(Image source: Bloomberg)

 

BY JIM FLINK AND EVAN THOMAS

ANCHOR MEGAN MURPHY

Just days after releasing disappointing Q1 earnings, Nokia got a double dose of bad news. Its debt has been reduced to junk.


Bloomberg reports....

“Fitch Ratings today lowered Nokia’s long-term debt ranking to BB+, one step below investment grade, citing a deterioration in the handset business in the first quarter and a ‘general lack of visibility.’ Fitch said it may further cut the rating if Espoo, Finland-based Nokia’s revenue doesn’t stabilize and operating margins don’t return to positive.”

Bloomberg notes, Fitch’s decision affects six and a half billion dollars in debt. And the company is forecasting more losses.


Here’s Nokia’s official response:

“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.”

But getting to that strong financial position might come at a cost. Intomobile explains what the Fitch downgrade means in the near term for Nokia:

“When Nokia wants to borrow money to do things like build a factory or make a large order from a component supplier, the interest that they’ll be paying back on their loan will be ridiculously high.”

Not all the news is bad. ZDNet notes, Moody’s just maintained Nokia’s rating at investment grade.

“...although it downgraded Nokia's long-term credit rating to Baa3 and maintained a negative outlook on the rating. Moody's said that its investment grade rating is backed by Nokia's strong liquidity position and capital structure.”

Of course, Nokia is banking on the release of the Lumia 900 to salve its wounds. But even there, the news is less than encouraging. Microsoft’s market share is down too, from 5.2% to 3.9% on the quarter, according to ComScore.

And if that partnership is any indication, ReadWriteWeb says, Nokia has an uphill climb.

“The trouble is that Microsoft's phones - though decent - just aren't good enough to demand attention. They're certainly better now than they used to be - especially the new Lumia series from Nokia - but that isn't enough. To cause any real damage to Apple or Google, Microsoft's phones would have to be dramatically better than the competition, and they just aren't.”

Fitch Cuts Nokia Debt to Junk Status

by Jim Flink
0
Transcript
Apr 24, 2012

Fitch Cuts Nokia Debt to Junk Status

(Image source: Bloomberg)

 

BY JIM FLINK AND EVAN THOMAS

ANCHOR MEGAN MURPHY

Just days after releasing disappointing Q1 earnings, Nokia got a double dose of bad news. Its debt has been reduced to junk.


Bloomberg reports....

“Fitch Ratings today lowered Nokia’s long-term debt ranking to BB+, one step below investment grade, citing a deterioration in the handset business in the first quarter and a ‘general lack of visibility.’ Fitch said it may further cut the rating if Espoo, Finland-based Nokia’s revenue doesn’t stabilize and operating margins don’t return to positive.”

Bloomberg notes, Fitch’s decision affects six and a half billion dollars in debt. And the company is forecasting more losses.


Here’s Nokia’s official response:

“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.”

But getting to that strong financial position might come at a cost. Intomobile explains what the Fitch downgrade means in the near term for Nokia:

“When Nokia wants to borrow money to do things like build a factory or make a large order from a component supplier, the interest that they’ll be paying back on their loan will be ridiculously high.”

Not all the news is bad. ZDNet notes, Moody’s just maintained Nokia’s rating at investment grade.

“...although it downgraded Nokia's long-term credit rating to Baa3 and maintained a negative outlook on the rating. Moody's said that its investment grade rating is backed by Nokia's strong liquidity position and capital structure.”

Of course, Nokia is banking on the release of the Lumia 900 to salve its wounds. But even there, the news is less than encouraging. Microsoft’s market share is down too, from 5.2% to 3.9% on the quarter, according to ComScore.

And if that partnership is any indication, ReadWriteWeb says, Nokia has an uphill climb.

“The trouble is that Microsoft's phones - though decent - just aren't good enough to demand attention. They're certainly better now than they used to be - especially the new Lumia series from Nokia - but that isn't enough. To cause any real damage to Apple or Google, Microsoft's phones would have to be dramatically better than the competition, and they just aren't.”

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