S&P cuts Nokia rating over smartphone blow
Helsinki, March 3, 2012
Standard and Poor's (S&P) downgraded mobile phone giant Nokia's rating by a notch, blaming especially the Finnish company's difficulties in defending its smartphone market share.
S&P cut Nokia's long-term corporate credit rating to BBB- from BBB, with a negative outlook 'reflecting the possibility of a further downgrade in the next two years,' if the company's margins remain too weak and its cash holdings decrease too much, the ratings agency said in a statement.
'The rating action reflects limited earnings visibility in Nokia's smartphone sub-division,' S&P said, adding that this in turn had led it to revise down its assessment of the company's profitability and cash flow in 2012.
The dramatic fall came as the company was undergoing a major restructuring, phasing out its Symbian line of smartphones in favour of a partnership with Microsoft that has produced a first line of Lumia smartphones.
Nokia is depending heavily on the new phones to help maintain its ranking as the world's largest mobile phone maker as it operates in a rapidly changing landscape with RIM's Blackberry, Apple's iPhone and handsets running Google's Android platform take growing bites out of its market share.
S&P yesterday said it believed Nokia's partnership with Microsoft could help it improve its competitive position, but added: 'we are uncertain about the extent to which revenue growth from higher-priced Lumia smartphones can offset a potentially rapid decline in revenues from smartphones based on the Symbian operating system.'
'As a result, we believe Nokia's market share could further decline from 12.6 per cent in the fourth quarter of 2011 following a decline from 28.1pc in the fourth quarter of 2010,' it cautioned.