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.
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.
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.
“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.
Its previous view on Nokia, Ba1, was already a “junk” rating, which discourages investment by conservative funds.
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.”
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.
The company said it would continue to cut costs and protect its finances, and that the downgrade will have a limited impact.
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.
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