Moody’s downgrades Nokia once again

imageCredit rating agency Moody’s has once again, for the third time, cut Nokia’s debt rating, now to Ba3.

That takes it firmly into junk territory, with Moody’s expecting the company to return to profitability only in the second half of 2013.

Wolfgang Draack, lead analyst for Nokia, said that the action “reflects our view that Nokia’s transition in the smartphone business will cause deeper operating losses and consequently cash consumption in the coming quarters than we had previously assumed”.

Moody’s said that Nokia’s management had indicated margins may not materially improve in the next three month,  adding that this may “not even be the weakest period” for Nokia yet.

Moody’s also warned that Nokia’s balance of net cash will gradually erode further owing to aggressive pricing, cash cost of restructuring and the launch cost for the new devices. “A very strong cash position cannot offset operating challenges and losses in the core business for an extended period of time,” it said.

Timo Ihamuotila, Nokia’s chief financial officer, said that it was disappointed with Moody’s decision but added that the impact on the company was limited.

The company’s debt has already been cut to junk status by all three leading rating agencies over the past few months.


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