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Nokia's credit rating is lowered to 'junk' status

Courtesy of rating agency Fitch
Tue Apr 24 2012, 17:08

GLOBAL RATING AGENCY Fitch has downgraded Nokia's credit rating to "junk", following the phone maker's poor first quarter earnings.

Fitch said the downgrade to BB+ from BBB- reflects the "deterioration in the company's core Devices and Services division in Q1", as well the "general lack of visibility" in Nokia's near term future. The agency also placed a negative outlook on the Finnish company, which means that it is likely to impose further downgrades in the future.

"In order to avoid further negative rating action, Nokia needs to demonstrate substantial improvements over Q312, Q412 and 2013", Fitch explained.

"The launch of the new Lumia phone with AT&T, and the potential launch of new Nokia products later in the year, could be positive for Nokia's credit profile. However, there are also numerous negative potential factors which could delay or fully impede a recovery."

"These could come from further dramatic declines in Nokia's low-end smartphone and feature phone business, further losses at NSN, or only partial success of the Lumia product range that does not compensate fully for the declines in the rest of the business."

Timo Ihamuotila, Nokia's EVP and CFO defended the company's financial situation, saying, "We are quickly taking action to position Nokia for future growth and success. Nokia will continue to increase its focus on lowering the company's cost structure, improving cash flow and maintaining a strong financial position."

This development follows a similar downgrade by Moody's last week, which saw Moody's drop Nokia's credit rating to one level above junk. µ

 

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