Business | July 23, 2012

Fitch downgrades Nokia debt rating

After posting losses for its fiscal 2Q, Nokia received another rabbit punch. Fitch Ratings on Friday downgraded Nokia's debt rating from BB+ all the way down to BB- (with a negative outlook).
The debt rating downgrade comes as Nokia delivered weak second quarter results last week and a rough third quarter outlook. Although the results that the struggling mobile phone giant presented weren't as disastrous as some analysts expected, figures were not see as been excitingly great.

Nokia's current net cash position of EUR 4.2bn is expected to be eroded significantly by restructuring charges over the coming two years.

A statement from Fitch reads:

"Fitch believes that the company does not have products in its current portfolio that can stem the recent losses. The release of a Windows 8 suite of products now appears crucial. However, the degree of competition in the industry would suggest that it is going to be difficult to re-establish a significant presence in the smartphone market. Numerous handset makers have issued profit warnings recently. For Nokia, an adjusted gross margin profile of around 16% in its Smart Devices division is unlikely to support a profitable smartphone business and Fitch remains unconvinced of Nokia's ability to improve pricing in this segment. Furthermore, the announcement that the current batch of Lumia devices will not be able to upgrade to Windows 8 is likely to put additional pressures on Nokia in the coming quarters."


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