2020, with the majority of these net sales expected to be shifted to 
      future periods, rather than being lost. At the end of Q3 2020, we were no 
      longer experiencing factory closures related to COVID-19. In addition, 
      COVID-19 has affected our operational costs, and we now expect a 
      temporary benefit of approximately EUR 250 million due to lower travel 
      and personnel expenses related to COVID-19 in full year 2020. 
 
   -- In Q3 2020, non-IFRS gross margin was 37.4% (reported 37.3%) and non-IFRS 
      operating margin was 9.2% (reported 6.6%). During the period, Nokia 
      continued to deliver improvements in gross margin and operating margin. 
 
   -- In Networks, gross profit and operating profit increased, driven 
      primarily by improved performance in Mobile Access and Optical Networks. 
      In Mobile Access, we continued to drive improvements in our portfolio by 
      strengthening our roadmaps, reducing product costs and improving our 
      product performance. In Optical Networks, our significantly improved 
      year-on-year results were due to a particularly strong Q3 2020, which 
      benefitted from pent-up demand, following the easing of temporary supply 
      chain constraints related to COVID-19. 
 
   -- Non-IFRS diluted EPS in Q3 2020 was EUR 0.05, compared to EUR 0.05 in Q3 
      2019, primarily driven by continued progress related to our cost savings 
      program and a net positive fluctuation in financial income and expenses, 
      partially offset by a net negative fluctuation in other operating income 
      and expense, higher investments in 5G R&D to accelerate our product 
      roadmaps and cost competitiveness in Mobile Access and lower gross 
      profit. 
 
   -- Reported diluted EPS in the first nine months of 2020 was EUR 0.03, 
      compared to negative EUR 0.10 in the first nine months of 2019. The 
      change was primarily driven by lower amortization of acquired intangible 
      assets, continued progress related to our cost savings program, a net 
      positive fluctuation in financial income and expenses and lower costs 
      related to network equipment swaps, partially offset by higher 
      investments in 5G R&D to accelerate our product roadmaps and cost 
      competitiveness in Mobile Access and a net negative fluctuation in other 
      operating income and expense. 
 
   -- Q3 2020 was the fifth quarter in a row of solid free cash flow. We 
      established a program in Q1 2019 to focus on free cash flow. Since 
      establishing this program, reduced working capital has been a significant 
      source of cash, principally because of lower net sales and, to a lesser 
      extent, improved execution. During Q3 2020, net cash increased by 
      approximately EUR 0.3 billion, resulting in an end-of-quarter net cash 
      balance of approximately EUR 1.9 billion. During Q3 2020, total cash 
      increased by approximately EUR 0.1 billion, resulting in an 
      end-of-quarter total cash balance of approximately EUR 7.6 billion. 
 
 
 
 
   COVID-19 
 
 
 
   The COVID-19 pandemic has made vividly clear the critical importance of 
connectivity to keep society functioning. We believe we have a resilient 
customer base, and we feel a sense of duty to our customers and the 
communities they serve. 
 
   We believe the impact of COVID-19 on Nokia's financial performance and 
financial position has so far been primarily related to factory 
closures. Due to significant uncertainties and risks in estimating the 
impact of customer-related delivery and implementation challenges, we 
are now focusing our COVID-19 disclosure on the impact of factory 
closures, which have had a net sales impact of approximately EUR 200 
million in the first nine months of 2020, with the majority of these net 
sales expected to be shifted to future periods, rather than being lost. 
At the end of Q3 2020, we were no longer experiencing factory closures 
related to COVID-19. The EUR 200 million of negative impact in the first 
nine months of 2020 relates primarily to Alcatel Submarine Networks 
within Group Common and Other, which experienced temporary factory 
closures that impacted Q1 2020 and Q2 2020. 
 
   COVID-19 also affected our operational costs (for example, temporary 
lower travel), capital expenditures (temporary delays), cash outflows 
related to taxes (tax relief), and net working capital (for example, 
lower inventories due to temporary disruptions). In full year 2020, we 
now expect a temporary benefit of approximately EUR 250 million due to 
lower travel and personnel expenses related to COVID-19, of which 
approximately EUR 150 million is expected to benefit operating expenses 
and approximately EUR 100 million is expected to benefit cost of sales. 
 
   Potential risks and uncertainties continue to exist related to the scope 
and duration of the COVID-19 impact and the pace and shape of the 
economic recovery following the pandemic. 
 
