revenue of $4.74 billion, which was down 6% from the same period last year. The company’s profits were recorded at $0.78 per share, beating analyst expectations of $0.76 per share. Microsoft’s full press release follows after the break.

Microsoft Reports Record Revenue of $20.9 Billion in Second Quarter

Strong business demand and holiday sales drive record revenue and EPS.

REDMOND, Wash. — Jan. 19, 2012 — Microsoft Corp. today announced quarterly revenue of $20.89 billion for the quarter ended Dec. 31, 2011, a 5% increase from the prior year period. Operating income, net income, and diluted earnings per share for the quarter were $7.99 billion, $6.62 billion, and $0.78 per share, compared with $8.17 billion, $6.63 billion and $0.77 per share, respectively, in the prior year period. Prior year results include recognition of $224 million of deferred revenue related to the Office 2010 technology guarantee program.

“We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services,” said Steve Ballmer, chief executive officer at Microsoft. “Coming out of the Consumer Electronics Show, we’re seeing very positive reviews for our new phones and PCs, and a strong response to our new Metro style design that will unify consumer experiences across our phones, PCs, tablets, and television in 2012.”

The Microsoft Business Division reported $6.28 billion in second quarter revenue, a 3% increase from the prior year period, and a 7% increase excluding the prior year recognition of deferred revenue for the Office 2010 technology guarantee program. Nearly 200 million licenses of Office 2010 have been sold in the 18 months since launch. Revenue from Exchange and SharePoint grew by 10% or more over the prior year period, and revenue from Lync and Dynamics CRM grew by more than 30%.

The Server & Tools business posted $4.77 billion in second quarter revenue, an 11% increase from the prior year period, reflecting double-digit revenue growth in Windows Server and SQL Server premium editions and more than 20% growth in System Center revenue.

“We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world,” said Peter Klein, chief financial officer at Microsoft. “We delivered record earnings per share by continuing to manage our costs while investing for future growth.”

The Windows and Windows Live Division posted revenue of $4.74 billion, a 6% decline from the prior period. Microsoft has sold over 525 million Windows 7 licenses since launch.

The Online Services Division reported revenue of $784 million, a 10% increase from the prior year period. Bing organic US market share grew to 15.1% while Bing-powered US market share, including Yahoo! properties, was approximately 27%.

The Entertainment & Devices Division posted revenue of $4.24 billion, an increase of 15% from the prior period. The Xbox 360 installed base now totals approximately 66 million consoles and 18 million Kinect sensors. Xbox LIVE now has 40 million members worldwide, an increase of 33% from the prior year period.

“In addition to the continued strength of our commercial business, this holiday season was the strongest in Microsoft history, thanks to good sales execution and compelling products like Xbox 360 and Kinect,” said Kevin Turner, chief operating officer at Microsoft. “We are seeing a lot of excitement for new devices, from Windows 7 Ultrabooks to new Windows Phones, as well as growing anticipation for Windows 8.”

Business Outlook

Microsoft is revising operating expense guidance downward to $28.5 billion to $28.9 billion for the full year ending June 30, 2012.

Webcast Details

Peter Klein, chief financial officer, Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/investor/. The webcast will be available for replay through the close of business on Jan. 19, 2013.

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Acer reported its second-quarter results on Wednesday and revealed its first ever quarterly loss. The company recorded a net loss of NT$6.79 billion, versus Wall Street estimates that the firm would report a NT$3.3 billion loss. The poor performance was blamed on Acer’s focus to clear up “excessive inventory” and on severance payments that were provided to executives who left the firm, Reuters said. In late March, Acer’s CEO Gianfranco Lanci resigned and recent rumors have suggested he will move to Samsung. Acer’s chairman J.T. Wang had originally expected to report positive revenue during the third quarter but he now says it will not be possible for the company to break out of its slump this year. “Today I have to say, trying to break even this year becomes impossible,” Wang said, noting that his company’s restructuring needs more time. Wang recently cut the company’s 2011 tablet forecast to 2.5 million units, down 50% from earlier estimates of 5-7 shipped units, and blamed weak tablet sales on competing devices. Acer founder Stan Shih recently said tablets are a passing “fad,” though we know several research firms that might disagree.

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Gartner on Thursday issued its global mobile phone sales data for the second quarter, which shows that the industry grew 16.5% from the same quarter last year, to 428.7 million units. Smartphone sales jumped 74% year-on-year, with 107.7 million smartphones having been sold to end users around the world. “Smartphone sales continued to rise at the expense of feature phones,” said Roberta Cozza, principal research analyst at Gartner, in a statement. “Consumers in mature markets are choosing entry-level and midrange Android smartphones over feature phones, partly due to carriers’ and manufacturers’ promotions.” Android was the top smartphone operating system in the second quarter with a market share of 43.4% and unit sales totaling 46.78 million devices, and Symbian’s 23.85 million devices secured it a No. 2 position with 22.1% of the smartphone OS market. Apple’s iOS held 18.2% of the smartphone market last quarter, followed by RIM’s BlackBerry OS at 11.7%, Samsung’s Bada OS at 1.9% and Microsoft mobile platforms at 1.6%. Gartner also said Nokia was the world’s top smartphone vendor in the second quarter, though it did not provide data to support this claim in its press release, which follows below.

Gartner Says Sales of Mobile Devices in Second Quarter of 2011 Grew 16.5 Percent Year-on-Year; Smartphone Sales Grew 74 Percent

ZTE Became Fifth-Largest Mobile Phone Manufacturer and RIM Dropped to No. 6

Egham, UK, August 11, 2011—

Worldwide sales of mobile devices to end users totaled 428.7 million units in the second quarter of 2011, a 16.5 percent increase from the second quarter of 2010, according to Gartner, Inc. (see Table 1).

The channel built up stock at the end of the first quarter of 2011 in preparation of possible component shortages following the Japanese earthquake. As a result, sell-in demand slowed in the second quarter of 2011 to 421.1 million units, a 4.4 percent decrease from the previous quarter.

Sales of smartphones were up 74 percent year-on-year and accounted for 25 percent of overall sales in the second quarter of 2011, up from 17 percent in the second quarter of 2010.

“Smartphone sales continued to rise at the expense of feature phones,” said Roberta Cozza, principal research analyst at Gartner. “Consumers in mature markets are choosing entry-level and midrange Android smartphones over feature phones, partly due to carriers’ and manufacturers’ promotions.” However, replacement sales in Western Europe showed signs of fatigue as smartphone sales declined quarter-on-quarter.

Table 1
Worldwide Mobile Device Sales to End Users by Vendor in 2Q11 (Thousands of Units)

Vendor	2Q11 Units	2Q11 Market Share (%)	2Q10 Units	2Q10 Market Share (%)
Nokia	97,869.3	22.8	111,473.7	30.3
Samsung	69,827.6	16.3	65,328.2	17.8
LG	24,420.8	5.7	29,366.7	8.0
Apple	19,628.8	4.6	8,743.0	2.4
ZTE	13,070.2	3.0	6,730.6	1.8
Research In Motion	12,652.3	3.0	11,628.8	3.2
HTC	11,016.1	2.6	5,908.8	1.6
Motorola	10,221.4	2.4	9,109.4	2.5
Huawei Device	9,026.1	2.1	5,276.4	1.4
Sony Ericsson	7,266.5	1.7	11,008.5	3.0
Others	153,662.1	35.8	103,412.6	28.1
Total	428,661.2	100.0	367,986.7	100.0

Source: Gartner (August 2011)

In smartphones, Nokia’s sales into the channel in the second quarter of 2011 were low. This was partly due to a very competitive market that deflated demand for Symbian, but also to inventory management issues in Europe and China in particular. The channel bought less and worked hard to reduce stock levels, partly by cutting prices on older products. These factors reduced Nokia’s average selling price for smartphones, compared to the first quarter of 2011. “The sales efforts of the channel, combined with Nokia’s greater concentration in retail and distributors’ sales, saw Nokia destock more than 9 million units overall and 5 million smartphones, helping it hold on to its position as the leading smartphone manufacturer by volume,” said Ms. Cozza. “However, we will not see a repeat of this performance in the third quarter of 2011, as Nokia’s channel is pretty lean.”

Samsung achieved strong growth in sales of mobile devices. For example, the Galaxy S II sold well, and this model went on to chalk up 5 million sales by the end of July. A strong performance in the smartphone market helped Samsung increase its market share, to become the third-largest smartphone vendor. However, its overall share dropped year-on-year, and grew only marginally quarter-on-quarter, mainly due to Samsung’s weaker presence in more price-sensitive market segments.

Apple continued to exceed expectations, even though the iPhone 4 will soon be replaced by a new model. Part of its growth came from the 42 new carriers and 15 new countries that it entered in the second quarter of 2011, which brought its total coverage to 100 countries. This expansion caused its inventory to grow a little by the end of the second quarter of 2011, when sales to end users stood at 19.6 million units. In mainland China, Apple is the seventh-largest mobile phone vendor and the third-largest smartphone vendor.

Research In Motion’s (RIM’s) share of the smartphone market declined to 12 percent in the second quarter of 2011, from 19 percent a year ago. Also, the company lost its No. 5 position in the worldwide ranking of mobile device vendors to ZTE. Demand for RIM’s devices in the second quarter was impaired by an ageing portfolio and delays in shipping products. In the coming quarters RIM will have to deal with increased competition to its messaging offering and manage a platform migration from BlackBerry 7 to QNX.

Google and Apple are the obvious winners in the smartphone ecosystem. The combined share of iOS and Android in the smartphone operating system (OS) market doubled to nearly 62 percent in the second quarter of 2011, up from just over 31 percent in the corresponding period of 2010 (see Table 2). Gartner analysts observed that these two OSs have the usability that consumers enjoy, the apps that consumers feel they need, and increasingly a portfolio of services delivered by the platform owner as well.

Table 2
Worldwide Smartphone Sales to End Users by Operating System in 2Q11 (Thousands of Units)

Operating System	2Q11 Units	2Q11 Market Share (%)	2Q10 Units	2Q10 Market Share (%)
Android	46,775.9	43.4	10,652.7	17.2
Symbian	23,853.2	22.1	25,386.8	40.9
iOS	19,628.8	18.2	8,743.0	14.1
Research In Motion	12,652.3	11.7	11,628.8	18.7
Bada	2,055.8	1.9	577.0	0.9
Microsoft	1,723.8	1.6	3,058.8	4.9
Others	1,050.6	1.0	2,010.9	3.2
Total	107,740.4	100.0	62,058.1	100.0

Source: Gartner (August 2011)

“We expect manufacturers and distributors to remain cautious about raising their stock levels in the second half of 2011, following the recent uncertainty on the world financial markets,” said Annette Zimmermann, principal research analyst at Gartner. Gartner expects sales of mobile devices to grow around 12 percent in 2011.

For more information, see the Gartner report “Market Share: Mobile Communication Devices by Region and Country, 2Q11” which is available on Gartner’s website at http://www.gartner.com/resId=1764117.

Apple was once again reaffirmed as the world’s No. 1 smartphone vendor on Thursday as market research firm IDC released its data for the June quarter. Smartphone shipments in the second quarter of this year totaled 106.6 million according to IDC, up from 64.4 million in the same quarter last year. Of that total, Apple owned 19.1% with 20.34 million smartphones shipped, making it the top vendor by volume and by profit in the quarter. “Apple’s success can be directly attributed to its distribution (more than 200 carriers in more than 200 countries), increased manufacturing capacity, and solid demand within emerging and developed markets from both consumers and business users,” IDC said. “Apple’s emergence as the number one smartphone vendor worldwide comes at a time when former worldwide leader Nokia is in the midst of a major transition. However, Apple has yet to top Nokia’s single-quarter volume record of 28.1 million units. But given Apple’s momentum in the smartphone market, it may not be a question of whether Apple will beat that milestone, but when.” IDC noted that Samsung was the No. 2 smartphone vendor last quarter with 16.2% and Nokia slid to No. 3 globally with 15.7% of the market. Several other market researchers have released estimates placing Apple at the top of the smartphone totem, including Strategy Analytics, which recently said Apple beat out Samsung (19.2 million smartphones shipped) and Nokia (16.7 million) to take the top spot. It noted, however, that Samsung’s 520% growth year-over-year far exceeded Apple’s 140% growth during the same period.

T-Mobile USA reported its second quarter results on Thursday and noted that it lost 50,000 subscribers during the quarter. That’s a drop, but it’s not as bad as the 93,000 customers the carrier lost during the year ago quarter or the 99,000 customers who left during the first quarter. T-Mobile also recorded $5.1 billion in revenue for the second quarter, down from the $5.2 billion it reported during the first quarter and the $5.4 billion in revenue it pulled in during the same quarter last year. Blended churn, which includes both prepaid and contract customers, was 3.3%. That’s down from the 3.4% reported last quarter. “The United States remains a difficult market for Deutsche Telekom, but we see improvements compared to the first quarter of 2011,” René Obermann, CEO of Deutsche Telekom said. “T-Mobile USA will continue its strategy with the extended HSPA+ 42 coverage and continued data growth.” Read on for the full press release.

