Moody's Downgrades Nokia to High Risk Investment

Published on April 17, 2012

Moody's Downgrades Nokia to High Risk Investment

Original author: Iain Thomson
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Finns are losing market share at both ends of the market. (approx. I mean the market for cheap phones and expensive business smartphones)

Moody's rating agency downgraded its debt rating for Nokia to almost “high risk investment” and warned that the company has even more difficult times ahead.

Today, in a note to investors, Moody's downgraded the world's largest handset maker from Baa2 to Baa3, the lowest rating for investment funds.

While the click for demotion was a “less than inspiring” financial report , Moody's warns that Nokia will soon face even bigger problems in the smartphone market, as well as the possibility of another demotion.

“Nokia’s transition from Symbian-based devices to Windows-based for the Lumia line proved to be more difficult than expected, if we rely on the fact that Symbian device sales are falling faster than Lumia sales are growing,” the note says. “Nokia’s current Baa3 rating reflects Moody's expectations that Lumia will be marketed in 2012 through pricing and marketing, and that it will become the third smartphone system along with Google’s Android and Apple’s iOS.”

No doubt, Nokia and Microsoft executives hope that Windows Phone will become a hit and grow to compete with Android and iOS, but there is a long way to go. At the same time, cheap Nokia models are rapidly leaving the market under the pressure of cheap Chinese models. Moody's predicts that keeping Nokia Siemens Network afloat will require even more money next year.

However, not everything was so lost for the Finns. Moody's says Nokia has reserves of about € 10 billion, about twice its debt, and the Lumia line is in good hands, even if you consider that they are being given away for nothing .

Moody's said it would enhance Nokia’s status if evidence of increased revenue or strong support from Lumia customers is presented. However, further lowering will occur if the situation continues to deteriorate.

You can argue that Moody's was one of the rating agencies that recommended debt as an investment (note the recent financial crisis) - and you may be right, Nokia's stock price rose a little on Monday. But more analysts are seriously concerned about the future of Nokia, the company is losing its employees and consumers, and this alliance Miscrosoft, to promote the (yet) not popular mobile OS, does not at all assure the analyst of the opposite.

UPD. Replaced “garbage” with “high risk investment”