AllThingsD » downgrade

S&P to Nokia: Whatcha Gonna Do With All That Junk, All That Junk Inside Your Trunk?

John Paczkowski — Fri, 27 Apr 2012 15:15:45 +0000

The market’s loss of faith in Nokia grows more profound by the day. Standard & Poor’s on Friday lowered its rating on the company to “junk,” and said it may drop it further unless its performance improves.

“We now expect Nokia to report significantly lower margins and cash flows in 2012 than we had previously expected,” S&P said. “The outlook is negative, reflecting the possibility of a further downgrade if Nokia fails to stabilize revenues and margins and significantly cut its cash losses.”

Evidently Nokia’s ugly first-quarter loss and 30 percent drop in sales didn’t do much to reassure S&P that the company’s turnaround is a sure thing — even with its relatively well-received new smartphone, the Lumia.

“We still expect revenue from Lumia smartphones to grow over time but not sufficiently to offset a rapid decline in revenue from Symbian-based smartphones over the next few quarters,” S&P analysts said.

Another voice to add to what’s fast becoming a Greek chorus of Nokia doomsayers. The company has been slapped with three nasty credit downgrades in a row.

Earlier in the week, Fitch downgraded Nokia’s long-term credit rating to junk status; last week, Moody’s did the same thing, citing concerns about Nokia’s low-end phone business.

Nokia Hit With More Debt Rating Downgrades From Moody's

Ina Fried — Mon, 16 Apr 2012 16:41:41 +0000

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.

Analyst Cuts Apple Rating on Prospect of iPhone Subsidy Revolt

John Paczkowski — Mon, 09 Apr 2012 18:25:41 +0000

Now here are two words you don’t often see in the same sentence: Apple and downgrade. Yet here they are in a note from BTIG Research’s Walter Piecyk, who this morning cut his rating on the company’s shares to “neutral” from “buy.”

A shocker of a call, coming as it does when Apple shares are so ascendant that some analysts have slapped a staggering $1,001 price target on them. But Piecyk has his reasons, and they’re worth considering, even as AAPL shrugs them off in midday trading. Top among them: He believes Apple’s carrier partners are tired of offering such high subsidies on the iPhone, which eat into their own margins while delivering huge ones to Apple. And soon they’re going to begin reining them in.

“Subsidies by post-paid wireless operators have fueled the growth of Apple’s $600 iPhone since its inception,” says Piecyk. “Wireless operators have been happy to subsidize smartphones to new and existing customers in order to provide a lift to the average monthly bill (ARPU) of their customer base, a metric which had been falling for the past three decades.”

But now that the pace of the smartphone upgrade cycle has quickened, subsidizing iPhone upgrades only one year into a two-year contract is becoming a costly proposition. Case in point: AT&T’s wireless margins, which used to be more than 44 percent, are these days hovering around 30 percent (see slide at right). So, to raise margin levels back to where they once were, AT&T is implementing stricter upgrade policies.

“We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012 and we expect to see some initial evidence of their success in the current quarter,” Piecyk said.

And that could cause a significant contraction in iPhone sales; more so, if other carriers follow AT&T’s lead, as Piecyk believes they might.

How significant?

Says Piecyk, “We expect Apple’s iPhone sales to drop to 27.5 million units in Fiscal Q3, resulting in a revenue estimate that is $1 billion below consensus.”

Which would obviously make for a hell of a surprise.

So what do we think of Piecyk’s rationale? Does it hold water?

Dow Slides 5.5 Percent, Ending Below 11,000

Brendan Conway — Mon, 08 Aug 2011 20:39:13 +0000

U.S. stocks tumbled in a Monday rout that sent the Dow Jones Industrial Average down 5.5 percent, plunging below 11,000 for the first time since November, as investors fled from risky assets in the first trading session since Standard & Poor’s downgraded the federal government’s credit rating late Friday.

The Dow Jones Industrial Average sank 632 points at 10,813, ending at the day’s low, in preliminary closing figures at 4 p.m. Eastern time.

The Standard & Poor’s 500 stock index tumbled 78 points, or 6.5 percent, to 1123, with financial and energy stocks falling hardest. The Nasdaq Composite slumped 168 points, or 6.6 percent, to 2,364.

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Moody's Downgrades Nokia

Gustav Sandstrom and Arild Moen — Wed, 27 Jul 2011 17:40:47 +0000

Moody’s Investor Service Inc. Wednesday downgraded Nokia Corp.’s debt rating two notches, heaping more pressure on the troubled mobile-phone maker as it struggles to realign its business strategy and regain traction in the lucrative smartphone business.

Moody’s downgraded Nokia’s senior debt rating to Baa2, the second lowest investment-grade rating, from A3, with a negative outlook. It also cut Nokia’s senior unsecured medium-term note program to (P)Baa2 from (P)A3 and its senior unsecured regular bond/debenture to Baa2 from A3.