T-Mobile USA Reports Second Quarter of 2011 Results

Adjusted OIBDA of $1.3 billion in the second quarter of 2011, up from $1.2 billion in the first quarter of 2011 but down from $1.4 billion in the second quarter of 2010

Service revenues in the second quarter of 2011 of $4.6 billion, consistent with the first quarter of 2011, but down 1.7% from $4.7 billion in the second quarter of 2010

Contract ARPU of $53 in the second quarter of 2011, up from $52 in the first quarter of 2011 and each of the previous four quarters

Data ARPU of $13.60 in the second quarter of 2011, up $2.00 or 17.2% from the second quarter of 2010

Net customer losses of 50,000, an improvement from 99,000 net customer losses in the first quarter of 2011 and 93,000 net customer losses in the second quarter of 2010

Nearly 10 million customers using 3G/4G smartphones as of the second quarter of 2011, an increase of 50% from the second quarter of 2010

America’s Largest 4G Network™ currently covers over 200 million people in over 190 markets and is being upgraded to even faster speeds (HSPA+ 42), which now covers more than 170 million people in over 100 markets

BELLEVUE, Wash.–(BUSINESS WIRE)–T-Mobile USA, Inc. (“T-Mobile USA”) today reported second quarter 2011 results. For the second quarter of 2011, T-Mobile USA reported service revenues of $4.6 billion, consistent with service revenues in the first quarter of 2011, and adjusted OIBDA of $1.3 billion, up from $1.2 billion reported in the first quarter of 2011. The number of Americans covered by our 4G network and the number of our customers using 3G/4G smartphones both continued to increase significantly during the quarter, driving growth in data ARPU. Additionally, net customer losses were 50,000 in the second quarter of 2011, nearly a 50% improvement from the 99,000 net customer losses in the first quarter of 2011.

“In a challenging market, we are seeing some encouraging trends in the quarter, particularly with our prepaid product growth and our year-on-year contract ARPU increase, thanks to all-time high of 29% of our customer base using 3G/4G smartphones. While contract churn continues to be high, we are focused on upgrading our customers to higher quality products and concentrating on retaining our loyal customers,” said Philipp Humm, President and CEO of T-Mobile USA. “We also continue to focus on customer value through further network upgrades where we now reach more than 170 million Americans with even faster speeds, through our large 4G Android device portfolio, and by offering affordable unlimited rate plans.”

“The United States remains a difficult market for Deutsche Telekom, but we see improvements compared to the first quarter of 2011. T-Mobile USA will continue its strategy with the extended HSPA+ 42 coverage and continued data growth,” said René Obermann, CEO of Deutsche Telekom.

Customers

T-Mobile USA served 33.6 million customers (as defined in Note 1 to the Selected Data, below) at the end of the second quarter of 2011, generally consistent with the first quarter of 2011 and the second quarter of 2010.

In the second quarter of 2011, net customer losses were 50,000, compared to net losses of 99,000 in the first quarter of 2011 and 93,000 in the second quarter of 2010.

In the second quarter of 2011, partner branded customers, representing our Wal-Mart Family Mobile business, were reclassified to the contract category from prepaid as the hybrid product, introduced in the third quarter of 2010, has demonstrated product characteristics more closely associated with T-Mobile USA’s other contract products. Prior quarter amounts have been restated to conform to current period customer reporting classifications.

Contract net customer losses were 281,000 in the second quarter of 2011, an improvement of 26% from the 382,000 net contract customer losses in the first quarter of 2011, but a decline from the 106,000 net contract customer additions in the second quarter of 2010.

Sequentially, the improvement in net contract customer losses was driven primarily by the introduction of new unlimited rate plans in the second quarter and faster growth in our connected device business.

The decline in contract customers in the second quarter 2011 when compared to the second quarter of 2010 was due to intense competitive pressures in the US wireless marketplace and the implementation of strengthened credit standards as part of T-Mobile USA’s focus on improving customer quality.

Additionally, connected device net customer additions, included within contract customers (as defined in Note 1 to the Selected Data, below), were 256,000 in the second quarter of 2011, an improvement of 33% compared to 192,000 in the first quarter of 2011 and 27% compared to 202,000 in the second quarter of 2010. Connected device customers totaled 2.3 million at June 30, 2011.

Prepaid net customer additions, including MVNO customers (as defined in Note 1 to the Selected Data, below), were 231,000 in the second quarter of 2011, down 18% compared to 283,000 in the first quarter of 2011 and up substantially from the 199,000 net losses in the second quarter of 2010.

The sequential decline in prepaid net customer additions was due primarily to fewer FlexPay non-contract gross customer additions which were offset in part by customer growth in traditional prepaid plans.

Year-on-year, prepaid net customer additions increased primarily due to the growth in customers including MVNOs, purchasing prepaid monthly unlimited plans.

MVNO customers continued to grow in the second quarter of 2011, totaling 3.5 million as of June 30, 2011.

Churn

Blended churn (as defined in Note 3 to the Selected Data, below), reflecting both contract and prepaid customers, decreased to 3.3% in the second quarter of 2011 from 3.4% in both the first quarter of 2011 and the second quarter of 2010.

The sequential and year-on-year decrease in blended churn was primarily driven by lower churn from T-Mobile USA branded customers (excluding MVNO and connected devices).

Contract churn was 2.4% in the second quarter of 2011, consistent with the first quarter of 2011 but up from 2.2% in the second quarter of 2010.

The year-on-year increase in contract churn was primarily driven by competitive pressures in the US wireless industry which have continued to negatively impact T-Mobile USA’s contract customer base.

Prepaid churn decreased in the second quarter of 2011 to 6.6%, from 6.7% in the first quarter of 2011 and 7.6% in the second quarter of 2010.

The sequential decrease in prepaid churn was driven by a shift in the customer base towards traditional prepaid products, which was partially offset by higher MVNO churn.

Year-on-year, prepaid churn decreased due to lower traditional prepaid product churn resulting from the success of T-Mobile USA’s recently introduced prepaid monthly unlimited plans.

Adjusted OIBDA and Net Income

T-Mobile USA reported adjusted OIBDA (as defined in Note 8 to the Selected Data, below) of $1.3 billion in the second quarter of 2011, compared to $1.2 billion in the first quarter of 2011 and $1.4 billion in the second quarter of 2010.

OIBDA was adjusted in the second quarter of 2011, to exclude AT&T transaction-related costs of $13 million, primarily consisting of employee-related expenses.

Sequentially, adjusted OIBDA increased due to lower handset subsidies and upgrade expenses in the second quarter of 2011 as compared to the first quarter of 2011, which included more costly customer loyalty initiatives.

Year-on-year, second quarter adjusted OIBDA decreased as a result of lower service revenue as described above. Additionally, higher network expenses related to the continued investment in T-Mobile USA’s 4G network were offset in part by lower volume-driven commission expenses and lower expenses resulting from T-Mobile USA’s Reinvent cost saving initiative program.

Adjusted OIBDA margin (as defined in Note 9 to the Selected Data, below) was 28% in the second quarter of 2011, up from 26% in the first quarter of 2011 but down from 30% in the second quarter of 2010.

Net income in the second quarter of 2011 was $212 million, up 57% when compared to $135 million in the first quarter of 2011 and down 48% from the $404 million reported in the second quarter of 2010.

Sequentially and year-on-year, the changes in net income were driven by the same factors impacting adjusted OIBDA, as described above. Additionally, certain fair value adjustments related to our financial instruments impacted Other expense, net, contributing to the changes in net income.

Revenue

Service revenues (as defined in Note 4 to the Selected Data, below) were $4.6 billion in the second quarter of 2011, consistent with $4.6 billion in the first quarter of 2011 and down 1.7% from $4.7 billion in the second quarter of 2010.

Service revenues in the second quarter of 2011 were positively impacted by data revenue growth, driven by increased adoption of mobile broadband data and unlimited text plans by our customers, seasonally higher roaming revenue and higher prepaid revenues from the growth in monthly unlimited plan adoption. These revenue growth drivers were more than offset by voice revenue declines related to net losses of branded customers, compared to the first quarter of 2011.

Year-on-year, quarterly service revenues decreased primarily due to contract customer losses, which were partially offset by the increased adoption of data plans in our contract and prepaid customer base and from T-Mobile USA directly providing handset insurance services to its customers.

Total revenues, including service, equipment, and other revenues were $5.1 billion in the second quarter of 2011, down from $5.2 billion in the first quarter of 2011 and $5.4 billion in the second quarter of 2010.

Equipment revenues decreased sequentially and year-on-year due primarily to lower handset sales volumes.

ARPU

Blended Average Revenue Per User (“ARPU” as defined in Note 4 to the Selected Data, below) was $46 in the second quarter of 2011, consistent with the first quarter of 2011, but lower than $47 in the second quarter of 2010 driven by a shift in the customer base towards prepaid plans.

Contract ARPU was $53 in the second quarter of 2011, up from $52 in the first quarter of 2011 and each of the previous four quarters.

Sequentially and year-on-year, contract ARPU increased as data revenue growth more than offset lower voice revenue. In addition, the year-on-year increase benefitted from handset insurance contract revenues due to the launch of the directly-provided T-Mobile Personal Handset Protection insurance and warranty program in the fourth quarter of 2010.

Prepaid ARPU was $18 in the second quarter of 2011, consistent with both the first quarter of 2011 and second quarter of 2010.

Data service revenues (as defined in Note 4 to the Selected Data, below) were $1.4 billion in the second quarter of 2011, up 17% from the second quarter of 2010. Data service revenues in the second quarter of 2011 represented 30% of blended ARPU, or $13.60 per customer, up from 29% of blended ARPU, or $13.10 per customer in the first quarter of 2011, and 25% of blended ARPU, or $11.60 per customer in the second quarter of 2010.

In the second quarter of 2011, the increase in the number of customers using smartphones and the continued upgrade of the 3G and 4G networks drove Internet access revenue growth through the increasing adoption of mobile broadband data plans.

9.8 million customers were using smartphones enabled for the T-Mobile USA 3G/4G network (as defined in Note 12 to the Selected Data, below) such as the T-Mobile® myTouch® 4G, T-Mobile® G2x® with Google™, and the Samsung Galaxy S™ 4G at the end of the second quarter of 2011. This represents a net increase of 50% or nearly 3.3 million customers using smartphones from the second quarter of 2010.

3G/4G smartphone customers now account for 29% of total customers, up from 27% in the first quarter of 2011 and 19% in the second quarter of 2010.

Messaging revenue (as defined in Note 5 to the Selected Data, below) also increased sequentially in the second quarter of 2011 with customers moving towards unlimited plans including messaging. Messaging accounted for approximately 35% of total data revenues, compared to 37% in the second quarter of 2010.

CPGA and CCPU

The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 7 to the Selected Data, below) was $320 in the second quarter of 2011, up from $300 in the first quarter of 2011, but down from $330 in the second quarter of 2010.

Sequentially, CPGA increased in the second quarter of 2011 primarily due to higher handset subsidies as T-Mobile USA offered a variety of incentives to attract customers.

Compared to the second quarter of 2010, CPGA decreased primarily due to lower commission expenses and a shift in the mix of customer additions towards MVNO and connected device customers.

The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 6 to the Selected Data, below), was $23 per customer per month in the second quarter of 2011, down from $25 in the first quarter of 2011 and consistent with the second quarter of 2010.

CCPU decreased in the second quarter of 2011 compared to the first quarter of 2011 due to lower equipment subsidies from customer loyalty initiatives than were offered in the first quarter of 2011.

Capital Expenditures

Cash capital expenditures (as defined in Note 10 to the Selected Data, below) were $688 million in the second quarter of 2011, compared to $749 million in the first quarter of 2011 and $682 million in the second quarter of 2010.

Sequentially, the decrease in cash capital expenditures was a result of payment timing differences which were partially offset by an increase in incurred capital expenditures during the quarter. In the second quarter of 2011, incurred capital expenditures were the result of the continued build-out of the HSPA+ 21 and HSPA+ 42 networks (as defined in Note 11 to the Selected Data, below).

Compared to the second quarter of 2010, cash capital expenditures were consistent and continued to be incurred to allow for network coverage expansion and the upgrade to HSPA+ 42.

T-Mobile USA currently offers its customers America’s Largest 4G Network with HSPA+ 21 service available in over 190 markets reaching over 200 million people.

To further improve the value provided to customers through its 4G mobile broadband network, T-Mobile USA has continued to invest in its HSPA+ 42 network, which reached over 170 million people as of the end of the second quarter of 2011, doubling the theoretical speed of its 4G network to 42 Mbps.

T-Mobile USA Recent Highlights

On March 20, 2011, Deutsche Telekom AG and AT&T Inc. entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash and stock transaction valued at approximately $39 billion, subject to adjustment in accordance with the agreement. The agreement has been approved by the Board of Directors of both companies, and is expected to provide an optimal combination of network assets to add capacity and provide an opportunity to improve network quality in the near term for the customers of both companies. In particular, the transaction is important to address spectrum constraints and gives T-Mobile USA customers a clear path to take advantage of new generation LTE (Long Term Evolution) services. The transaction is expected to close in the first half of 2012, subject to regulatory approvals and other closing conditions. As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of approximately 8 percent and one seat on the AT&T Board of Directors.

During the second quarter of 2011, and again in July 2011, T-Mobile USA introduced a series of new “Value” rate plans that provide exceptional value and choice to the wireless consumer, reinforcing a focus on making it more affordable for customers to experience America’s Largest 4G Network. These plans include offerings of unlimited talk, text and data services to individuals and families (both with and without handset subsidies).

T-Mobile USA continues to unveil leading devices including the HTC Sensation™ 4G and the myTouch® 4G Slide to leverage America’s Largest 4G Network.

In August 2011, T-Mobile USA announced a new partnership with 7-Eleven Stores, Inc. to provide a prepaid no contract handset and service through the retail chain’s 7-Eleven® stores.

T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (OTCQX: DTEGY). In order to provide comparability with the results of other US wireless carriers, all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States (“GAAP”). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).

This press release includes non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations from the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below following Selected Data and the financial statements.

