Nokia is burning cash too fast, facing further downgrades

Nokia is burning cash too fast, facing further downgrades
Nokia had nearly 10 billion euro in cash reserves at the time when the iPhone hit the market in 2007. It was a turning point - since then, the number has dwindled, and lately its just sliding as Nokia is burning cash so fast that bearish analysts warn that the Finns are facing default in 2 years if the worst-case scenario comes true.

The average expectation is for Nokia to burn through another 2 billion euro in just the next three quarters, a Reuters poll of 30 banks and brokerages showed.

And the worst-case scenario would be a repetition of what happened in the last five quarters when Nokia lost 2.1 billion euro of its cash reserves. The speed at which Nokia dips its reserves has only accelerated recently.

It doesn’t help that two of the big three credit rating agencies, Standard & Poor’s and Fitch, have downgraded Nokia stock to junk, and Moody’s ranks it just above junk, making it costlier for Espoo to borrow money. At the same time, the Finns are looking to find money where they can. We've heard about them trying to sell Vertu, but that will only bring them around 200 million euro. Other possibilities include sale of patents where Nokia is still very strong, or even splitting up and selling their low-end feature phone division.

"In our opinion, the company's ability to repay even its shorter-term 2014 bond could be an issue," French bank Societe General analyst Juliano Torii said. "Nokia's spreads do not reflect the severity of the company's situation.”

The bank’s analysts downgraded Nokia’s stock recently, and said they won’t be surprised if the major credit rating agencies downgrade the Finns further soon.

Of course, there are more optimistic estimates for the future of the former global leader in phone sales. Hopes are for Nokia’s Lumia Windows Phone series to sell 20 million units this year, and 46 million next year. Finally, there’s also Microsoft, already paying $1 billion a year to Nokia. Given the close ties between Nokia and Microsoft top management, it would be no surprise if Microsoft comes to save the day for its biggest Windows Phone partner.

source: Reuters

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55 Comments

1. bubbadoes

Posts: 1225; Member since: May 03, 2012

If I had "Microsoft" backing me up, I would be blowing the cash also...This is the case here...Its not "Finlands" money--It's all Redmond, Washington's money experimenting on the wp7 platform-waiting for the os to take off

25. sunandks

Posts: 2; Member since: May 18, 2012

and Redmond gets this money from Droid :)....

31. haseebzahid

Posts: 1853; Member since: Feb 22, 2012

Redmond gets money from every corner :P

28. steelicon

Posts: 318; Member since: Apr 02, 2011

Nokia vs Android vs Apple No matter who wins, we all lose...

2. angelesmec unregistered

God Bless Nokia.. my ''Alma Mater''

22. hepresearch unregistered

Mine too... I hope they make it through okay, too, but I'm not holding my breath...

3. PimpStrong

Posts: 310; Member since: Jul 25, 2011

At work, I see a lot of iPhones and even more Androids but never any Windows Phones and have never seen a Lumia 900 anywhere in public. It's sad that they banked on such an unsuccessful platform.

12. andro.

Posts: 1999; Member since: Sep 16, 2011

ultimately as sad as it is for Nokia its their own fault,they picked an os that nobody's wants or would ever like. The n8 for a hypothetical example if running gingerbread or ice cream sandwich would have been a major seller.Now they have to compete with bada level sales.

15. djg71087

Posts: 70; Member since: Oct 10, 2010

"Nobody wants or would ever like" are some very strong words andro. WP7 does have some strong features already built into its software, as time goes on and WP8 rolls out, things "will" become more competative. It's clear your an android lover (and their is nothing wrong with that), but do not say stupid things.

20. -box-

Posts: 3991; Member since: Jan 04, 2012

Ditto what djg said. I have a Lumia 900 and I find myself reaching for it probably 70-80% of the times I used to use my Android Sensation 4G. Only reason I'm still using the Sensation, honestly, are a few games I'm using and its excelent camera. Android is wonderful, it's just that the Lumia meets my needs, is faster at what I want it to do, gets much better reception, and also the novelty of having something newer and unique. I've been stopped several times in public asking about what phone I have that's blue, or those that have seen ads about the Lumia but haven't played with one, or were interested and want an owner's view on it.

29. steelicon

Posts: 318; Member since: Apr 02, 2011

Saying "stupid things" is better than doing "stupid things." And yet saying "stupid things" AND doing "stupid things," now THERE'S real talent! Stephen Elop.