   During the COVID-19 pandemic, we have continued to advance our 5G 
roadmap and product evolution, as planned, and we believe that our 
COVID-19 mitigation actions in R&D have been successful. We believe we 
remain on track with our plans to drive progressive improvement over the 
course of 2020. 
 
   Health and safety 
 
   Naturally, Nokia's first focus during the COVID-19 pandemic is to our 
employees. We have in place strict protocols for Nokia facilities and 
provided clear advice to our employees about how they can mitigate the 
risks of COVID-19 in situations where they have to go about critical 
work. 
 
   We have taken a range of steps, including banning international travel 
for Nokia employees, except for strictly-defined 'critical' reasons; 
closing all our facilities to all visitors, with the exception of people 
engaged in essential maintenance and services, and asking our staff to 
work from home wherever possible. We started implementing these measures 
in some regions already in January and have updated guidance as the 
situation has developed. 
 
   As the overwhelming majority of Nokia employees continue working 
remotely, we are providing guidance on how staff can maintain a healthy 
work-life balance and look after their physical and mental well-being. 
 
   Supporting the essential services our customers provide 
 
   The products and services that we provide have never been more critical 
in enabling the world to continue to function in an orderly way. We 
continue to work closely with all our customers, to ensure that the 
changing needs and requirements at this time are well understood and 
that we respond appropriately to them. 
 
   In Q3 2020, connectivity continued to bring together people isolated 
from each other by the COVID-19 pandemic. Remote working and schooling, 
robust delivery of basic services and smart deliveries are just some 
examples that have been enabled by our connectivity solutions. Our 
shared value project with UNICEF in Kenya continued in Q3 2020 with the 
first schools connected in September using our Fixed Wireless Access 
solution, FastMile. The work started in early 2018. The current COVID-19 
pandemic has underlined the importance of connectivity to enable digital 
learning and inclusion. 
 
   Nokia has a global manufacturing footprint designed for optimized global 
supply, and to mitigate against risks such as local disruptive events, 
transportation capacity problems, and political risks. Our supply 
network consists of 25 factories around the globe and six hubs for 
customer fulfillment. As a result, at the Nokia level, we are not 
dependent on one location or entity. We have also established a global 
command center to manage the supply chain challenges arising from the 
outbreak; and we are ready to activate relevant business continuity 
plans should the situation in any part of our organization require this. 
 
   Impact on asset valuations 
 
   COVID-19 has affected the valuations of certain assets, including 
investments in non-publicly quoted assets through Nokia's venture fund 
investments and pension plans, the valuation of which is inherently 
challenging in fast-moving market conditions. In Q3 2020, the valuation 
uncertainty has decreased compared to Q2 2020 but still remains elevated 
(for details, please refer to note 5 "Pensions and other post-employment 
benefits" and note 8 "Fair value of financial instruments") in the 
"Financial statement information" section included in Nokia Corporation 
interim report for Q3 and January-September 2020). 
 
   In relation to its financial statements as of September 30, 2020, Nokia 
has also considered the indicators of impairment of goodwill and other 
intangible assets, recoverability of deferred tax assets, valuation of 
inventories, and collectability of trade receivables and contract 
assets. Based on these assessments, COVID-19 is currently not expected 
to have long-term effects on Nokia's financial performance that would 
require adjustments to the carrying amounts of goodwill and other 
intangible assets or deferred tax assets. Also, Nokia has not identified 
any material increase in the amount of bad debt or need to adjust the 
valuation of inventories. 
 
   Doing our part to fight the pandemic 
 
   We also feel another sense of duty -- to the societies where Nokia 
operates. As a global company, we have a duty to be part of the global 
fight against this pandemic. In Q3 2020, we also continued our support 
for the mHealth program with UNICEF in Indonesia where their real-time 
big data and artificial intelligence platform is allowing policymakers 
and citizens to understand the levels of physical distancing, movement 
and mobility at the village level. As a result of the insights from the 
platform, UNICEF Indonesia has been able to materially assist in the 
formation of evidence-based policy to fight COVID-19, ensuring a lower 
disease burden and a brighter future in Indonesia. 
 
   These actions demonstrate our strong commitment to supporting global 
efforts to end the pandemic and overcoming the disruption and challenges 
we currently face.

(MORE TO FOLLOW) Dow Jones Newswires

10-29-20 0215ET