HTC posted impressive second-quarter results on Friday noting that its revenues of NT$12.4 billion ($4.3 billion) were up 104% year-over-year and up 19% over the first quarter. The Taiwanese phone maker’s shipment total of 12.1 million devices during the quarter was up 24% year-over-year and 25% quarter-over-quarter. The company also noted that it shipped a total of 21.8 million devices during the first half of the year, a big jump from the 8.7 million it shipped during the first half of 2010. HTC noted that much of its growth came from the Americas, Europe and Asia. The average selling price of an HTC smartphone is currently $349, down from the average price of $359 last quarter thanks to new entry-level handsets. HTC expects its third quarter revenue to jump 10% quarter-over-quarter and 90% year-over-year, and plans to sell “around” 13.5 million handsets. Read on for a link to the PDF of HTC’s second quarter results.

Read [PDF]

Motorola Mobility on Thursday released its second quarter 2011 earnings and despite recent analyst downgrades, the company recorded a strong quarter. Motorola posted net revenues of $3.3 billion, up 28% from the same time period last year. In addition, mobile device revenues were $2.4 billion, up 41% from the second quarter of 2010. Motorola Mobility shipped a total of 11 million devices, including 4.4 million smartphones and 440,000 units of its XOOM Android tablet. That’s a large improvement over the 8.3 million mobile devices the firm shipped during the year-ago quarter. CEO Sanjay Jha also told CNET in a recent interview that the Verizon Wireless DROID BIONIC will finally launch in September. In addition, Motorola Mobility will introduce two new tablets and two 4G LTE smartphones. One of the tablets will have a 10-inch screen while the other will have a smaller display. “You’ll like the look of the tablet,” Jha said. “The consumer and carrier feedback has been positive. We want to compete. We think we have competitive products in the marketplace, and we’ve got good design wins in the U.S.” Read on for the full press release.

Motorola Mobility Announces Second-Quarter Financial Results

Second Quarter Financial Highlights

Net revenues of $3.3 billion, up 28 percent from second quarter 2010
GAAP net loss of $0.19 per share compared to net earnings of $0.27 per share in second quarter 2010
Non-GAAP earnings of $0.09 per share compared to $0.30 loss in second quarter 2010
Mobile Devices revenues of $2.4 billion, up 41 percent from second quarter 2010; GAAP operating loss of $85 million; non-GAAP operating loss of $31 million
Shipped 11.0 million mobile devices, including 4.4 million smartphones and 440,000 tablets
Home revenues of $907 million, up 2 percent from second quarter 2010; GAAP operating earnings of $62 million; non-GAAP operating earnings of $90 million
Click here for printable press release and financial tables.

LIBERTYVILLE, Ill. – July 28, 2011 – Motorola Mobility Holdings, Inc. (NYSE: MMI) today reported net revenues of $3.3 billion in the second quarter of 2011, up 28 percent from the second quarter of 2010. The GAAP net loss in the second quarter of 2011 was $56 million, or $0.19 per share, compared to net earnings of $80 million, or $0.27 per share, in the second quarter of 2010. On a non-GAAP basis, the net earnings in the second quarter of 2011 were $26 million, or $0.09 per share, compared to a loss of $87 million, or $0.30 per share, in the second quarter of 2010.

Total cash at the end of the quarter was $3.2 billion and includes cash, cash equivalents and cash deposits, and operating cash flow was breakeven for the quarter.

Details on non-GAAP adjustments and the use of non-GAAP measures are included later in this press release and in the financial tables.

“In the second quarter, Mobile Devices launched several new smartphones in the U.S. and markets around the world. Revenues grew over 40 percent driven largely by Latin America and China where sales more than doubled year over year. Our Home business delivered another strong performance, and we introduced several innovative products and services for next generation multi-screen video solutions,” said Sanjay Jha, chairman and chief executive officer, Motorola Mobility. “With a focus on profitable growth and delivering differentiated LTE smartphones and tablets, we expect to achieve profitability in Mobile Devices in the fourth quarter and for the full year 2011.”

Operating Results

Mobile Devices net revenues in the second quarter were $2.4 billion, up 41 percent compared with the year-ago quarter. The GAAP operating loss was $85 million compared to operating earnings of $87 million in the year-ago quarter. The non-GAAP operating loss was $31 million compared to an operating loss of $109 million in the year-ago quarter. The Company shipped a total of 11.0 million mobile devices, including 4.4 million smartphones and 440,000 Motorola XOOM™ tablets. In the second quarter of 2010, the company shipped 8.3 million mobile devices, including 2.7 million smartphones.

Mobile Devices highlights:

Expanded Motorola DROID family at Verizon Wireless with the introduction of DROID X2 and DROID 3 by Motorola both featuring a dual-core 1GHz processor, providing better gaming experiences, web browsing, multi-tasking, and Adobe® Flash® video performance.

Launched 4 new smartphones in China, including the Motorola XT883 with China Telecom, the newest and most advanced member of the powerful Milestone™ product family, and the XT316, Motorola’s first value priced smartphone for emerging market consumers.

Announced plans to launch 10 devices in 2011 with Sprint, including Motorola Photon™ 4G, Sprint’s first international smartphone, the ready-for business Motorola XPRT™ smartphone, the Motorola TITANIUM™ smartphone featuring iDEN technology, and Motorola TRIUMPH™, a value priced smartphone for prepaid customers on Virgin Mobile USA Expanded distribution of the ATRIX™ 4G smartphone and Motorola XOOM tablets into Latin America, China, Korea, and Europe.

Named exclusive U.S. launch marketing partner for mobile devices and tablets by Spotify. Spotify is an award-winning digital music service that gives users on-demand access to one of the world’s largest music libraries.

Home segment net revenues in the second quarter were $907 million, up 2 percent compared with the year-ago quarter. GAAP operating earnings were $62 million, compared to $29 million in the year-ago quarter. Non-GAAP operating earnings increased to $90 million from $58 million in the year-ago quarter. The Company maintained its leadership in key markets with set-top shipments up more than 10 percent as compared to the year-ago quarter.

Home highlights:

Introduced Motorola Televation™, a broadband video device enabling consumers to watch live TV on a connected IP device anywhere around the home.
Launched the Medios Xperience platform which enables operators to merge video content with social networking, games and web-based content, and deliver more interactive functionality with broadcast television and video-on-demand services.
Selected by Time Warner Cable to develop a video gateway platform capable of delivering an advanced in-home entertainment experience and announced the DCX3600M, Motorola’s first video gateway device.
Selected by ESPN to transition all programming for ESPN and ESPN-2 networks to an MPEG-4 HD format using Motorola’s video distribution solution.
Third-Quarter and 2011 Outlook

The Company’s outlook for the third quarter and full year 2011 is the following:

Third-quarter net earnings per share of $0.00 to $0.10
2011 net earnings per share of $0.48 to $0.60
Excludes charges associated with items of the variety typically highlighted by the Company in its quarterly earnings results, stock-based compensation expense and intangible assets amortization expense
Consolidated GAAP Results
Conference Call and Webcast

Motorola Mobility will host its quarterly conference call beginning at 5:00 p.m. (U.S. Eastern Time) on Thursday, July 28. The conference call will be webcast live with audio and slides at http://investors.motorola.com.

Use of Non-GAAP Financial Information

In addition to the GAAP results included in this presentation, Motorola Mobility also has included non-GAAP measurements of results. Motorola Mobility has provided these non-GAAP measurements to help investors better understand Motorola Mobility’s core operating performance, enhance comparisons of Motorola Mobility’s core operating performance from period to period, and allow better comparisons of Motorola Mobility’s operating performance to that of its competitors. Among other things, the Company’s management uses these operating results, excluding the identified items, to evaluate the performance of its businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results, excluding these items, because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of its core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the Company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP.

Highlighted items: The Company has excluded the effects of highlighted items (and any material reversals of highlighted items recorded in prior periods) from its non-GAAP operating expenses and net income measurements because the Company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the Company’s current operating performance or comparisons to the Company’s past operating performance.

Stock-based compensation expense: The Company has excluded stock-based compensation expense from its non-GAAP operating expenses and net income measurements. Although stock-based compensation is a key incentive offered to our employees and the Company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues – the Company continues to evaluate its performance excluding stock-based compensation expense primarily because it represents a significant non-cash expense. Stock-based compensation expense will recur in future periods.

Intangible assets amortization expense: The Company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net income measurements, primarily because it represents a significant non-cash expense and because the Company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the Company’s acquisitions. Investors should note that the use of intangible assets contributed to the Company’s revenues earned during the periods presented and will contribute to the Company’s future period revenues as well. Intangible assets amortization expense will recur in future periods. Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.

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LG on Wednesday reported second-quarter earnings that showed notable growth, though the consumer electronics giant still hasn’t found a way to return its mobile business to profitability. The company’s revenue for the quarter reached KRW 14.4 trillion (U.S. $13.3 billion), up 9.3% sequentially. Following two straight quarters of losses, LG reported a net profit of KRW 108 billion (U.S. $99.6 million) in the second quarter thanks to solid TV sales and cost-cutting efforts. The company’s operating income of KRW 158 billion (U.S. $145.8 million) was up 25% from the same quarter last year, and up 21% over the first quarter. LG’s mobile business is still struggling, however; despite improved performance, LG Mobile Communications Company still reported a loss of KRW 54 billion (U.S. $49.8 million) on sales of KRW 3.25 trillion (U.S. $3 billion), up 11.6% compared to the first quarter. The South Korean firm said it expects to see modest year-over-year growth in the third quarter. LG’s full press release follows below.

LG ANNOUNCES SECOND-QUARTER 2011 FINANCIAL RESULTS

Net Profit Turns to Black with High-End Products,
Aggressive Cost Cutting, and Improved Investment Income from Affiliates

SEOUL, July 27, 2011 — LG Electronics (LG) today announced unaudited consolidated financial results based on IFRS (International Financial Reporting Standards) for the three-month period ending June 30, 2011. The turnaround in net profit reflected steady improvements in its businesses and successful cost-reduction efforts, in line with analysts’ estimates.

Sales and Profit

LG posted consolidated second quarter 2011 revenues of KRW 14.4 trillion (USD 13.3 billion) a 9.3 percent increase from the previous quarter. After two consecutive quarters of losses, LG turned the corner with a net profit of KRW 108 billion (USD 99.6 million). LG reported an operating profit of KRW 158 billion (USD 145.8 million) this quarter, a 21 percent increase from the previous quarter and a 25 percent increase from the previous year, thanks to higher profitability for the TV business and reduced losses in handsets.

LG Home Entertainment Company posted a quarter-over-quarter sales increase of 2.7 percent to KRW 5.4 trillion (USD 5.0 billion) thanks to higher revenues from LED LCD TVs, its new CINEMA 3D TVs and general business growth in developing markets. The HE Company posted a KRW 90 billion (USD 83.0 million) operating profit in the second quarter, a 10 percent increase over the previous quarter as a result of better product mix and cost controls. The company expects to see sales continue to rise with the anticipated strong consumer acceptance of its film patterned retarder (FPR) CINEMA 3D TVs as well as smart TVs.

LG Mobile Communications Company reported an 11.6 percent increase in sales in the second quarter compared to the previous quarter, to KRW 3.25 trillion (USD 3.0 billion). While recording a loss of KRW 54 billion (USD 49.8 million), operating income showed strong improvement, reducing losses from the previous quarter by almost half. The company continues to strengthen its global competitiveness by launching a mix of competitive smartphones and its continued investment in R&D.

LG Home Appliance Company posted record-high quarterly sales of KRW 2.9 trillion (USD 2.7 billion) from April to June 2011, a 6.9 percent increase from the previous quarter and a 6.0 percent increase year-over-year, primarily due to strong sales in emerging markets. Although revenue grew and product offerings improved, operating profit of KRW 51 billion (USD 47.1 million) reflected an increase in raw material costs, appreciation of the Korean won and greater market competition. The Home Appliance Company intends to maintain its market leadership by introducing more energy-efficient and “smarter” products in the second half while continuing to control costs.

LG Air Conditioning and Energy Solution Company grew its second quarter revenues by 29.2 percent quarter-over-quarter and 15.3 percent year-over-year to KRW 1.9 trillion (USD 1.7 billion) by focusing on product quality and launching new products with superior features. The company posted a KRW 44 billion (USD 40.6 million) operating profit, a 13 percent increase quarter-over-quarter. Operating profit margin was 2.3 percent in light of higher raw material costs and unfavorable foreign exchange rates. Although the market is entering its slow season, the company still expects demand to increase in key strategic regions.

2011 3Q Business Direction and Prospects

LG Electronics expects to see modest growth year-over-year in the third quarter of 2011 with new product launches in major categories and creative marketing activities across its various 3D products. For the long-term, the company will continue to strengthen profitability through aggressive cost innovation and strategic investments in existing as well as new business areas.

2011 2Q Exchange Rates Explained

LG Electronics unaudited earnings results are based on IFRS. Amounts in Korean won (KRW) are converted into US Dollars (USD) at the average rate of the three month period in each corresponding quarter: KRW 1,084 per USD (2011 2Q) and KRW 1,163 per USD (2010 2Q).

Verizon Communications on Friday reported second-quarter earnings that topped the Street’s estimates, though it failed to match AT&T’s impressive wireless growth during the quarter. Revenue climbed to $27.5 billion in the June quarter, up 2.8% from the same quarter last year. EPS was up 6 cents sequentially to $0.57, a huge swing from the second quarter in 2010 when Verizon reported a loss of $0.42 per share. In wireless, the carrier netted 2.2 million subscribers — or “total connections,” rather — excluding gains made through acquisitions, and service revenues climbed 6.6% year-over-year. Verizon now reports total connections, which include machine to machine devices and other non-standard subscribers, and its total now sits at 106.3 million. The carrier also said that it activated 2.3 million iPhone 4 handsets in the June quarter. “In terms of earnings growth and the acceleration of revenue growth, this has been one of Verizon’s best quarters since the 2008 economic downturn,” said Verizon Chairman and CEO Ivan Seidenberg in a statement. “We expanded sequential margins in both our wireline and wireless businesses, and in the second half of the year we expect Verizon to build on this strong, positive momentum to continue to drive profitable, sustainable growth.” The company also noted that Ivan Sandberg will step down as CEO, replaced by Lowell McAdam. Sandberg will retail is his as chairman of the board. Verizon’s full press release follows below.

