Markets and Digia's business operations

Realigned technology-platform strategies and changes in the competitive situation for phone manufacturers markedly changed the business environment for the company’s Mobile Solutions segment. As a result of the changes and the ensuing reduction in contract engineering orders, the Mobile Solutions segment’s consolidated net sales and profitability fell significantly throughout the financial year. This had a major negative impact on the whole company’s consolidated net sales and operating profit compared to the previous year.

The negative impact strengthened as the year progressed. For this reason, the company conducted four rounds of personnel negotiations during the period, leading to the closure of the Pori and Lappeenranta offices and the dismissal of 344 employees. The personnel negotiations caused non-recurrent costs of approximately EUR 4.9 million.

As a consequence of the change in the operating environment of the Mobile Solutions segment, and of the downward revision of long-term profit expectations for mobile operations in general, the company made a one-off writedown of EUR 25.4 million in relation to the segment’s customer relations and goodwill.

With regard to international operations, the product selections, expertise and ability to serve local customers of the Chinese and Russian units were improved during 2011. The Chinese unit generates product development and maintenance services, thanks to which the company is able to serve customers at various points in their product development cycle. The unit’s capacity is utilised both in projects within China and for global customer relationships. The decrease in demand for contract engineering also affected the Chinese unit’s operations.

The Russian unit operates as a near-shore resource for Digia’s Finnish customers and also sells services directly to local customers. The unit’s direct sales to local customers were actively developed during the year and operations progressed according to plan.

Enterprise Solutions

The customers of Digia’s Enterprise Solutions segment are companies, organisations and public bodies. The segment’s product and service strategy is based on multi-channel solutions that increase the efficiency of customers’ business operations, and on services that cover the entire product lifecycle. An innovative development partner for its customers, Digia introduces to the market products, services and business models that employ new technologies. The segment’s core market consists of the Nordic region and Russia, where it seeks to increase its operations mainly through organic growth.

In addition, the segment includes a commercial Qt licensing and service business acquired from Nokia Plc during the year, and whose start-up and development progressed according to plan. The majority of the Qt Commercial turnover is generated by product-based, scalable business operations. Around half of the turnover is generated in the North American market, with Central Europe and Great Britain being the other significant markets.

Demand for ERP systems continued at a moderate level during the period. Demand for e-business and financial sector systems was lower than expected.

The net sales of the Enterprise Solutions segment grew slightly. Taking into account the Qt licensing and service business, the segment’s growth rate exceeded that of the market in general.

Operational profitability also increased towards the end of the year, flattening out at the high level previously encountered. Further segment-specific information is presented in Note 1 to the financial statements.

Mobile Solutions

The customers of Digia’s Mobile Solutions segment are globally operational smart phone, machine and equipment manufacturers and telecom operators that utilise Digia’s contract engineering services.

Due to major changes in the operating environment, the Mobile Solutions segment’s contract engineering business shrank significantly compared to the previous year. Because the effect of the changes was permanent, during the period the company revised the entire segment and its long-term profit expectations. The result was a writedown of EUR 25.4 million in relation to the segment’s customer relations and goodwill. Further segment-specific information is presented in Note 1 to the financial statements.