S&P slashes Nokia's credit rating to junk

Pinning the blame on Nokia's slumping sales, S&P has downgraded the company's credit rating to the junk category.

Just when things couldn't get much worse for Nokia -- the mobile phone maker's credit rating is taking it on the chin.

Standard & Poor's today cut the rating for the Finnish mobile phone maker to junk, anticpating lower sales ahead.

Following a similar move by Fitch Ratings earlier this week, S&P cut Nokia's rating to BB+ from BBB-. BB+ is considered the highest speculative grade, "speculative" being another word for junk.

S&P said that the weaker rating reflects a lower estimate for sales from Nokia's Devices and Services division this year along with a revised forecast on profits and cash flow.

"We now believe that revenues from the Devices and Services division could decline in 2012 by the same extent as in 2011 (minus 18 percent) after Nokia reported first-quarter 2012 revenues below our expectations, particularly for Symbian-based smartphones," S&P said in a statement.

Nokia last week announced a huge loss for its first quarter . Its Symbian phones continue to shed market share. The company has been hedging its bets on its new Windows Phone-based Lumia handsets, but sales have yet to take off on a global scale.

"We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim," Nokia CEO Stephen Elop said last week. "The actual sales results have been mixed. We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the U.K. has been more challenging."

S&P anticipates higher sales from the Lumia lineup, but not for a while.

"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 said.

"We believe the volume market share of the smartphone operations could decline below 10 percent (from 12.6 percent in the fourth quarter of 2011, according to market research company Strategy Analytics)."

Nokia has been striving to cut costs, a move applauded by Wall Street and S&P. But at the end of the day, S&P still expects overall revenue to fall and operating margins to turn negative this year.

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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