Nokia Hit With More Debt Rating Downgrades From Moody’s
Moody’s cut its ratings on Nokia’s debt on Monday, citing concerns in particular about Nokia’s low-end phone business.
The credit firm cut long-term and short-term debt ratings by one notch. Moody’s also said its outlook was negative, meaning further downgrades are possible.
“While volatility by quarters is not uncommon, Moody’s believes that the structural challenges facing Nokia’s Mobile Phones segment may not be easy to address, such as the market share gains recorded by makers of very low-end phones or new phone promotions by Chinese carriers,” Moody’s said in a statement. “This precipitous decline is of particular concern considering that Nokia’s Mobile Phones segment was still the core income generator for the Nokia group in 2011, when it contributed 1.5 billion Euros to the group’s operating profit of 1.8 billion Euros.”
Moody’s also noted that the company’s shift from Symbian to Windows Phone-based devices “is proving more challenging than expected given that sales of Symbian-based devices are falling off very quickly while Lumia sales are only ramping up slowly.”
The ratings move follows Nokia’s warning last week that its business was weaker than expected and that it sees another rough quarter ahead. Nokia is slated to deliver its full earnings report on Thursday.
For its part, Nokia said it is “quickly taking action” to address concerns about its business.
“Nokia will continue to increase its focus on lowering the company’s cost structure, improving cash flow and maintaining a strong financial position,” CFO Timo Ihamuotil said in a statement.
Nokia was hit with downgrades last year after announcing its plans to focus on Windows Phone.
Moody’s did note that Nokia “has maintained a strong liquidity position and capital structure” and had about twice as much cash and marketable securities as it did debt as of the end of March.