Verizon Reports Accelerated Revenue Growth, Expanded Margins and Strong 2Q Earnings Performance

2Q HIGHLIGHTS

Consolidated

·        57 cents in diluted earnings per share (EPS), compared with a loss of 42 cents per share and adjusted EPS (non-GAAP) of 51 cents in 2Q 2010.

Wireless

·        6.6 percent year-over-year increase in service revenues in 2Q 2011; data revenues up 22.2 percent; 27.1 percent operating income margin and 45.4 percent Segment EBITDA margin on service revenues (non-GAAP).

·        2.2 million net additions, excluding acquisitions and adjustments, includes 1.3 million retail postpaid net customer additions; 106.3 million total connections, includes 89.7 million retail customers.

·        Retail postpaid churn of 0.89 percent, the lowest in three years.

Wireline

·        189,000 FiOS Internet and 184,000 FiOS TV net additions.

·        9.4 percent year-over-year increase in consumer ARPU; FiOS consumer retail revenues represent approximately 57 percent of total consumer revenues.

·        17.8 percent increase in strategic services revenues, representing approximately 48 percent of total global enterprise revenues.

NEW YORK — Verizon Communications Inc. (NYSE, NASDAQ: VZ) today reported accelerated revenue growth and improved margins across its business groups, leading to a strong earnings performance in second-quarter 2011.

Verizon reported 57 cents in EPS in the quarter, compared with a second-quarter 2010 loss of 42 cents per share.

There are no adjustments to second-quarter 2011 earnings results.  Adjusted second-quarter 2010 earnings were 51 cents per share, excluding the impact of divestitures and non-operational charges (non-GAAP).  The most significant 2010 charges related to a workforce-reduction incentive offer that led to approximately 11,900 voluntary separations last year.

Strong, Positive Momentum

“In terms of earnings growth and the acceleration of revenue growth, this has been one of Verizon’s best quarters since the 2008 economic downturn,” said Chairman and CEO Ivan Seidenberg.  “We expanded sequential margins in both our wireline and wireless businesses, and in the second half of the year we expect Verizon to build on this strong, positive momentum to continue to drive profitable, sustainable growth.”

Seidenberg added: “We expect Verizon Wireless to gain share in the retail postpaid market and widen its network-quality lead throughout 2011.  We also continue to see strong customer demand for FiOS Internet and TV, and for cloud and other strategic services.  At the same time, we remain focused on our cost structure, as we deliver improvements in wireline margins quarter after quarter.”

Consolidated Revenue Growth Continues to Accelerate

On a consolidated basis, Verizon’s total operating revenues were $27.5 billion in second-quarter 2011, an increase of 2.8 percent compared with second-quarter 2010.  Last year’s results included revenues from operations that have since been divested.

On a comparable basis (non-GAAP), second-quarter 2011 total operating revenues increased 6.3 percent compared with second-quarter 2010.  This was Verizon’s strongest quarter for consolidated revenue growth in 10 quarters.

Also on a comparable basis, consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for second-quarter 2011 totaled $9.0 billion, up 5.2 percent year over year.

Cash flow from operating activities totaled $12.8 billion in the first half of 2011, down from $16.8 billion in the first half of 2010.  Last year’s total included cash flow from businesses that have since been divested and the timing of favorable tax-related impacts, and 2011 totals include inventory purchases for wireless devices and the impact of previously announced pension-fund payments in first-quarter 2011.  Verizon said its cash flow outlook for the remainder of 2011 remains very strong.

The company aggressively invested in growth opportunities in the first half of 2011.  One example is the deployment of Verizon’s nationwide 4G LTE (fourth-generation, Long-Term Evolution) wireless broadband network.  In first-half 2011, Verizon’s capital expenditures totaled $8.9 billion, compared with $7.6 billion in first-half 2010.

Verizon continues to expect full-year 2011 capital spending to be similar to its 2010 investment of $16.5 billion.

Verizon Wireless Delivers Another Strong Quarter

Verizon Wireless delivered strong growth in revenues, retail customers and other connections, driven by increased smartphone penetration and increased retail postpaid ARPU (average monthly service revenue per user).  In the second quarter of 2011:

Wireless Financial Highlights

·        Service revenues in the quarter totaled $14.7 billion, up 6.6 percent year over year.  Data revenues were $5.8 billion, up $1.1 billion or 22.2 percent year over year, and represent 39.5 percent of all service revenues.  Total revenues were $17.3 billion, up 10.2 percent year over year.

·        Retail postpaid ARPU grew 1.9 percent or $1.00 over second-quarter 2010, to $54.12. Retail postpaid data ARPU increased to $21.26, up 15.2 percent year over year.  Retail service ARPU also grew 1.9 percent, to $52.49.

·        Wireless operating income margin was 27.1 percent.  Segment EBITDA margin on service revenues (non-GAAP) was 45.4 percent.

Wireless Operational Highlights

·        Verizon Wireless added 2.2 million total connections, including 1.3 million retail postpaid customers, and 890,000 wholesale and other connections.  These additions exclude acquisitions and adjustments.

·        At the end of the second quarter, the company had 106.3 million total connections, an increase of 6.6 percent year over year, including 89.7 million retail customers and 16.6 million wholesale and other connections.

·        At the end of the second quarter, smartphones were 36 percent of Verizon Wireless’ retail postpaid customer phone base, up from 32 percent at the end of first-quarter 2011.

·        Retail postpaid churn was 0.89 percent, the lowest in the industry and the company’s lowest since second-quarter 2008.  Total retail churn was 1.22 percent, an improvement of 9 basis points year over year and 11 basis points sequentially.

·        Verizon Wireless continued to roll out its 4G LTE mobile broadband network during the quarter.  As of yesterday (July 21), Verizon Wireless 4G LTE service is available in 102 markets across the country, covering a population of more than 160 million.  By year-end, Verizon Wireless’ 4G LTE network, the fastest and most advanced LTE network in the U.S., is expected to be available in more than 175 markets across the country, covering a population of more than 185 million.

·        The company introduced three new 4G LTE devices: the Droid Charge by Samsung, Revolution by LG and the MiFi 4510L 4G LTE Mobile Hotspot by Novatel Wireless.  The company also announced that the 4G LTE-enabled Samsung Galaxy Tab 10.1 is available for pre-order; the device is expected to launch by the end of this month.  During the second-quarter 2011, Verizon Wireless sold 1.2 million 4G LTE smartphones and Internet data devices.

·        Verizon Wireless continued to invest in and enhance its 3G network, the nation’s largest and most reliable 3G network.

·        During the quarter, Verizon Wireless deployed crisis response teams to help customers stay connected in areas devastated by disasters including the North Dakota floods,  Arizona wildfires and Joplin, Mo., tornado.

Improved Revenue Trends in Wireline

Verizon’s Wireline segment continued to expand margins, supported by improved revenue trends.  In the second quarter of 2011:

Wireline Financial Highlights

·        Segment EBITDA margin (non-GAAP) was 23.8 percent, compared with 22.4 percent in second-quarter 2010.  This was Wireline’s fifth consecutive quarter of sequential EBITDA margin expansion.

·        Second-quarter 2011 operating revenues were $10.2 billion, a decline of 0.3 percent compared with second-quarter 2010.  This is an improvement from a decline of 2.2 percent comparing first-quarter 2011 to first-quarter 2010.  Verizon acquired cloud and managed IT infrastructure leader Terremark Worldwide in April, and the inclusion of Terremark results added $98 million in revenue, representing 100 basis points of wireline revenue growth, in second-quarter 2011.

·        Revenues for Verizon’s FiOS fiber-optic services to consumer retail customers generated approximately 57 percent of consumer wireline revenues in second-quarter 2011, compared with approximately 48 percent in second-quarter 2010.

·        Consumer revenues grew 1.3 percent compared with second-quarter 2010.  Consumer ARPU for wireline services was $92.44 in second-quarter 2011, up 9.4 percent compared with second-quarter 2010.  ARPU for FiOS customers continues to be more than $146.

·        Global enterprise revenues totaled $4.0 billion in the quarter, up 3.6 percent compared with second-quarter 2010.  Sales of strategic services — including Terremark cloud services, security and IT solutions, and strategic networking — increased 17.8 percent compared with second-quarter 2010 and now represent approximately 48 percent of global enterprise revenues.

Wireline Operational Highlights

·        Verizon added 189,000 net new FiOS Internet connections and 184,000 net new FiOS TV connections in second-quarter 2011.  Verizon had a total of 4.5 million FiOS Internet and 3.8 million FiOS TV connections at the end of the quarter.

·        FiOS penetration (subscribers as a percentage of potential subscribers) is now 30 percent or more for both services.  FiOS Internet penetration was 34 percent at the end of second- quarter 2011, compared with 30 percent at the end of second-quarter 2010.  In the same periods, FiOS TV penetration was 30 percent, compared with 26 percent, respectively.  The FiOS network passed 16.1 million premises at mid-year 2011.

·        Broadband connections totaled 8.6 million at the end of second-quarter 2011, a 3.3 percent year-over-year increase.  FiOS Internet connections more than offset a decrease in DSL-based HSI connections, resulting in a net increase of 62,000 broadband connections from first-quarter 2011.  Total voice connections, which measures FiOS Digital Voice connections in addition to traditional switched access lines, declined 7.9 percent to 25.0 million — the smallest year-over-year decline since second-quarter 2007.

·        During the quarter Verizon continued to execute its global cloud strategy, rolling out an expanded portfolio of secure IT solutions and an operational model for its Terremark subsidiary.  Verizon also continued to deploy integrated IT and communications solutions for multinational enterprise, medium-sized and government customers.  These solutions included expansion of the company’s managed mobility services for tablets, mobile access to cloud-based SAP applications and enhanced security management programs for health care providers.  Verizon also completed new agreements with a range of multinational corporations, including Constellation Energy, Epsilon, Masco Corp. and PHH Corp.

·        Verizon expanded its global network infrastructure during the quarter as it continued to broaden its scope and capabilities.  The company installed 63 additional Private IP edge routers for a total of 915 edge routers in 245 sites throughout 63 countries, activated more than 1,500 kilometers (932 miles) of ultra-long-haul network across the southern part of the United Kingdom, and completed a joint fiber build in Singapore, which almost doubles the coverage of the Singapore fiber-optic network.  Verizon continued to demonstrate leadership in scaling the global IP network and kicked off the expansion of 100G IP backbone capabilities in the U.S. to nine routes.

NOTE: Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results for the divestiture of overlapping wireless properties in 105 operating markets in 24 states during the first half of 2010; the wireless deferred revenue adjustment that was disclosed in Verizon’s Form 10-Q for the period ended June 30, 2010; the spinoff to Frontier of local exchange and related landline assets in 14 states, effective on July 1, 2010; and other non-operational items.  See the accompanying schedules and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.

Continued strong sales of Apple’s blockbuster smartphone have propelled the Cupertino-based company into the No. 1 spot globally. As noted by the Financial Times, Apple shipped 20.34 million iPhone handsets last quarter, up from 18.7 million units in the first quarter of 2011. Meanwhile Nokia’s smartphone shipments dropped from 24.2 million units in the first quarter to just 16.7 million smartphones in the June quarter — 3.64 million fewer smartphones than Apple. With just two smartphone models currently available for sale, Apple had already been the world’s top smartphone vendor by revenue and profits. The June quarter marks the first time the company has managed to out-sell Nokia by volume, however.

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Microsoft has yet to launch its tablet-optimized operating system and yet slates running various versions of the Windows operating system still managed to outsell Research In Motion’s BlackBerry PlayBook last quarter. According to market research firm Strategy Analytics’ latest report, Windows-powered media tablets owned 4.6% of the global market in the second quarter of 2011. In the same period, RIM’s PlayBook made up just 3.3% of the market. The firm also shows that competition may finally be heating up in the tablet space. Apple, which owned more than 94% of the market in the second quarter last year, saw the iPad’s share slide to 61.3% according to Strategy Analytics. Over the same period of time, Android tablets jumped from a 2.9% share to a 30% share last quarter. Strategy Analytics’ report comes just one week after rumors surfaced that RIM may soon discontinue its current Wi-Fi tablet. RIM would later adamantly deny the rumors, saying it had “no plan to discontinue” production of its Wi-Fi PlayBook. RIM stated last month that it shipped 500,000 BlackBerry PlayBook tablets in the fiscal first quarter following the tablet’s debut this past April.

AT&T reported its second quarter results on Thursday. The company’s consolidated revenues were $31.5 billion, up 2.2% ($680 million) from the same quarter last year. AT&T’s wireless, wireline data and managed services were responsible for 76% of those revenues, and that figure is growing at a rate of 8.3% year-over-year. AT&T Mobility added a total of 1.1 million subscribers during the quarter, including 331,000 net postpaid adds, and it now serves a total of 98.6 million subscribers. The carrier also noted that it had its best-ever second quarter for smartphone sales: it sold 5.6 million total smartphones, up 43% year-over-year. AT&T activated 3.6 million iPhones during the quarter, more than half of the smartphones sold, and said that nearly 25% of the iPhone activations were from new subscribers. AT&T also noted that its planned acquisition of T-Mobile is still on track for closure during the first quarter of next year. Read on for the full press release.

