Woes continue for Nokia Corp. (NOK) as Moody’s rating agency recently downgraded the company’s long-term debt from Baa2 to Baa3. The rating agency also slashed Nokia’s short-term debt rating from Prime-2 to Prime-3.
Such reduced outlook provided by Moody’s ratings agency was mainly on the back of poor performance of the company’s handset business in the first quarter of fiscal 2012. Few days back, the company came up with grim outlook for its first quarter of 2012 where handset device revenue dipped by 40% while sale of handset units were down by 24%.
Moreover, Nokia expects its operating margin to be a negative 3%, much lower than the previously mentioned guidance of breakeven operating margin for its non-IFRS Devices & Services.
Stiff competition in the global market and continuous loss of market share were also responsible for the ratings downgrade. The rating agency also remains concerned about the weak demand for Nokia’s new Windows-based Lumia series of smartphones.
Currently, Nokia has sold only 2 million Lumia smartphones out of total 12 million smartphones sold in first quarter of fiscal 2012. So the rating agency believes these results by the company may lead to another rating downgrade.
Recently, Nokia released its first quarter of fiscal 2012 results where it missed both the top and bottom line estimates by a significant margin. Moreover, the company provided a somber outlook for the forthcoming quarter with an operating margin of negative 3% or flat with the first quarter of 2012.
Last year, Nokia teamed up with Microsoft Corporation (MSFT) to develop user-friendly Windows-based Lumia series of smartphones and at the same time sidelined its Symbian-based handsets. However, the performance of Lumia series of smartphones were disappointing mainly due to stiff competition from Apple Inc’s (AAPL) new iPhone 4S and Android-based smartphones. Moreover, the recently launched first LTE-based Lumia 900 smartphones is also facing some software problems, thus creating doubts in the mind of the customers. So we believe that the success of Nokia device segment still remains a distant dream.
Based in Espoo, Finland, Nokia Corporation is the largest mobile phone maker of the world. The company also provides Internet services, comprehensive digital map information and equipment, and other solutions and services throughout the world.
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