Moody′s sees Nokia on the wane, cuts rating | Business| Economy and finance news from a German perspective | DW | 16.04.2012
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Moody's sees Nokia on the wane, cuts rating

International ratings agency Moody's has cut the credit rating of mobile phone maker Nokia, describing an investment in the Finnish firm as speculative. The move comes in anticipation of 'disappointing' sales.

Moody's Investors Service downgraded the creditworthiness of Nokia from "Baa2" to "Baa3," meaning that the Finnish mobile phone maker has fallen to the bottom of the agency's "speculative, non-investment" category.

The Paris-based ratings agency said it believed that the structural challenges facing Nokia's mobile phone segment might not be easy to address in the face of gains in market share by low-end phone manufacturers or new phone promotions by Chinese carriers.

Nokia is struggling in the fiercely contested smartphone segment, with the firm's chief executive, Stephen Elop, describing sales in the first quarter of 2012 as "disappointing" ahead of officially publishing company figures on April 19.

"This precipitous decline is of particular concern considering that Nokia's mobile phones segment was still the core income generator in 2011," Moody's said in a statement.

Last year, sales of mobile phones contributed 1.5 billion euros ($1.9 billion) to Nokia group's operating profit of 1.8 billion euros.

Crucial Lumia launch

Nokia is still considered to be the world's largest mobile phone manufacturer but is rapidly losing market share to smartphone rivals Apple and Samsung as well as to Asian competitors in the low-end mobile phone segment.

Under a major restructuring program, it has phased out its Symbian line of smartphones in favor of a partnership with Microsoft which has produced a first line of Lumia smartphones.

"Nokia's Baa3 rating reflects Moody's expectation that Lumia devices will be accepted in the market in 2012 … and that it will become the third smartphone system next to Google's Android and Apple's iOS," the ratings agency said.

At the same time, Moody's warned that "margin pressure" in the mobile phones segment would continue, making Nokia "more reliant on the smart devices, thereby reducing the group's revenue diversification."

As a result, the ratings agency maintained its negative outlook on senior debt owed by Nokia.

uhe/ai (AFP, dapd, AP)