38. microsoftnokiawin

Posts: 1268; Member since: Mar 30, 2012

Stephen Elop doesn't give a crap about nokia he's sleeping in bed with Microsoft while nokia is freezing in the storm outside next to the dead corpse of Meego and Symbian

4. Altair

Posts: 367; Member since: Feb 02, 2012

Ahh another negative article from Victor. Looks like that unprofessional Apple troll has become "economy journalist" at Phonearena! I've counted 27 negative articles about MS-Nokia recently. That guy doesn't know anything about objective point of view.

6. pongkie

Posts: 663; Member since: Aug 20, 2011

yeah what a surprise... hes kinda obsessed in this kind of stuff. I feel bad for him such a bitter person

42. nando2do

Posts: 53; Member since: Nov 10, 2011

yes i think the same way! PHONEARENA make something you cant let people like this Victor writes against just one system because he doesnt like it.. make an option whether we can decide if is ethical or not.. or make an option to report it just like our comments.. articles can be offensive too..

5. TheRetroReplay

Posts: 256; Member since: Mar 20, 2012

It's only a matter of time, Microsoft is going to own Nokia. The evidence is screaming that Elop is purposely driving it into the ground so that Microsoft can buy it for pennies.

7. darac

Posts: 2156; Member since: Oct 17, 2011

Exactly. Flop did his best to make Nokia an easy catch for Microsoft

8. FoneAddict

Posts: 263; Member since: Jul 05, 2011

Incredible! How long is Nokia prepared to hemorrhage money like this? They need to wake up and smell the coffee, Windows Phone is an utter failure, it's not too late to look at other platforms, because right now Windows Phone is looking like the real "burning platform" not Symbian.

9. neutralguy

Posts: 1152; Member since: Apr 30, 2012

you think that another transition to another platform/os will save them? No. WP is just starting to gain popularity. Every new platform started in this state. YOu can'y expect it to boom considering the fact that ANDROID together with samsung caught the heart of consumers as what nokia did before with its feature phones way before the emergence of smartphones.

13. downphoenix

Posts: 3165; Member since: Jun 19, 2010

well Nokia should have either supported a popular platform like Android or at least not called it quits on Symbian and just say they are also supporting WP7. You know, the smart decisions that someone running a company to be successful would make, not the decision someone running a company preping it for acquisition and selloff like Elop is doing.

14. FoneAddict

Posts: 263; Member since: Jul 05, 2011

@downphoenix the more this drama plays out the more it looks like Microsoft's plan all along was to buy Nokia out especially when you consider Elops actions. I mean what boss makes disparaging remarks about his own products. If the Boss doesn't have trust in the products he sells how on earth does he expect consumers to have trust in Nokia?

26. Stoli89

Posts: 333; Member since: Jun 28, 2010

Symbian was already at the edge of the cliff when the BoD fired OPK and brought on Elop. The burning platform memo may have been news...but the reality was that Symbian was already on a negative trajectory. OPK simply masked the severity of the problem for at loeast 3 quarters by price cutting to support volume. He went to the price cutting trough so many times that the BoD fired his ass. Take a look at Nokia's avg selling price over the last years and it becomes painfully apparent that the previous strategy was driving a race to the bottom. With MSFT, Nokia is better able to focus, cut costs where it makes sustainable sense, and get a premium position in another big ecosystem bet.

17. FoneAddict

Posts: 263; Member since: Jul 05, 2011

Yes I do. Nokia's hardware is proven, everyone who has used Nokia phones appreciate how well made they are. They have the in house expertise and why would you throw all that away for a company like Microsoft who have no real comparable experience in the mobile phone field and who's reputation for buggy windows software is well known. The sad fact is Microsoft has a crap reputation in Europe, I don't know about the US but in Europe Microsoft isn't exactly synonymous for quality software. People simply don't trust Microsoft.

39. microsoftnokiawin

Posts: 1268; Member since: Mar 30, 2012

and Meego as well

10. Tsepz_GP

Posts: 1176; Member since: Apr 12, 2012

Dear oh dear Nokia. How the mighty have fallen.

11. JSern

Posts: 282; Member since: May 22, 2011

Here they come

16. hepresearch unregistered

Well, with Nokia CEO Jar-jar Binks at the helm, what did you all expect? ... just a cheeky reference to my earlier comments #87 and #88 at: http://www.phonearena.com/news/Verizon-will-give-its-customers-time-to-plan-before-eliminating-grandfathered-unlimited-data-plans_id30272

18. MicroNokia

Posts: 15; Member since: May 18, 2012

Nokia will never worry as long as Microsoft is backing them!!!! They both need each other....

21. hepresearch unregistered

Yes, they need each other... just a little too much...

19. himanshulumia

Posts: 1; Member since: May 18, 2012

why you all are against nokia.nokia want support cheer them.

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