Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s long-term issuer default rating and senior unsecured rating has been affirmed at BB- by Fitch Ratings, according to Reuters. The firm also states that the outlook on the company’s long-term IDR is negative.
Fitch rates Nokia negative in spite of positive performance
According to Fitch, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s performance recently has been better than it expected. However, it cited continuing challenges and a lack of visibility for the company’s handset business as reasons that the company’s rating has not yet stabilized. They believe stabilization may be quite a bit in the future.
Fitch notes that Nokia’s outperformance is mostly being driven by Nokia Siemens Networks and Nokia Solutions. The firm said that NSN carriers a targeted focus toward mobile equipment which has enabled it to improve its profitability thanks to its focus on developed markets.
Challenges remain for Nokia’s handsets
The firm said that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) still faces challenges in devices and services, especially in the mobile phone business. It said this part of Nokia’s business is still seeing market share and revenue erosion. The firm also believes that low-end handsets and more locally based companies will undermine Nokia’s handset business even further.
Fitch admits that Nokia’s Lumia Windows Phone line is starting to gain traction, although it still sees too many challenges ahead in order to warrant a rating increase. It said the Lumia line has yet to establish itself firmly within the smartphone industry, even though sales of the line are starting to slowly increase.
The firm said in order for Nokia to see its ratings stabilized, it must first stabilize its handset business and continue posting strong performance at NSN. Nokia must also show that its Lumia Windows Phone line and the Windows Phone ecosystem will be able to help it snag more market share. The firm says that Nokia is just facing too much pressure from Apple Inc. (NASDAQ:AAPL) and Samsung right now.
