Feeds

Moody's downgrades Nokia to near-junk status

Finns failing at high and low end of market

Boost IT visibility and business value

Ratings agency Moody's has lowered its debt rating for Nokia to near junk status, and warned that the company is facing even tougher times ahead.

In a note to investors today Moody's cut the world's largest mobile handset manufacturer's rating from Baa2 to Baa3, its lowest rating for investment grade stock.

While the trigger for the downgrade was last week's less-than-inspiring financial results, Moody's warns that Nokia faces a rough road ahead in its smartphone business and further downgrades are possible.

"Nokia's transition in its Smart Devices from Symbian-based phones to the Windows-based Lumia 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 note reads. "Nokia's current Baa3 rating reflects Moody's expectation that Lumia devices will be accepted in the market in 2012 with the help of price and marketing support and that it will become the third smartphone system next to Google's Android and Apple's iOS."

No doubt Nokia's management, and Microsoft's for that matter, are hoping that Windows Phone will be a massive hit and grow to rival Android and iOS, but there's a huge way to go. In the meantime Nokia's low-end phone business is being rapidly eroded by cheap Chinese competition Moody's notes, while the agency predicts more money will be needed to support joint venture Nokia Siemens Networks next year.

It's not all doom and gloom for the Finns however. Moody's notes that Nokia has reserves of around €10bn, roughly double its debt, and the company now has the Lumia line well in hand, even if it is having to give some away free.

Moody's said it would upgrade Nokia again if it showed evidence of increasing margins or got a lot of support from buyers for the Lumia range. However, a further downgrade is promised if things continue to get worse.

You could argue that Moody's was one of the ratings agencies that consistently passed off sub-prime debt as investment grade material in the noughties and that it may well be wrong – indeed, Nokia's share price rose slightly on Monday. But more than a few analysts are now seriously concerned about Nokia's future, with the company losing both staff and customers, and in an alliance with Microsoft to push an unpopular mobile operating system. ®

Build a business case: developing custom apps

More from The Register

next story
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Online tat bazaar eBay coughs to YET ANOTHER outage
Web-based flea market struck dumb by size and scale of fail
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.