Credit agency Moody's has downgraded Nokia's credit rating as it expressed fears about the company's return to profitability.
Nokia was 'disappointed' by the downgrade, but said the impact on the company would be limited. Last week, the manufacturer announced a loss of €1.41bn as it continues to be hit by the transition away from feature phones and its Symbian platform to its new Windows Phone smartphones.
New Windows 8 smartphones are expected later this year but Moody's said Nokia would 'find it challenging to achieve a level of differentiation and market penetration to become a meaningful income generator in the first few quarters after launch'. The credit agency noted that Nokia had strong cash reserves of €4.2bn but said this will not offset the challenges facing the business in the longer term.
Wolfgang Draack, Moody's senior VP and lead analyst for Nokia, said: 'Today's rating 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. A return to profitability in the Devices & Services (D&S) segment on the back of smartphones with the Windows Phone 8 mobile operating system is by no means assured.'
In response, Nokia CFO Timo Ihamuotila said: 'While we are disappointed with Moody's decision, its impact on the company is limited. We are quickly taking action to position Nokia for future growth and success. Nokia will continue to focus on lowering the company's cost structure rapidly, improving cash flow and maintaining a strong financial position.'
Editor: Graeme Neill