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Fitch Lowers Nokia Credit Rating

Drew FitzGerald and Christopher Lawton — Tue, 07 Jun 2011 21:05:57 +0000

Fitch Ratings downgraded Nokia Corp.’s credit ratings by two notches, to one step away from junk territory, saying that the cellphone maker’s market share quickly deteriorated and will take time to recover.

The ratings firm based its decision on Nokia’s continued market-share losses and its surprise profit warning last week, when the Finland-based company shocked the market by confessing that its core mobile-handset business might not make a profit in the second quarter.

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Why Verizon’s iPhone Won’t Be So Bad for RIM

Arik Hesseldahl — Mon, 10 Jan 2011 17:29:28 +0000

It was about a year ago I was talking with Charles Wolf, the analyst at Needham and Co. in New York who covers both Apple and Research In Motion. At the time he promised that the day Verizon picked up the iPhone he would downgrade RIM to “sell.” I called him this morning to ask if that were still true. His answer? No, he’s not planning to downgrade RIM even though Verizon is expected to announce its first iPhone tomorrow.

A year ago, when Wolf first made that statement, he was right. An iPhone on Verizon would have been a severe blow to Research In Motion. That it will only amount to a sting this year says a lot about how RIM’s business has improved and how its revenue base has become more diverse in the year or so since.

RIM doesn’t disclose the identities of its biggest carrier partners, but it does disclose how much the top three contribute to overall sales, though it’s not hard to figure out that Verizon has traditionally been its biggest customer. A year ago, Verizon’s sales of BlackBerry devices contributed 25 percent of RIM’s overall sales, while the next two largest customers contributed 13 percent and 10 percent, respectively. At least one of those was AT&T.

Today the picture’s different. RIM’s biggest customer–and it may still be Verizon–accounted for only 12 percent of sales in the quarter ended November, while number two and number three each accounted for 9 percent.

RIM’s growth outside its top three countries–the U.S., the U.K. and Canada–has also picked up. According to figures from IDC, in 2007 RIM relied on North America for more than three quarters of its sales. As of the third quarter of 2010, that figure was down to less than 48 percent. And in a lot of these markets carriers don’t subsidize the phone as aggressively as U.S. carriers do, and so RIM ends up having an advantage on price: $250 or so versus $500 or $600 for an iPhone. RIM is also seeing strong growth in its prepaid business outside North America. During its Dec. 16 earnings call, CEO Jim Balsillie said prepaid sales in the U.K. had grown by 245 percent year-over-year.

Then there’s Android. Verizon threw a lot of weight behind Google’s Android platform last year and has been marketing it heavily all year. The results have been mixed. A study by ITG Investment Research last year suggested that Android didn’t give Verizon the competitive bump it had hoped for versus AT&T. Meanwhile, RIM has in the last year moved closer to AT&T and in August launched the BlackBerry Torch with that carrier, though it didn’t go as well as had been hoped.

It’s not like RIM isn’t going to take some damage from the iPhone. RIM shares are down this morning more than 1 percent. But for RIM it could have been much worse. In June, when Bloomberg News reported that Verizon planned to bring the iPhone to its network, I covered the story of how investors freaked out and lopped more than 6 percent off RIM’s valuation. Now investors seem to understand that it’s likely to hurt RIM’s overall share of the smartphone market, but it won’t be the disaster that it would have been a year ago.

Meanwhile, if you haven’t seen it already, make sure you watch the interview Walt Mossberg and Kara Swisher did with RIM Co-CEO Mike Lazaridis at D: Dive Into Mobile in December.

[ See post to watch video ]

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Chips: The Street’s Worries Intensify; Downgrades Piling Up

Eric Savitz — Tue, 07 Sep 2010 17:46:37 +0000

The Street’s fretting over weakening demand in the chip sector is intensifying.

In short, signs of weak PC demand, combined with fears of a slowing recovery in IT spending, indications of inventory expansion in the supply chain and general worries over the lackluster economic recovery have spurred multiple analysts to rethink their positions on the sector generally and on a variety of individual issues. Today alone, there were downgrades and estimate cuts from a number of firms.

Here’s a rundown.

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Getting a New Windows Computer With XP

Walter S. Mossberg — Thu, 14 Aug 2008 00:00:45 +0000

Here are a few questions I’ve received recently from people like you, and my answers. I have edited and restated the questions a bit, for readability.

I am in the market for a new Windows computer, but I prefer the Windows XP operating system, not Vista. I understand Microsoft has now barred the major PC vendors from selling XP systems. Is there a way I can get around this?

