Moody’s slashed Nokia’s credit rating by two notches to Ba3, saying it expects the struggling mobile phone maker to post bigger losses and burn more cash than previously expected.<\/p>\n
Nokia has been trying to reverse its decline in the smartphone market by adopting Microsoft software but has had little success against Apple and Samsung.<\/p>\n
Moody’s said it was unsure whether Nokia’s Windows-based smartphones will gain a solid market share, and forecast its next range of phones using Windows Phone 8 software would take more than a few quarters to generate profits.<\/p>\n
“Given further rather modest profitability in the mobile phone business and at Nokia Siemens Networks, Moody’s now expect a return to profitability only in the second half 2013,” it said.<\/p>\n
Its previous view on Nokia, Ba1, was already a “junk” rating, which discourages investment by conservative funds.<\/p>\n
Wolfgang Draack, a Moody’s Senior Vice President and lead analyst for Nokia, said: “A return to profitability in the Devices & Services segment on the back of smartphones with the Windows Phone 8 mobile operating systems is by no means assured.”<\/p>\n
Last week, Nokia reported a 1.53 billion euros loss for the second quarter. It said it ended June with net cash of 4.2 billion euros ($5.2 billion), more than a market estimate of 3.7 billion euros but that was mostly due to prepayment of royalties.<\/p>\n
The company said it would continue to cut costs and protect its finances, and that the downgrade will have a limited impact.<\/p>\n
It also said that in addition to its cash, it had access to liquidity through a revolving credit facility of 1.5 billion euros available through March 2016.<\/p>\n
Shares in Nokia were down 3.2 percent at 1.38 euros by 1249 GMT. ($1 = 0.8219 euros)<\/p>\n
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