AT&T Reports Strong Wireless Gains, Record Mobile Broadband Sales and Continued Strength in U-verse and Strategic Business Services in Second-Quarter Results

$0.60 diluted EPS, compared to $0.67 diluted EPS, and $0.60 per diluted share when excluding a significant item in the second quarter of 2010

Consolidated revenues of $31.5 billion in the second quarter, up more than $680 million, or 2.2 percent, versus the year-earlier period

9.5 percent growth in wireless revenues, with a 7.4 percent increase in wireless service revenues

Total wireless subscribers up 1.1 million to reach 98.6 million subscribers in service, with gains in every customer category including 331,000 postpaid net adds

Best-ever second-quarter smartphone sales of 5.6 million; nearly 70 percent of total postpaid sales were smartphones

iPhone activations remain strong at 3.6 million, with 24 percent of subscribers new to AT&T; iPhone subscriber churn down slightly sequentially

Sales of Android and other smartphones doubled year over year; more than 40 percent of smartphone sales in the quarter

Branded computing subscribers (includes tablets, aircards, MiFi devices, tethering plans and other data-only devices) up 545,000, almost doubling since the second quarter of 2010 to reach 4.0 million

23.4 percent growth in wireless data revenues, up $1 billion versus the year-earlier quarter

Postpaid subscriber ARPU (average monthly revenues per subscriber) up 2.0 percent to $63.87, the tenth consecutive quarter with a year-over-year increase

Fourth consecutive quarter of year-over-year growth in wireline consumer revenues, driven by AT&T U-verse^® services

202,000 net gain in AT&T U-verse TV subscribers to reach 3.4 million in service, with continued high broadband and voice attach rates

21.9 percent growth in wireline consumer Internet Protocol (IP) data revenues to reach nearly half of consumer revenue, driven by continued AT&T U-verse expansion

Continued increase in strategic business services revenues, up 19.4 percent year over year, their strongest growth in six quarters

*AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

Note: AT&T’s second-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. ET on Thursday, July 21, 2011, at www.att.com/investor.relations.

Consolidated Statements of Income

Statements of Segment Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Supplementary Operating and Financial Data

Reconciliation of EBITDA

Reconciliation of Free Cash Flow

Reconciliation of Annualized Net-Debt-to-EBITDA Ratio

EBITDA and Free Cash Flow Discussions

AT&T Inc. (NYSE:T) today reported second-quarter results, highlighted by robust mobile broadband growth, record second-quarter smartphone sales and stable sequential wireline revenues.

“We delivered another strong quarter capping a solid first half of the year,” said Randall Stephenson, AT&T chairman and chief executive officer. “Mobile broadband growth continues to be robust, and we are seeing encouraging signs in wireline revenues. This adds to our confidence as we look ahead.

“Mobile broadband with IP infrastructure and cloud services are transforming our industry and are creating unprecedented opportunity. AT&T is strongly positioned to lead in this new era,” Stephenson said. “Our planned acquisition of T-Mobile USA will accelerate development of next-generation capabilities, and it will lay the groundwork for continued high-tech innovation for years to come.”

Second-Quarter Financial Results
For the quarter ended June 30, 2011, AT&T’s consolidated revenues totaled $31.5 billion, up more than $680 million, or 2.2 percent, versus the year-earlier quarter, marking the company’s sixth consecutive quarter with a year-over-year revenue increase.

Compared with results for the second quarter of 2010, AT&T’s operating income margin was 19.6 percent, compared to 19.7 percent; and operating expenses were $25.3 billion versus $24.7 billion; operating income was $6.2 billion, up from $6.1 billion.

Second-quarter 2011 net income attributable to AT&T totaled $3.6 billion, or $0.60 per diluted share. These results compare with reported net income attributable to AT&T of $4.0 billion, or $0.67 per diluted share, in the second quarter of 2010. Earnings per share for the second quarter of 2011 matched earnings per share excluding the Telmex Internacional transaction in the year-ago second quarter.

Second-quarter 2011 cash from operating activities totaled $9.0 billion, and capital expenditures totaled $5.3 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.7 billion.

Compared with results for the first half of 2010, year to date through the second quarter, cash from operating activities totaled $16.8 billion versus $15.8 billion; capital expenditures totaled $9.5 billion compared to $8.2 billion; and free cash flow totaled $7.3 billion versus $7.6 billion.

Updating Outlook
Led by increased wireless demand, AT&T now expects capital expenditures in the $20 billion range for full-year 2011. Previously, the company expected capital expenditures in the low-to-mid $19 billion range. Free cash flow guidance remains unchanged, with expected growth over 2010 levels.

WIRELESS OPERATIONAL HIGHLIGHTS
Led by continued strong performance in mobile broadband in the second quarter, AT&T delivered solid growth in its wireless business, including strong revenue growth, record second-quarter smartphone gains and strong net adds including postpaid and branded computing devices. Highlights included:

Postpaid Leads Solid Subscriber Gains.
AT&T posted a net gain in total wireless subscribers of 1.1 million, to reach 98.6 million in service. This included gains in every customer category. Net adds for the quarter include postpaid net adds of 331,000. Excluding the impacts of the Alltel and Centennial integration migrations, postpaid net adds were 504,000. Prepaid net adds were 137,000, connected device net adds were 379,000 and reseller net adds were 248,000. Second-quarter net adds reflect adoption of smartphones, increases in prepaid subscribers and sales of tablets and connected devices such as automobile monitoring systems, security systems and a host of other products.

Strongest Quarter Ever for Branded Computing Device Sales.
AT&T had a record quarter with branded computing subscribers, a new growth area for the company that includes tablets, aircards, MiFi devices, tethering plans and other data-only devices. AT&T added 545,000 of these devices to reach 4.0 million, nearly twice as many in service as a year ago. Most of those new subscribers were tablets, with 377,000 added in the quarter, of which 30 percent were postpaid.

Postpaid Churn Remains Stable.
Total churn was 1.43 percent versus 1.29 percent in the second quarter of 2010 and 1.36 percent in the first quarter of 2011. Postpaid churn was 1.15 percent, compared to 1.01 percent in the year-ago second quarter and 1.18 percent in the first quarter of 2011. Excluding the impacts of the Alltel and Centennial migrations, postpaid churn of 1.06 percent for the quarter was relatively stable with 0.99 percent in the year-ago quarter and better than the 1.12 percent in the first quarter of 2011.

Smartphones Near 70 Percent of Postpaid Sales.
AT&T continues to deliver robust smartphone sales. (Smartphones are voice and data devices with an advanced operating system to better manage data and Internet access.) In the second quarter, 5.6 million smartphones were sold, a second-quarter record and the third-highest quarter ever. Smartphone sales also increased more than 43 percent year over year. Sales of non-iPhone smartphones more than doubled year over year. Nearly 70 percent of postpaid device sales were smartphones. During the quarter, 3.6 million iPhones were activated.

At the end of the quarter, 49.9 percent of AT&T’s 68.4 million postpaid subscribers had smartphones, up from 35.8 percent a year earlier. The average ARPU for smartphones on AT&T’s network is 1.8 times that of the company’s non-smartphone devices. More than 85 percent of smartphone subscribers are on FamilyTalk or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.

Strong Wireless Revenue Growth Continues.
Total wireless revenues, which include equipment sales, were up 9.5 percent year over year to $15.6 billion. Wireless service revenues increased 7.4 percent, to $14.2 billion, in the second quarter.

Wireless Data Revenues Lead Growth.
Wireless data revenues — driven by Internet access,  access to applications, messaging and related services — increased more than $1 billion, or 23.4 percent, from the year-earlier quarter to $5.4 billion. AT&T’s postpaid wireless subscribers on monthly data plans increased by 19.5 percent over the past year. Versus the year-earlier quarter, total text messages carried on the AT&T network increased by 24 percent to 190.8 billion, and multimedia messages increased by 54 percent to 4.0 billion.

Postpaid ARPU Expansion.
Driven by strong data growth, postpaid subscriber ARPU increased 2.0 percent versus the year-earlier quarter to $63.87. This marked the tenth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU reached $24.57, up 16.6 percent versus the year-earlier quarter.

Wireless Margins Expand Sequentially Even with Strong Smartphone Sales.
Second-quarter wireless margins reflect increased operating costs associated with strong smartphone sales, high customer upgrade levels and the Alltel and Centennial merger costs, offset in part by improved operating efficiencies and further revenue growth from the company’s growing base of high-quality smartphone subscribers. AT&T’s second-quarter wireless operating income margin was 27.0 percent versus 28.9 percent in the year-earlier quarter, and AT&T’s wireless EBITDA service margin was 41.1 percent, compared with 43.1 percent in the second quarter of 2010. Without customer migration and integration costs from the Alltel and Centennial mergers, the service margin would have been 42.0 percent. (EBITDA service margin is earnings before interest, taxes, depreciation and amortization, divided by total service revenues.) Second-quarter wireless operating expenses totaled $11.4 billion, up 12.5 percent versus the year-earlier quarter, and wireless operating income was $4.2 billion, up 2.3 percent year over year.

WIRELINE OPERATIONAL HIGHLIGHTS
AT&T’s second-quarter wireline results were highlighted by stable sequential revenues, the fourth consecutive quarter of year-over-year wireline consumer growth and stabilizing wireline business revenues. Other highlights included:

Wireline Consumer Revenues Grow for Fourth Consecutive Quarter.
Driven by strength in IP data services, revenues from residential customers totaled $5.4 billion in the second quarter. Versus the second quarter of 2010, consumer wireline revenues increased 0.1 percent, the fourth consecutive quarter of year-over-year growth, and revenues also increased sequentially.

U-verse TV and ARPU Continue Gains.
AT&T U-verse TV added 202,000 subscribers to reach 3.4 million in service. In the second quarter, the AT&T U-verse High Speed Internet attach rate continued to run above 90 percent and 55 percent of new subscribers took AT&T U-verse Voice. Three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T. ARPU for U-verse triple-play customers was $170, up 8.3 percent year over year.

AT&T’s U-verse deployment now reaches 29 million living units. Companywide penetration of eligible living units is 15.5 percent, and overall penetration is 25.0 percent across areas marketed to for 36 months or more. AT&T’s total video subscribers, which combine the company’s U-verse and bundled satellite customers, reached 5.3 million at the end of the quarter, representing 21.5 percent of households served.

U-verse Broadband Continues Strong Growth.
AT&T U-verse High Speed Internet delivered a second-quarter gain of 439,000 subscribers to reach a total of 4.1 million, helping offset losses from DSL. At the end of the second quarter, AT&T had 16.5 million total wired consumer broadband connections, up 3.3 percent over the past year and down slightly from first-quarter 2011 levels largely due to seasonality. About 70 percent of consumers have a broadband plan of 3 Mbps or higher.

IP Data Nears Half of Consumer Revenues.
U-verse continues to drive a transformation in AT&T’s consumer business, reflected by the fact that consumer IP revenues now represent 49.2 percent of AT&T’s wireline consumer revenues, up from 40.4 percent in the year-earlier quarter. Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 21.9 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 5.6 percent sequential growth. U-verse revenues grew 57.0 percent compared with the year-ago second quarter and 10.7 percent versus the first quarter of 2011.

Growth in Revenues Per Household.
Wireline revenues per household served increased 5.2 percent versus the year-earlier second quarter and were up 1.8 percent sequentially (average revenue per household is total consumer wireline revenues divided by the average monthly households in service), driven by AT&T U-verse services. This marked AT&T’s 14th consecutive quarter with year-over-year growth in wireline consumer revenues per household.

Consumer Connection Trends Continue.
In the second quarter, AT&T posted a decline in total consumer revenue connections primarily due to expected declines in traditional voice access lines, consistent with broader industry trends and somewhat offset by increases in U-verse TV, broadband and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 162,000 in the quarter and 695,000 over the past four quarters. Total consumer revenue connections at the end of the second quarter were 42.5 million, compared with 44.3 million at the end of the second quarter of 2010 and 43.1 million at the end of the first quarter of 2011.

Wireline Business Revenues Stable Sequentially.
Total business revenues were $9.3 billion, declining 0.3 percent sequentially and down 4.1 percent versus the year-earlier quarter. The year-over-year decline reflects economic weakness in voice and legacy data products somewhat offset by growth in IP data. Excluding the effect of the third-quarter 2010 sale of Japan assets, business service revenues, which exclude CPE, declined 3.2 percent year over year, compared to a year-over-year decline of 4.0 percent in the year-ago quarter.

Strong Strategic Business Services Revenue Growth Continues.
Revenues from the new-generation capabilities that lead AT&T’s most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and application services — grew 19.4 percent versus the year-earlier quarter continuing strong trends in this area. This now represents a more than $5.5 billion annualized revenue stream.

VPN Growth Drives Business IP Revenues.
Total business IP data revenues grew 8.8 percent versus the year-earlier second quarter, led by growth in VPN revenues. IP-based solutions allow customers to easily add managed services such as network security, cloud services and IP conferencing on top of their infrastructures. Total business data revenues grew 0.4 percent year over year and grew 0.9 percent sequentially.

Wireline Revenue Trends Stabilizing.
AT&T’s second-quarter wireline operating income margin was 13.1 percent, down slightly compared to 13.2 percent in the year-earlier quarter and up from 11.5 percent in the first quarter of 2011. Improved consumer and business IP data revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues. Second-quarter total wireline revenues were $14.9 billion, down 3.2 percent versus the year-earlier quarter and stable sequentially. Second-quarter wireline operating expenses were $13.0 billion, down 3.1 percent versus the second quarter of 2010 and down 1.8 percent sequentially. Wireline operating income totaled $2.0 billion, down versus the second quarter of 2010 and up from $1.7 billion in the first quarter of 2011.

