Nokia Credit Rating Downgraded To Just Above ‘Junk’

Nokia has had its credit rating downgraded to one level above ‘junk’ status by agency Moody’s, following a financial warning from the phone maker last week.

Nokia issued a profit warning on 11 April for its devices and services division, blaming strong competition from smartphone kings like Apple and Samsung, and the company’s long-term credit rating was cut to Baa3 from Baa2 with a negative outlook.

Mobile reign almost over

The troubled Finnish firm said it believed operating margin for the first quarter 2012 was approximately negative 3 percent, whereas it had expected to break even.

The vendor claimed its financial position remains strong, pointing to the €4.9 billion (£4bn) cash it is sitting on, but said it is taking action to rectify its weakened performance of recent months.

“Nokia is quickly taking action. Nokia will continue to increase its focus on lowering the company’s cost structure, improving cash flow and maintaining a strong financial position,” said Timo Ihamuotila, Nokia’s executive vice president and chief financial officer.

Meanwhile, analysts have predicted Nokia will have lost its position as the biggest mobile seller in the world when official first quarter figures are released. A poll suggested Samsung will have sold 88 million mobiles between January and March, whilst Nokia would have pushed 83 million out to customers, according to Reuters.

“After 14 years as the largest global mobile phone maker, getting knocked off the top spot will come as a bitter blow to Nokia,” said Ben Wood, head of research at CCS Insight.

“In contrast it will be greeted with euphoria by Samsung – they’ll be dancing from the boardroom to the factory floor.”

Nokia is trying to make a splash in the smartphone market, where Samsung and Apple have emerged as the dominant hardware players. Nokia sold 12 million smartphones in the first quarter.

The Finnish phone maker has been making changes ever since former Microsoft executive Stephen Elop was made CEO. There have been plenty of job losses, with another 1,000 redundancies in Finland confirmed last month.

The shift to Windows Phone is expected to help Nokia recover, but along with RIM, it is one of a handful of manufacturers suffering from a difficult climate and even HTC, which was growing rapidly, has found its financials under pressure.

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