If you want a new, brand-name PC that comes pre-loaded with the seven-year-old Windows XP operating system, you can still get one through an odd and circuitous process. Most major PC makers will sell you selected Vista models with an option, which sometimes costs extra, officially called a “downgrade,” but sometimes marketed as an “upgrade” or “bonus.” You may have to hunt through the selections offered by the computer makers to find one that has this XP option.

When you order a PC in this fashion, you are technically buying a Vista machine, and Microsoft counts it as a Vista sale. But the computer company actually loads XP on the new hardware, in place of Vista, before it leaves the factory. In many cases, you also get discs containing Vista, in the event you wish to switch to the newer Vista operating system later.

I was wondering if you could give me some suggestions of a small, light portable radio-type gadget with earbuds that would be good for me while I do athletic activities like riding my bike. I want something that will give me different pre-programmed selections of music, not something that I have to load with music (I don’t remember names of songs). I love my Sirius satellite radio in my car.

My first reaction is to suggest you simply get the portable, small, personal Sirius radio that is meant for carrying on your person. It’s called the Stiletto 2 and costs around $300. Like the one in your car, it does require a subscription, but it is much smaller. I haven’t tested it, but you can get more information at sirius.com.

However, this unit isn’t in the smallest class of portable music players, so another alternative might be to get a very small portable player, which, while it allows you to download music, also has a built-in FM radio. Among these is the smallest Microsoft Zune, called the Zune 4 GB, at about $100, and the Sansa Clip, starting at about $35. Neither requires a subscription fee. Information is at zune.com and sansa.com.

The popular Rhapsody subscription music service is also available on portable players, and offers pre-programmed channels of music. Some of these players also include FM radios. Information on these is at learn.rhapsody.com/devices.

Last week, you said you didn’t know of a dedicated gadget that simply allows people to both send and receive emails. What about the MailBug?

Thanks for reminding me. The MailBug, which I haven’t tested, is a small, text-only terminal for sending and receiving email over a dial-up connection. It costs about $125 and requires a companion email service that is about $100 a year. It’s made by a company called Landel and can be ordered at mailbug.com.

While the device itself can’t send or receive photos or other nontext attachments, account holders with access to a computer can view such attachments via a Web-based version of their email accounts.

You can find Mossberg’s Mailbox, and my other columns, online, free, at the new All Things Digital Web site, http://walt.allthingsd.com.

For the Memory Chip Sector, a Day to Forget

Eric Savitz — Tue, 22 Jul 2008 17:14:45 +0000

For the memory sector, it is a day to forget.

Last night, SanDisk (SNDK) reported an extremely nasty June quarter earnings report–the Street has responded with a host of downgrades. Meanwhile, this morning, Citigroup chip analyst Glen Yeung cut his ratings on Micron (MU), Qimonda (QI) and Spansion (SPSN) to Hold from Buy. The result is that all of the stocks in the beleaguered sector are getting pummeled. Again.

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I'd Like a Copy of Windows Vista "XP Edition," Please

John Paczkowski — Mon, 30 Jun 2008 17:31:32 +0000

Microsoft (MSFT) has extended the availability of Windows XP nearly as many times as it has extended the ship dates of Windows Vista and Office 2007. The company had planned to cut off XP sales through the retail and original equipment manufacturer channels on Jan. 30, 2008, one year after Vista’s debut. But the poor reception given the new OS and “feedback” from XP advocates gave it pause to reconsider. So Microsoft adjusted the deadline to June 30.

Which makes today XP’s last on the retail market. From now on, if you want to run Windows XP on a new machine, you’ll need to purchase Windows Vista and then “downgrade” to its predecessor, which Microsoft will continue to support until 2014.

I'd Like a Copy of Windows Vista "XP Edition," Please

John Paczkowski — Mon, 30 Jun 2008 17:31:32 +0000

That "Downgrade" to XP Option Sure Worked Wonders, Didn't It?

John Paczkowski — Thu, 08 May 2008 14:02:08 +0000

You wouldn’t know it from the protests over Microsoft’s decision to retire Windows XP at the end of June or the PC users exercising their Windows Vista downgrade rights, but Vista is actually selling quite well. Microsoft (MSFT) Chairman Bill Gates said today that sales of Windows Vista have reached 140 million copies worldwide. “That’s a very rapid sales rate,” Gates explained.

Sure is. Especially for an operating system that’s met with such a middling reception. That said, you’ve got to wonder if the 140 million copies to which Gates refers are deployed copies or licenses sold. Because if it’s the latter, the number would be decidedly less impressive. It wouldn’t really account for volume licenses sold to corporate customers, copies pre-installed on OEM computers, and copies downgraded to Windows XP. And Gates has made exactly this type of oblique statement before, the last time Microsoft announced Vista sales figures.

That "Downgrade" to XP Option Sure Worked Wonders, Didn't It?

John Paczkowski — Thu, 08 May 2008 14:02:08 +0000