Nokia CEO Stephen Elop on Thursday best summarized Nokia’s second quarter earnings: “our Q2 results were clearly disappointing.” The Finnish phone vendor saw operating profit slide a worrisome 44% to €391 million in the second quarter, down from 704 million in the first quarter and €660 in the second quarter last year. Revenue dipped 11% sequentially to €9.275 billion and EPS was cut in half to $0.06. Revenue from smartphone sales dropped 33% to €2.368 billion on shipments of 16.7 million units, down 34% from the same quarter in 2010 when Nokia shipped 25.2 million smartphones. Nokia still managed to top Wall Street’s expectations for the quarter, however, thanks to royalties from a patent settlement with Apple. “The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011,” said Nokia CEO Stephen Elop in a statement. He continued, “While our Q2 results were clearly disappointing, we are executing well on the initiatives that are most important to our longer term competitiveness.  Some progress is already evident, and thus we are targeting to end this year with more net cash and liquid assets than at the end of Q2 2011.  We firmly believe that our deliberate and unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry and drive value creation for our shareholders.” Nokia’s full earnings release follows below.

Nokia Q2 2011 net sales EUR 9.3 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.10)

Published July 21, 2011

6.7% Devices & Services non-IFRS operating margin, benefiting from IPR royalty income related to the second quarter 2011 and settling prior periods

Nokia Corporation
Interim Report
July 21, 2011 at 13.30 (CET+1)

This is a summary of the second quarter 2011 interim report published today. The complete second quarter 2011 interim report with tables is available at http://www.nokia.com/results/Nokia_results2011Q2e.pdf. Investors should not rely on summaries of our interim reports only, but should review the complete interim reports with tables.

	Reported and Non-IFRS second quarter 2011 results1,2
EUR million	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Nokia
Net sales	9 275	10 003	-7%	10 399	-11%
Operating profit	-487	295		439
Operating profit (non-IFRS)	391	660	-41%	704	-44%
EPS, EUR diluted	-0.10	0.06		0.09
EPS, EUR diluted (non-IFRS)3	0.06	0.11	-45%	0.13	-54%
Net cash from operating activities	-176	944		-173
Net cash and other liquid assets4	3 891	4 088	-5%	6 372	-39%
Devices & Services5
Net sales	5 467	6 799	-20%	7 087	-23%
Smart Devices net sales	2 368	3 503	-32%	3 528	-33%
Mobile Phones net sales	2 551	3 190	-20%	3 407	-25%
Mobile device volume (million units)	88.5	111.0	-20%	108.5	-18%
Smart Devices volume (million units)	16.7	25.2	-34%	24.2	-31%
Mobile Phones volume (million units)	71.8	85.8	-16%	84.3	-15%
Mobile device ASP6	62	61	2%	65	-5%
Smart Devices ASP6	142	139	2%	146	-3%
Mobile Phones ASP6	36	37	-3%	40	-10%
Operating profit	-247	643		690
Operating profit (non-IFRS)	369	647	-43%	694	-47%
Operating margin %	-4.5%	9.5%		9.7%
Operating margin % (non-IFRS)	6.7%	9.5%		9.8%
NAVTEQ
Net sales	245	252	-3%	232	6%
Operating profit	-58	-81		-62
Operating profit (non-IFRS)	53	50	6%	54	-2%
Operating margin %	-23.7%	-32.1%		-26.7%
Operating margin % (non-IFRS)	21.5%	19.8%		23.3%
Nokia Siemens Networks7
Net sales	3 642	3 039	20%	3 171	15%
Operating profit	-111	-179		-142
Operating profit (non-IFRS)	40	51	-22%	3	1233%
Operating margin %	-3.0%	-5.9%		-4.5%
Operating margin % (non-IFRS)	1.1%	1.7%		0.1%

Note 1 relating to January-June 2011 results: Nokia reported net sales were EUR 19 674 million and reported earnings per share (diluted) were EUR -0.01 for the period from January 1 to June 30, 2011. Further information about the results for the period from January 1 to June 30, 2011 can be found on pages 16, 18, 26, 27 and 29 of the complete Q2 2011 interim report with tables.

Note 2 relating to non-IFRS results: Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i) the formation of Nokia Siemens Networks and ii) all business acquisitions completed after June 30, 2008. More specific information about the exclusions from the non-IFRS results may be found in our complete interim report with tables for Q2 2011 on pages 4 and 20-22 and 24. Nokia believes that these non-IFRS financial measures provide meaningful supplemental information to both management and investors regarding Nokia’s performance by excluding the above-described items that may not be indicative of Nokia’s business operating results. These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure(s), but should be used in conjunction with the most directly comparable IFRS measure(s) in the reported results. A reconciliation of the non-IFRS results to our reported results for Q2 2011 and Q2 2010 can be found in the tables on pages 17, 20-24 of our complete interim report with tables. A reconciliation of our Q1 2011 non-IFRS results can be found on pages 11-12 and 14-18 of our complete Q1 2011 interim report with tables which was published on April 21, 2011.

Note 3 relating to non-IFRS Nokia EPS: Nokia taxes continued to be unfavorably impacted by Nokia Siemens Networks taxes as no tax benefits are recognized for certain Nokia Siemens Networks deferred tax items. In Q2, this was partially offset by lower Devices & Services taxes. If Nokia’s estimated long-term tax rate of 26% had been applied, non-IFRS Nokia EPS would have been approximately 0.3 Euro cent higher in Q2 2011.

Note 4 relating to Nokia net cash and other liquid assets: Calculated as total cash and other liquid assets less interest-bearing liabilities.

Note 5 relating to Devices & Services reporting structure: Effective from April 1, 2011, our Devices & Services business includes two new operating and reportable segments – Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices – as well as Devices & Services Other.  Prior period results for each quarter and the full year 2010 and Q1 2011 have been regrouped (on an unaudited basis) for comparability purposes according to the new reporting format. The regrouped financial information can be accessed at: http://www.nokia.com/investors

Note 6 relating to average selling prices (ASP): Mobile device ASP represents total Devices & Services net sales (Smart Devices net sales, Mobile Phones net sales, and Devices & Services Other net sales) divided by total Devices & Services volumes. Devices & Services Other net sales includes net sales of Nokia’s luxury phone business Vertu and spare parts, as well as intellectual property royalty income. Smart Devices ASP represents Smart Devices net sales divided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phones net sales divided by Mobile Phones volumes.

Note 7 relating to the acquired Motorola Solutions networks assets: Nokia Siemens Networks operating results for Q2 2011 include the results of the acquired Motorola Solutions networks assets from April 30, 2011. Accordingly, the results of Nokia Siemens Networks for Q2 2011 are not directly comparable to its results for prior periods. Information that excludes the results of the acquired Motorola assets in Q2 2011 is provided in the discussion of Nokia Siemens Networks operating results. Additionally, our complete interim report with tables for Q2 2011 includes additional information on the acquisition of Motorola Solutions’ networks assets on pages 31-32.

STEPHEN ELOP, NOKIA CEO:
The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011. However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business. Most importantly, we are making better-than-expected progress toward our strategic goals.

In Q2, our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales channel dynamics, which led to greater business stability in the latter weeks of the quarter.

- Most notably we took action in China and Europe to address an inventory build-up that occurred in the first quarter of 2011.

- We took a more responsive approach to product pricing around the world.

- We have shifted our sales focus and marketing resources more towards retail interactions with consumers.

- We made changes in certain critical sales management.

During this time of transition, we expect competitive pressures to continue.  However, we have a clear strategy to address the concerns about our product competitiveness. In Q2, both our Smart Devices and Mobile Phones business units moved forward on their plans.

- In Smart Devices, those who already have viewed our early Windows Phone work are very optimistic about the devices Nokia will bring to market and about the long-term opportunities. Step by step, beginning this year, we plan to have a sequence of concentrated product launches in specific countries, systematically increasing the number of countries and launch partners.

- In Mobile Phones, early results of the Dual SIM product launches are very encouraging, and we are on track to deliver more products this year.

This shift into the execution of our new strategy also has allowed us to identify additional opportunities for operational improvement. We are accelerating our plans for expense reductions, and we now plan to exceed our previous target of non-IFRS operating expense reductions in Devices & Services of EUR 1 billion for the full year 2013.

It was also validated during Q2 that Nokia understands how to take advantage of our strong intellectual property portfolio. We are well positioned to defend against intellectual property claims and to ensure that other industry participants are properly licensed.

Thus, while our Q2 results were clearly disappointing, we are executing well on the initiatives that are most important to our longer term competitiveness.  Some progress is already evident, and thus we are targeting to end this year with more net cash and liquid assets than at the end of Q2 2011.  We firmly believe that our deliberate and unwavering commitment to making the changes necessary at Nokia is the right way to deal with the disruptive forces in our industry and drive value creation for our shareholders.

NOKIA OUTLOOK

- Nokia targets Nokia Group net cash and other liquid assets at the end of 2011 to be above the EUR 3.9 billion balance at the end of the second quarter 2011.

- Due to limited visibility, Nokia is providing a wider than normal range for its Devices & Services non-IFRS operating margin outlook for the third quarter 2011. Nokia expects its non-IFRS Devices & Services operating margin in the third quarter 2011 to be slightly above breakeven, ranging either above or below this level by approximately 2 percentage points. This outlook is based on our expectations regarding a number of factors, including:
- Competitive industry dynamics;
- Nokia’s actions to intensify its focus on retail sales marketing to drive net sales;
- Improved competitiveness in our Mobile Phones unit due to the ramp up of Dual SIM devices;
- Timing of our new product shipments; and
- The macroeconomic environment.

- Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and Nokia now targets to exceed its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full year 2013, compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion.

- Nokia and Nokia Siemens Networks expect Nokia Siemens Networks net sales to be between EUR 3.2 billion and EUR 3.5 billion in the third quarter 2011.

- Nokia and Nokia Siemens Networks expect the non-IFRS operating margin in Nokia Siemens Networks to be between -3% and breakeven in the third quarter 2011.

- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks net sales to grow faster than the market in 2011.

- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks non-IFRS operating margin to be above breakeven in 2011.

- Nokia and Nokia Siemens Networks continue to target Nokia Siemens Networks to reduce its non-IFRS annualized operating expenses and production overheads by EUR 500 million by the end of 2011, compared to the end of 2009.

- The outlook relating to Nokia Siemens Networks includes the impact of the acquisition of Motorola Solutions’ networks assets. This is an update to the previous outlook that did not include the impact of the acquisition of Motorola Solutions’ networks assets.

SECOND QUARTER 2011 FINANCIAL HIGHLIGHTS

The non-IFRS results exclude:

Q2 2011 – EUR 878 million consisting of:
- EUR 68 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 297 million restructuring charge in Devices & Services
- EUR 275 million accrued Accenture deal consideration in Devices & Services
- EUR 41 million impairment of shares in an associated company in Devices & Services
- EUR 83 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks and the acquisition of Motorola’s networks assets
- EUR 111 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 3 million of intangible assets amortization and other purchase price related items arising from the acquisition of OZ Communications, Novarra and Motally in Devices & Services

Q2 2010 – EUR 365 million consisting of:
- EUR 114 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks
- EUR 131 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition of OZ Communications, Novarra and MetaCarta in Devices & Services

Q1 2011 – EUR 265 million consisting of:
- EUR 28 million restructuring charge and other associated items in Nokia Siemens Networks
- EUR 117 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks
- EUR 116 million of intangible asset amortization and other purchase price accounting related items arising from the acquisition of NAVTEQ
- EUR 4 million of intangible assets amortization and other purchase price related items arising from the acquisition of OZ Communications, Novarra and Motally in Devices & Services

Non-IFRS results exclude special items for all periods. In addition, non-IFRS results exclude intangible asset amortization, other purchase price accounting related items and inventory value adjustments arising from i) the formation of Nokia Siemens Networks and ii) all business acquisitions completed after June 30, 2008.

Nokia Group

The following chart sets out the year-on-year and sequential growth rates in our net sales on a reported basis and at constant currency for the periods indicated.

SECOND QUARTER 2011 NET SALES, REPORTED & CONSTANT CURRENCY1
	YoY Change	QoQ Change
Group net sales – reported	-7%	-11%
Group net sales – constant currency1	-7%	-9%
Devices & Services net sales – reported	-20%	-23%
Devices & Services net sales – constant currency1	-20%	-21%
NAVTEQ net sales – reported	-3%	6%
NAVTEQ net sales – constant currency1	1%	9%
Nokia Siemens Networks net sales – reported	20%	15%
Nokia Siemens Networks net sales – constant currency1	21%	16%

Note 1: Change in net sales at constant currency excludes the impact of changes in exchange rates in comparison to the Euro, our reporting currency.

The following chart sets out Nokia Group’s cash flow (for the periods indicated) and financial position (at the end of the periods indicated), as well as the year-on-year and sequential growth rates.

NOKIA GROUP CASH FLOW AND FINANCIAL POSITION
EUR million	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net cash from operating activities	-176	944		-173
Total cash and other liquid assets	9 358	9 463	-1%	11 056	-15%
Net cash and other liquid assets	3 891	4 088	-5%	6 372	-39%

Year-on-year, the decrease in net cash from operating activities in the second quarter 2011 was due to negative net working capital impacts mainly driven by lower net sales and an unfavorable geographic mix, as well as lower underlying profitability. These factors were to some extent offset by higher cash inflows of IPR royalty income related to the second quarter 2011 and earlier periods, cash inflows related to foreign currency hedging activities and lower income taxes paid. Sequentially, the decrease in net cash from operating activities in the second quarter 2011 was due to lower underlying profitability, which was offset to some extent by less negative net working capital impacts compared to the previous quarter, higher cash inflows of IPR royalty income related to the second quarter 2011 and earlier periods, cash inflows related to foreign currency hedging activities and lower income taxes paid.

