Moody’s cuts Nokia’s rating
Business Day - Apr 17th 2012, 08:38
Moody’s rating agency yesterday downgraded Nokia’s debt grade to near-junk status, citing a sharp decline in first-quarter cellphone sales that led to a 35% fall in revenue.
The agency lowered Nokia’s long-term credit rating by one notch to Baa3 — just a step above noninvestment grade — following last week’s profit warning which had caused Nokia’s shares to plunge by more than 20%.
It left a negative outlook on the ratings, meaning it could downgrade Nokia to junk status if Nokia’s new smartphones do not sell well and revenue fails to recover later this year. Moody’s noted that Nokia’s cellphone volumes dropped 16% in the first quarter due to increasing competition from makers of low-end phones or new phone promotions by Chinese carriers.
"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," the rating agency said.
Reacting to the downgrade, Nokia said its financial position remained strong, with its investment grade rating "backed by Nokia’s strong liquidity position and capital structure." Chief financial officer Timo Ihamuotila said Nokia was "quickly taking action".
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