Standard & Poor, one of the most credible ratings services organizations worldwide, lowered Nokia Corporation (NYSE:NOK)’s corporate credit rating from BB+ to BB-. The current rating reflects the fact that the company is in a disadvantaged position, as the company tries to emerge from its financial difficulties.
Last June, Moody’s downgraded the company’s debt rating to junk status, from to Ba1 from Baa3. Today’s unfavorable rating from the S&P Rating Services is another major blow for Nokia.
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Since the introduction of the smartphones, Nokia Corporation (NYSE:NOK) lost its position as the world’s leading mobile device manufacturer. The company is struggling to catch up with the technology, and to develop a more competitive device to attract consumers and regain its position in the market.
In a statement, the S&P explained the lower rating for Nokia Corporation (NYSE:NOK) was based on its revenue and profitability estimates on the company’s smartphone operations in 2012 and 2013. S&P said, “We have subsequently also revised our cash flow assumptions, including the impact from Nokia’s restructuring of its Devices and Services division. In line with our criteria, we have therefore revised our assessment of Nokia’s business risk profile to weak from fair, and that of the financial risk profile to ‘significant’ from ‘intermediate.'”
Although the current rating is much worse, S&P said Nokia might be able to recover and stabilize its financial position in 2013, if the Lumia smartphone becomes successful, and offsets the revenue decline from smartphones with the Symbian operating system.
The growth of the company obviously depends on its upcoming Windows Phone 8 device, which will be launched in September.In a previous report, Stephen Elop, chief executive officer of Nokia, said the company will compete with the Google’s Android and Apple’s iOS operating systems using Microsoft’s Windows 8 platform.
Elop said, “In today’s war… [between] Android, Apple and Windows, we are very clear, we are fighting that with the Windows phone.”
During the second quarter of 2012, the company’s total sales declined by 19 percent to €7.54 billion. Nokia recorded €1.54 billion sales on smartphone, the result is 34 percent weaker. Elop expects the third quarter will “remain difficult” for Nokia Corporation (NYSE:NOK) as the company continues to phase out its Symbian smartphones. According to him, its upcoming Windows Phone 8 will serve as an “important catalyst for Lumia,” and the company is committed to use it as its primary smartphone strategy.
Recently, the company announced it is selling some of its assets that are no longer significant to its core business operations, to offset its losses as part of its restructuring program. The company is also cutting 10,000 jobs.