Total as well as net cash and other liquid assets in the second quarter 2011 were somewhat lower compared to the second quarter 2010 primarily due to payment of the dividend, cash outflow related to the acquisition of Motorola’s networks assets and capital expenditure, offset to a large extent by positive overall cash generation. Sequentially, total as well as net cash and other liquid assets decreased primarily due to payment of the dividend. On a sequential basis, net cash and other liquid assets decreased also due to cash outflow related to the acquisition of Motorola’s networks assets that was financed mainly by an increase in short-term interest bearing liabilities.

Devices & Services

Effective from April 1, 2011, our Devices & Services business includes two new operating and reportable segments – Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices – as well as Devices & Services Other.  Prior period results for each quarter and the full year 2010 and Q1 2011 have been regrouped (on an unaudited basis) for comparability purposes according to the new reporting format. The regrouped financial information can be accessed at: http://www.nokia.com/investors

The following chart sets out a summary of the results for our Devices & Services business for the periods indicated, as well as the year-on-year and sequential growth rates.

DEVICES & SERVICES RESULTS SUMMARY
	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net sales (EUR millions)1	5 467	6 799	-20%	7 087	-23%
Mobile device volume (million units)	88.5	111.0	-20%	108.5	-18%
Mobile device ASP (EUR)	62	61	2%	65	-5%
Non-IFRS gross margin (%)	31.1%	30.2%		29.1%
Non-IFRS operating expenses (EUR millions)	1 329	1 425	-7%	1 385	-4%
Non-IFRS operating margin (%)	6.7%	9.5%		9.8%

Note 1: Includes IPR royalty income recognized in Devices & Services Other net sales.

Net Sales
The year-on-year and sequential declines in our Devices & Services net sales are discussed below in our operating analysis of our Smart Devices and Mobile Phones business units. Our overall Devices & Services net sales in the second quarter 2011 benefited from the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier periods recognized in Devices & Services Other net sales.

The following chart sets out the net sales for our Devices & Services business for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area. The IPR royalty income described in the paragraph above has been allocated to the geographic areas contained in this chart.

DEVICES & SERVICES NET SALES BY GEOGRAPHIC AREA
EUR million	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Europe	1 666	2 173	-23%	2 082	-20%
Middle East & Africa	988	934	6%	1 088	-9%
Greater China	913	1 373	-34%	1 902	-52%
Asia-Pacific	1 085	1 543	-30%	1 317	-18%
North America	88	223	-61%	140	-37%
Latin America	727	553	31%	558	30%
Total	5 467	6 799	-20%	7 087	-23%

Volume
The following chart sets out our mobile device volumes for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area.

DEVICES & SERVICES MOBILE DEVICE VOLUMES BY GEOGRAPHIC AREA
million units	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Europe	18.4	26.1	-30%	23.4	-21%
Middle East & Africa	20.5	21.0	-2%	22.2	-8%
Greater China	11.3	19.3	-41%	23.9	-53%
Asia-Pacific	24.5	30.8	-20%	27.3	-10%
North America	1.5	2.6	-42%	1.2	25%
Latin America	12.3	11.2	10%	10.5	17%
Total	88.5	111.0	-20%	108.5	-18%

On a year-on-year and sequential basis, the declines in our total Devices & Services volumes were driven by declines in both our Smart Devices and Mobile Phones volumes, with a greater percentage decline in our Smart Devices volumes.

At the end of the first quarter 2011, our sales channel inventories were slightly above normal levels given then anticipated volumes. During the second quarter 2011, distributors and operators purchased fewer of our devices across our portfolio as they reduced their inventories of Nokia devices. The second quarter 2011 ended with our sales channel inventories near the midpoint of our normal range of 4-6 weeks.

Due to the devastation caused by the earthquake and tsunami in Japan, we had previously expected our component supply to be adversely impacted in the second and third quarters of 2011. In the second quarter 2011, we were able to redirect our component requirements to suppliers with production capacity and, in addition, our suppliers in Japan were able to recover faster than Nokia anticipated. Thus, related to the tragic events in Japan, we did not experience component constraints in the second quarter 2011, and we do not expect a significant impact in the third quarter 2011 or going forward.

Average Selling Price
On a year-on-year basis, the overall increase in our Devices & Services ASP in the second quarter 2011 was driven by the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier periods recognized in Devices & Services Other and a positive impact from foreign currency exchange hedging, partially offset by the lower ASP in Mobile Phones and Smart Devices, appreciation of the Euro against certain currencies, and a product mix shift towards Mobile Phones.

On a sequential basis, the overall decline in our Devices & Services ASP was driven by a product mix shift towards Mobile Phones, the lower ASP in Mobile Phones and Smart Devices, and the appreciation of the Euro against certain currencies, partially offset by the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier periods recognized in Devices & Services Other and a positive impact from foreign currency exchange hedging.

Gross Margin
On both a year-on-year and sequential basis, the increase in our Devices & Services gross margin in the second quarter 2011 was driven by the recognition of approximately EUR 430 million of IPR royalty income related to the second quarter 2011 and earlier periods, recognized in Devices & Services Other, partially offset by gross margin declines in both Smart Devices and Mobile Phones and a negative impact from foreign currency hedging.

Operating Expenses
Devices & Services non-IFRS research and development expenses decreased 9% year-on-year  and 10% sequentially due to declines in Devices & Services Other and Smart Devices research and development expenses, partially offset by an increase in Mobile Phones research and development expenses. Devices & Services Other includes common research and development expenses. The decreases in Devices & Services Other and Smart Devices research and development expenses were due primarily to a focus on priority projects and cost controls. The increase in Mobile Phones research and development expenses was due primarily to investments to accelerate product development to bring new innovations to the market faster and at lower price-points, partially offset by a focus on priority projects and cost controls.

Devices & Services non-IFRS sales and marketing expenses decreased 3% year-on-year due to lower spending on sales programs and marketing programs. Devices & Services non-IFRS sales and marketing expenses increased 6% sequentially driven by higher spending on marketing programs, while spending on sales programs was flat.

Devices & Services non-IFRS administrative and general expenses decreased 12% year-on-year and sequentially, driven by a strong focus on near-term cost controls.

Devices & Services non-IFRS other income and expense had a slight negative impact on profitability in the second quarter 2011 both year-on-year and sequentially due to a variety of individually insignificant changes.  Reported other income and expense was significantly adversely impacted in the second quarter 2011 primarily as a result of restructuring related expenses discussed below, which were recognized in Devices & Services Other.

Cost Reduction Activities
Nokia is accelerating its plans to reduce its Devices & Services non-IFRS operating expenses and now targets to exceed its previous Devices & Services non-IFRS operating expense reduction target of EUR 1 billion for the full year 2013, compared to the full year 2010 Devices & Services non-IFRS operating expenses of EUR 5.65 billion. This reduction is expected to come from a variety of different sources and initiatives, including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.

Nokia’s cost reduction activities include a strategic collaboration with Accenture to outsource Nokia’s Symbian software development and support activities to Accenture. Approximately 2 800 Nokia employees are expected to transfer to Accenture at closing, which is expected to take place in the early part of October 2011. In addition, we also announced plans to reduce our global workforce by about 4 000 employees by the end of 2012, as well as plans to consolidate the company’s research and product development sites so that each site has a clear role and mission.

During the second quarter 2011, Devices & Services recognized charges related to our cost reduction activities of EUR 572 million, and Nokia expects to recognize additional charges in future quarters.

Smart Devices

The following chart sets out a summary of the results for our Smart Devices business unit for the periods indicated, as well as the year-on-year and sequential growth rates.

SMART DEVICES RESULTS SUMMARY
	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net sales (EUR millions)1	2 368	3 503	-32%	3 528	-33%
Smart Devices volume (million units)	16.7	25.2	-34%	24.2	-31%
Smart Devices ASP (EUR)	142	139	2%	146	-3%
Gross margin (%)	25.7%	32.2%		29.8%
Operating expenses (EUR millions)	752	848	-11%	835	-10%
Contribution margin (%)	-6.2%	8.1%		6.2%

Note 1: Does not include IPR royalty income. IPR royalty income is recognized in Devices & Services Other net sales.

Net Sales
Smart Devices net sales decreased both year-on-year and sequentially in the second quarter 2011 primarily due to significantly lower volumes and, to a lesser extent, lower ASP.

Volume
The year-on-year and sequential decreases in our Smart Devices volumes were driven by the strong momentum of competing smartphone platforms relative to our Symbian devices, particularly in Europe and China, as well as pricing tactics by certain competitors. In addition, the sequential decrease in our Smart Devices volumes was driven by distributors and operators purchasing fewer of our smartphones during the second quarter 2011 as they reduced their inventories of those devices which were slightly above normal levels at the end of the first quarter 2011, particularly in China.

Average Selling Price
Smart Devices ASP increased year-on-year driven by the shipment of new Symbian devices, partially offset by pressure from competing smartphone platforms, tactical pricing actions, and price aggressive competitors.

Smart Devices ASP decreased sequentially driven by pressure from competing smartphone platforms, tactical pricing actions, and price aggressive competitors, partially offset by the shipment of new Symbian devices.

Gross Margin
The year-on-year and sequential declines in our Smart Devices gross margin in the second quarter 2011 were driven by lower volumes, greater price erosion than cost erosion, and tactical pricing actions for specific products due to the competitive environment, partially offset by a gross margin benefit due to lower deferral of revenue related to map services sold in combination with devices.

Mobile Phones

The following chart sets out a summary of the results for our Mobile Phones business unit for the periods indicated, as well as the year-on-year and sequential growth rates.

MOBILE PHONES RESULTS SUMMARY
	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net sales (EUR millions)1	2 551	3 190	-20%	3 407	-25%
Mobile Phones volume (million units)	71.8	85.8	-16%	84.3	-15%
Mobile Phones ASP (EUR)	36	37	-3%	40	-10%
Gross margin (%)	25.1%	27.8%		27.9%
Operating expenses (EUR million)	420	374	12%	386	9%
Contribution margin (%)	8.6%	16.1%		16.5%

Note 1: Does not include IPR royalty income. IPR royalty income is recognized in Devices & Services Other net sales.

Net Sales
On a year-on-year basis, our Mobile Phones net sales in the second quarter 2011 decreased primarily due to lower volumes and, to a less extent, lower ASP. On a sequential basis, our Mobile Phones net sales decreased due to lower volumes and lower ASP.

Volume
The year-on-year and sequential declines in our Mobile Phones volumes were driven by distributors and operators purchasing fewer of our mobile phones during the second quarter 2011 as they reduced their inventories of those devices which were slightly above normal levels at the end of the first quarter 2011.  In addition, our lack of Dual SIM phones, a growing part of the market, until late in the second quarter 2011 adversely impacted our Mobile Phones volumes during that quarter. Mobile Phones volumes were also adversely affected by continued pressure from a variety of price aggressive competitors.

Average Selling Price
The year-on-year and sequential declines in our Mobile Phones ASP in the second quarter 2011 were driven by a recalibration of our prices as general price competition across all price categories increased following a relatively benign pricing environment over the previous three quarters. On a year-on-year and sequential basis, Mobile Phones ASP was also negatively impacted by a product mix shift towards lower-priced mobile phones, reflecting the market trend towards increasingly affordable smartphones. This was moderated somewhat on a year-on-year basis by the solid performance of QWERTY products in Mobile Phones’ portfolio.

Gross Margin
The year-on-year decline in our Mobile Phones gross margin was primarily due to general declines across the majority of the portfolio, partially offset by the strong performance of certain new products such as the Nokia C3, C1-01, C2-01, and X2-00.  Gross margin was negatively impacted due to greater price erosion than cost erosion across the portfolio, driven by a recalibration of our prices in the second quarter of 2011 following a relatively benign pricing environment over the previous three quarters. Lower volumes also contributed to the gross margin decline.

The sequential decline in our Mobile Phones gross margin was primarily due to greater price erosion than cost erosion across the portfolio, driven by a recalibration of our prices following a relatively benign pricing environment over the previous three quarters. In addition, the gross margin was negatively impacted by lower volumes and tactical pricing actions for specific products due to the competitive environment.

NAVTEQ

On June 22, 2011, we announced plans to create a new Location & Commerce business which will combine NAVTEQ and Nokia’s social location services operations from Devices & Services. The Location & Commerce business will be an operating and reportable segment beginning October 1, 2011. In addition to a broad portfolio of products and services for the wider internet ecosystem, the Location & Commerce business will create integrated social location offerings in support of Nokia’s strategic goal in smartphones, including Nokia products with Windows Phone, as well as support for bringing the internet to the next billion.

The following chart sets out a summary of the results for NAVTEQ for the periods indicated, as well as the year-on-year and sequential growth rates.

NAVTEQ RESULTS SUMMARY
	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net sales (EUR millions)	245	252	-3%	232	6%
Non-IFRS gross margin (%)	82.9%	81.4%		84.1%
Non-IFRS operating expenses (EUR millions)	151	153	-1%	142	6%
Non-IFRS operating margin (%)	21.5%	19.8%		23.3%

Net Sales
The year-on-year decrease in NAVTEQ net sales was primarily driven by changes in the foreign currency exchange rate and lower sales of map licenses to mobile device customers, partially offset by higher sales of map licenses to vehicle customers due to higher consumer uptake of vehicle navigation systems. Sequentially, the increase in NAVTEQ net sales was primarily driven by seasonally higher sales in all customer categories except for mobile devices. At constant currency, NAVTEQ net sales would have increased 1% year-on-year and 9% sequentially.

Gross Margin
On a year-on-year basis, the increase in NAVTEQ non-IFRS gross margin was primarily due to reduced royalty payments to data suppliers. Sequentially, the decline in NAVTEQ non-IFRS gross margin was primarily due to the annual reset of a royalty contract with a data supplier.

Operating Expenses
NAVTEQ non-IFRS research and development expenses were flat year-on-year driven by increased spending on the development of location content, offset by changes in foreign currency exchange rates. NAVTEQ non-IFRS research and development expenses increased 4% sequentially driven by the timing of projects and increased spending on the development of location content.

