Tuesday, 2 August 2011

S&P downgrades Nokia

Standard and Poor's on Tuesday became the latest ratings agency to downgrade mobile phone giant Nokia's rating, blaming the Finnish company's dismal sales and difficult strategic transition.

S&P cut Nokia's long-term corporate credit rating to BBB from BBB+.

"The rating actions reflect the continued erosion of Nokia's smartphone market shares," S&P credit analyst Matthias Raab said in a statement, adding that a revised assessment of the company's operating margins also pushed the rating down.

Raab said S&P might lower Nokia's rating even further this year if there is no improvement in the mobile phone unit's operating margins in the next six to nine months.

In March, S&P's rating for Nokia stood at A but like other ratings agencies, it reevaluated Nokia's fortunes following a radical strategic shift announced at the beginning of the year.

In February, chief executive Stephen Elop said the company would abandon its Symbian platform, once touted as the future of smartphones, and instead adopt the Microsoft Windows Phone platform in a risky partnership.

With the first Microsoft-Nokia phones not expected to ship until 2012, Nokia's shares have plummeted.

Raab said he expected the lower ratings to remain at least until "Nokia has completed the adoption of Microsoft's Windows Phone as its new primary software platform for smartphones."

S&P's action comes almost two weeks after Nokia reported a dismal 368-million-euro ($520.5-million) net loss for the second quarter, with sales down 7.3 percent.

Nokia refused to give any third-quarter guidance but analysts expect the slide to continue.

"We expect the revenues of Nokia's Devices and Services segment to decline by about 20 percent in 2011 but to recover by 2013 to the level reported in fiscal 2010," S&P said.

Since February's shake-up, ratings agency Fitch has downgraded Nokia's short and long-term ratings with a negative outlook and Moody's docked its rating by two notches, also with a negative outlook.


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