Nokia Corp. (NOK) has suffered a setback as Standard & Poor’s Ratings Services (S&P) downgraded its credit rating. Currently, S&P rates Nokia as BBB-, which is the lowest rank of the rating agency’s investment grade category. As per S&P, Nokia’s partnership with Microsoft Corp. (MSFT) may help the company to strengthen its competitive position in the global smartphone market, but significant fall in demand for the company’s legacy Symbian-based handsets will more than offset the positives of Windows Phone based smartphones.
Quarterly net revenue in the fourth quarter of 2011 was approximately $13,496.7 million, down 21% year over year. Smartdevices (including smartphones and tablets) revenue was $3,705.7 million, down 38% year over year. Mobile Feature Phone revenue was $4,101 million, down 23% year over year. Smartdevices average selling price (ASP) was $188.9, down 9% year over year. Mobile Feature Phone ASP was $43.2, down 24% year over year. In the fourth quarter of 2011, Nokia shipped 19.6 million smartdevices and 93.9 million Mobile Feature Phones, down 31% and 1% year over year, respectively.
Despite fairly good market traction for its Lumia series of Windows Phone-based smartphones, Nokia’s top line fell primarily due to poor performance of its Symbian-based handsets compared with low-cost handsets from Samsung, LG, and HTC in the Asian markets. Furthermore, although technologically Lumia is a solid product, we are not very sure whether it will be able to gain market share from Apple Inc. (AAPL) developed iPhone or Google Inc. (GOOG) developed Android based smartphones in the most lucrative North American markets.
S&P assigned a negative outlook for Nokia, indicating a potential downgrade of Nokia’s overall credit rating if operating margin in the company's devices and service business segment remain in the low-to-mid single digits or if the company's net cash position declines to below EUR2 billion.
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