NAVTEQ non-IFRS sales and marketing expenses decreased 6% year-on-year driven by changes in foreign currency exchange rates. NAVTEQ non-IFRS sales and marketing expenses increased 10% sequentially driven by seasonal increases in marketing expenses related to map update marketing campaigns.

NAVTEQ non-IFRS administrative and general expenses were flat year-on-year driven by changes in foreign currency exchange rates and lower occupancy costs, offset by costs related to the forming of the planned Location & Commerce business. NAVTEQ non-IFRS administrative and general expenses increased 13% sequentially driven by costs related to the forming of the planned Location & Commerce business.

Nokia Siemens Networks

Nokia Siemens Networks operating results for the second quarter 2011 reflect the inclusion of the acquired Motorola Solutions networks assets from April 30, 2011. Accordingly, the results of Nokia Siemens Networks for the second quarter 2011 are not directly comparable to its results for prior periods.

The following chart sets out a summary of the results for Nokia Siemens Networks for the periods indicated, as well as the year-on-year and sequential growth rates.

NOKIA SIEMENS NETWORKS RESULTS SUMMARY
	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Net sales (EUR millions)	3 642	3 039	20%	3 171	15%
Non-IFRS gross margin (%)	26.6%	30.8%		26.9%
Non-IFRS operating expenses (EUR millions)	931	898	4%	852	9%
Non-IFRS operating margin (%)	1.1%	1.7%		0.1%

Net Sales
The following chart sets out Nokia Siemens Networks net sales for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area.

NOKIA SIEMENS NETWORKS NET SALES BY GEOGRAPHIC AREA
EUR millions	Q2/2011	Q2/2010	YoY Change	Q1/2011	QoQ Change
Europe	1 122	1 136	-1%	1 001	12%
Middle East & Africa	389	400	-3%	307	27%
Greater China	403	357	13%	322	25%
Asia-Pacific	973	594	64%	988	-2%
North America	311	181	72%	169	84%
Latin America	444	371	20%	384	16%
Total	3 642	3 039	20%	3 171	15%

Nokia Siemens Networks completed the acquisition of Motorola Solutions’ networks assets on April 29, 2011.

As of April 30, 2011, responsibility for supporting customers of Motorola Solutions’ GSM, CDMA, WCDMA, WiMAX and LTE products and services was transferred to Nokia Siemens Networks. Approximately 6900 employees are transferring to Nokia Siemens Networks, as well as responsibility for supporting 50 operators across 52 countries. The acquisition covers a number of research and development facilities, including sites in the United States, China, Russia, India and the UK. The acquisition is expected to strengthen Nokia Siemens Networks’ market position in key geographic markets, in particular North America and Japan, as well as with some of the world’s major service providers.

The 20% year-on-year increase in Nokia Siemens Networks net sales in the second quarter 2011 was primarily driven by growth in both the product and services businesses in most regions, as well as the contribution from the acquired Motorola networks assets. Excluding the acquired Motorola networks assets, Nokia Siemens Networks net sales would have increased 13% year-on-year.

The 15% sequential increase in Nokia Siemens Networks net sales in the second quarter 2011 was driven by a seasonally stronger infrastructure market in most regions as well as the contribution from the acquired Motorola networks assets. Excluding the acquired Motorola networks assets, Nokia Siemens Networks net sales would have increased 8% sequentially.

At constant currency, Nokia Siemens Networks net sales would have increased 21% year-on-year and increased 16% sequentially.

Gross Margin
The lower year-on-year Nokia Siemens Networks non-IFRS gross margin in the second quarter 2011 was primarily due to lower software sales, an unfavorable regional net sales mix and new network infrastructure modernization projects in certain regions. On a year-on-year basis, the acquired Motorola networks assets had a positive impact on the non-IFRS gross margin of approximately 30 basis points.

The lower sequential Nokia Siemens Networks non-IFRS gross margin in the second quarter 2011 was primarily due to the negative impact of certain network modernization projects, which more than offset the improved regional mix and the positive impact of approximately 30 basis points from the acquired Motorola networks assets.

Operating Expenses
Excluding the acquired Motorola networks assets, Nokia Siemens Networks non-IFRS operating expenses would have decreased 6% year-on-year and decreased 1% sequentially.

Nokia Siemens Networks non-IFRS research and development expenses increased 6% year-on-year and 9% sequentially. Excluding the acquired Motorola networks assets, Nokia Siemens Networks non-IFRS research & development expenses would have decreased by 6% year-on-year and 3% sequentially driven by ongoing cost initiatives which more than offset increased investments in strategic initiatives in radio technology.

Nokia Siemens Networks non-IFRS sales and marketing expenses decreased 1% year-on-year and increased 7% sequentially. Excluding the acquired Motorola networks assets, Nokia Siemens Networks non-IFRS sales and marketing expenses would have decreased 6% year-on-year and increased 2% sequentially. The year-on-year decline was driven by lower pre-sales activities as well as ongoing cost savings initiatives. The sequential increase was driven primarily by pre-sales activities.

Nokia Siemens Networks non-IFRS administrative and general expenses increased 7% year-on-year and 15% sequentially. Excluding the acquired Motorola networks assets, Nokia Siemens Networks non-IFRS administrative and general expenses would have decreased 2% year-on-year and increased 4% sequentially. The year-on-year decline was driven by ongoing cost initiatives. On a sequential basis, the increase was primarily due to higher revenues.

Nokia Siemens Networks non-IFRS other income and expense decreased year-on-year and was flat sequentially due to a variety of individually insignificant changes.

Operating Margin
The lower year-on-year Nokia Siemens Networks non-IFRS operating margin in the second quarter 2011 primarily reflected the lower gross margin and increased operating expenses and integration costs related to the acquired Motorola networks assets.  Sequentially, the increase in Nokia Siemens Networks non-IFRS operating margin reflected the higher net sales, offset to some extent by increased operating expenses and integration costs related to the acquired Motorola networks assets.

On a year-on-year and sequential basis, the acquired Motorola networks assets had a negative impact on the non-IFRS operating margin of approximately 50 basis points. The impact would have been positive excluding integration-related items.

Since the end of the quarter, Nokia Siemens Networks has confirmed that a review for assessing private equity interest in the company had been completed. The two current shareholders, Nokia and Siemens, believe they are in the best position to further enhance the value of Nokia Siemens Networks and have thus reaffirmed their commitment to the company. Together with Siemens, Nokia is evaluating alternatives that would create an industry leading company with best-in-class profitability and which is viable on a stand-alone basis.

SECOND QUARTER 2011 OPERATING HIGHLIGHTS

Nokia
- We announced the appointment of Michael Halbherr as Executive Vice President to lead the new Location & Commerce business, which will combine NAVTEQ and Nokia’s social location services operations from Devices & Services as of October 1, 2011. As of July 1, Halbherr is a member of the Nokia Leadership Team, reporting to CEO Stephen Elop. The Location & Commerce business will develop a new class of integrated social location products and services for consumers, as well as platform services and local commerce services for device manufacturers, application developers, internet services providers, merchants, and advertisers.
- To deliver on its new strategy, Nokia announced plans to align its global workforce and consolidate site operations, including plans to reduce its global workforce by about 4 000 employees by the end of 2012, with the majority of reductions in Denmark, Finland and the UK.

Devices & Services
- We signed a definitive agreement with Microsoft on a partnership that will result in a new global mobile ecosystem, utilizing the very complementary assets of both companies.
- We announced that we have signed a patent license agreement with Apple. The agreement resulted in settlement of all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission.
- We started shipping the Nokia E6 and the Nokia X7, two new smartphones aimed at business people and entertainment enthusiasts respectively. The two devices are the first Nokia smartphones running on Symbian Anna, the latest Symbian software, with new icons and usability enhancements such as improved text input, a faster browser and refreshed Ovi Maps.
- We started shipping Nokia N8s, E7s, C7s and C6-01s with the new Symbian Anna software, and announced that, by the end of August, existing owners of these devices can also download Symbian Anna.
- Nokia and Accenture finalized an agreement for Nokia to outsource Symbian software development and support activities to Accenture. Under the agreement, Accenture will provide Symbian based software development and support services to Nokia through 2016. Approximately 2 800 Nokia employees located in China, Finland, India, United Kingdom and the United States, are expected to transfer to Accenture at closing, which is expected to take place in the early part of October, 2011.
- Nokia introduced the Nokia N9, a pure touch smartphone. The outcome of our MeeGo efforts, the Nokia N9 comes in a unibody polycarbonate design that enables superior antenna performance for better reception, better voice quality and fewer dropped calls; and a smarter all-round experience with NFC for sharing and pairing to accessories.  The Nokia N9 also introduces an innovative new design where the home key – typically located at the bottom of the device – is replaced by a simple gesture: a swipe.
- We started shipping the Nokia C2-00, our first Dual SIM mobile phone which enables users to use two SIM cards in the same device, meaning calls and text messages can come to either number when the phone is on. The Nokia C2-00 is a Series 40-based device.
- We started shipping the Dual SIM Nokia X1-01, a Series 30-based phone optimized for music playback through a powerful built-in speaker.
- We further expanded our Dual SIM portfolio with the introduction of the Nokia C2-03, which has unique Dual SIM capabilities. The device enables users to personalize up to five SIM cards, while it also features our Easy Swap technology which makes switching SIM cards simple and quick.
- Along with two other new models we introduced in the quarter – the Nokia C2-02 and Nokia C2-06 – the Nokia C2-03 features the new Nokia Browser, which is designed to provide a more personal and affordable internet experience. The Nokia Browser, which is available in 87 languages, compresses data and can thus reduce the cost of surfing the web. All three new models also feature Nokia Maps for Series 40, which provides an advanced, cost-efficient maps experience. The new Nokia Maps for Series 40 is similar to that available on our smartphones in that people can view maps and plan routes when the phone is in offline mode.
- We launched photorealistic 3D models of certain metropolitan areas for the web version of Ovi Maps.  This immersive and free feature adds a new dimension to the Ovi Maps experience and enables people to explore places in a completely different way.
- Store continued to see increased downloads of applications and content during the quarter. By early July 2011, the Store was attracting more than 6.5 million downloads a day, compared with up to 5 million a day reported in April 2011, boosted by downloads on the latest Symbian devices. Increased demand for apps from the approximately 225 million-strong Symbian consumer base has seen the Store catalog grow to more than 50 000 apps.
- We announced plans to make Qt core to our mobile phones strategy. For developers, this means a dramatic increase in the distribution and monetization opportunities for Qt apps.
- We announced the release of Qt SDK 1.1 offering one integrated development environment for creating both consumer applications on Nokia’s Symbian platform as well as for desktop applications such as Windows 7, Mac OSX and Linux.  Using the Qt SDK to build their apps, developers have a complete, easy-to-use tool designed to reduce application creation time for Nokia touch-screen devices.

NAVTEQ
- NAVTEQ launched its LocationPoint mobile ad network in South Africa.
- NAVTEQ announced the availability of real-time traffic in Russia and United Arab Emirates. The UAE launch coincided with the data being made available on Nokia smartphones.
- NAVTEQ announced it is supplying map data for new GPS-enabled digital cameras from Fujifilm and Olympus Imaging.
- NAVTEQ previewed its TPEG-based traffic services which will significantly reduce costs of delivering traffic and other dynamic data.
- NAVTEQ expanded its presence in India with the opening of a second production center and the launch of NAVTEQ Natural Guidance for India.

Nokia Siemens Networks
- Nokia Siemens Networks completed the acquisition of certain wireless network infrastructure assets of Motorola Solutions, paying USD 975 million in cash, on April 29, 2011. The acquisition is expected to strengthen the company’s position in North America and Japan, adding approximately 6 900 employees across 52 countries.
- Nokia Siemens Networks announced several key mobile broadband deals, including a LTE roll-out for LG U+ in Korea, HSPA+ as part of 3G modernization and expansion for Celcom in Klang Valley, Malaysia, as well as 3G/HSPA network equipment and related turnkey services for TelCell in the Netherlands Antilles. The company signed a system integration deal with MegaFon to build a country-wide IP mobile backhaul network in Russia and an exclusive packet core deal with Optus in Australia. In addition, FASTWEB, an Italian broadband provider, selected Nokia Siemens Networks and Juniper Networks to build additional network capacity and deliver a Multiservice IP backbone.
- SK Telecom in Korea selected Nokia Siemens Networks to provide a 100G-ready optical network system and INOVENTICA, a Russian infrastructure service provider, will use the company’s DWDM optical transport network to offer cloud computing services.
- Nokia Siemens Networks announced it has invested in ClariPhy Inc., a leading U.S.-based semiconductor developer for next-generation platforms.
- In services, Nokia Siemens Networks announced the start of operations for its Global Network Operations Center (GNOC) in Sao Paulo, Brazil. In China, Shanghai Unicom awarded the company a five-year contract for network maintenance services. China Unicom’s subsidiary in Anhui province will deploy Nokia Siemens Networks’ Energy Solutions to reduce by 20% total mobile base station site power consumption.
- In the customer experience management field, Nokia Siemens Networks expanded its portfolio with CEM 2.0, which helps operators fully utilize data to improve the customer experience and their business results. The company announced Zain Kuwait is now deploying two CEM platforms, Serve atOnce Traffica and Serve atOnce Intelligence.
- Nokia Siemens Networks has signed a contract with Yutong Bus in China to provide a machine-to-machine (M2M) service platform and develop telematics applications based on a cost efficient Software-as-a-Service (SaaS) model.
- Nokia Siemens Networks has expanded its Liquid Radio architecture with the launch of a new, high power radio module for its Flexi Multiradio Base Station family at CommunicAsia 2011 in Singapore.