Now S&P downgrades Nokia stock to "junk"

posted by Victor H.

Apr 27, 2012, 9:05 AM

Now S&P downgrades Nokia stock to "junk"

Only a couple of days after Fitch downgraded Nokia stock to “junk” status and gave the Finns a negative outlook, now Standard & Poor’s follows suit by similarly decreasing Nokia’s credit rating to “junk” or BB-. This removes the company from S&P’s list of low investment companies to non-investment status, and on top of that the rating agency gave the Finns a negative outlook with the possiblity of another downgrade happening in the future if the situation doesn’t stabilize.

Nokia is sitting on a solid pile of cash, but it’s already started burning it and that concerns credit agencies. Moreover, S&P says that even if Nokia’s Lumia series meets expectations, the company won’t be able to make up for a huge decline in Symbian sales. Symbian, announced by Nokia CEO Stephen Elop as a “burning platform,” is what’s keeping Nokia afloat. Last quarter, in the first three months of 2012, Symbian really started burning and Nokia revenue fell accordingly.

"We still expect revenue from Lumia smartphones to grow over time but not sufficiently to offset a rapid decline in revenue from Symbian-based smartphones over the next few quarters," S&P explained.

Here’s the list of factors that S&P wants to see dealt with to fix the rating:

- revenues in the Devices and Services division should stabilize,

- cash burn should decline significantly,

- non-IFRS operating margins should return to at least mid-single digit percentage levels.

Nokia defended its positions earlier when Fitch dropped its ratings, and it echoes the same arguments now:

"As we have detailed in recent announcements, Nokia is in the middle of a transformation program which encompasses every aspect of our business. We are implementing a decisive action plan to position our company for future growth and success. The main focus of these actions is on lowering the company's costs, improving cash flow and maintaining a strong financial position, while bringing attractive new products to market," Nokia CFO Timo Ihamuotila responded.

Nokia’s net cash reserves stand at around $6.48 billion (4.9 billion euro) currently.

source: Standard & Poor’s, Nokia

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27 Comments

24. guildsa654

Posts: 27; Member since: Apr 12, 2012

I think Elop has plans and actually knows this is going to happen. Well, let's see. Time will know.

posted on Apr 27, 2012, 8:32 PM 0

27. -RVM-

Posts: 331; Member since: Oct 19, 2011

Then these plans are certainly not good for Nokia. Because these downgrades are clearly results of his failed WP transition announcement.

posted on Apr 27, 2012, 11:49 PM 2

21. networkdood

Posts: 6330; Member since: Mar 31, 2010

-this is all part if microsoft's master plan...which will result in the sale of nokia to MS.

posted on Apr 27, 2012, 7:06 PM 1

23. networkdood

Posts: 6330; Member since: Mar 31, 2010

if = of

posted on Apr 27, 2012, 7:11 PM 1

20. Nokia_Sucks_Ass

Posts: 2; Member since: Apr 27, 2012

Nokia deserves this downgrade.

posted on Apr 27, 2012, 5:48 PM 0

19. jopancy

Posts: 78; Member since: Apr 25, 2012

I don't understand why Elop would announced that symbian was a burning platform when that was the major source of revenue for nokia before nokia's window phones could gain ground. To me that is a seriously wrong strategic move by the CEO. What he should have done was to ensure developers and customers support for symbian and still effect a change to window phone. Now only few developers want to continue developing for symbian. And fewer people wants a symbian phone. Nokia's window phones is still not widely accepted. It would take a huge stroke of genius on Elop part to turn this mess into a spectacular success.

posted on Apr 27, 2012, 4:50 PM 2

16. -RVM-

Posts: 331; Member since: Oct 19, 2011

S&P is wrong. In Q3 Symbian sales will stabilize and probably even grow a bit, because of 808 PureView. It will also increase Symbian's ASP a lot. It will give Nokia enough time to gain decent market share with their Lumia line. I guess in Q3 Nokia will be back in profit.

posted on Apr 27, 2012, 3:23 PM 2

14. stipe

Posts: 33; Member since: Apr 05, 2012

O please . All 3 creditrating agenc.... are from USA and Nokia is from Europe . This is cristal clear . They want to dowgrade biggest europe mobile maker to make it easy to apple , motorola and other amer... firms ...

posted on Apr 27, 2012, 1:05 PM 3

15. Commentator

Posts: 3723; Member since: Aug 16, 2011

That's racist fear-mongering BS, especially since Microsoft, an AMERICAN company, has tied its entire Windows Phone success to Nokia.

posted on Apr 27, 2012, 3:14 PM 1

18. -RVM-

Posts: 331; Member since: Oct 19, 2011

Actually, it's only Nokia who's in the risk. Microsoft can only profit from this deal. Even if Microsoft's phone OS fails, Microsoft will still be perfectly OK with it's PC and tablet OS and other SW business they have. Deal with Nokia is just a perfect way to push WP and to sell it to hundreds of millions of Nokia traditional customers. === On the other hand, Nokia (thanks to Mr. Elop) lost its cash-cow Symbian and is in very dangerous position now. All because of this transition to WP. Remember, how Elop exagerated the problems Nokia had (burning memo platform), when he announced move to WP. Until then, Symbian sales were still rising (even if not so fast as iOS or Android), while marketshare was slowly declining (hell, even iPad's marketshare is declining now!). And most importantantly, Nokia was always in profits, until transition to WP has taken place.

posted on Apr 27, 2012, 3:57 PM 3

22. Commentator

Posts: 3723; Member since: Aug 16, 2011

Of course MS will be fine without Nokia: they have control over the entire PC market. However, Nokia is by far WP's largest manufacturer, and if Nokia goes down, I can't see any way WP can make up ground, especially with HTC and Samsung so focused on Android. Also, WP might be more important to Microsoft's future than it is to its present: it needs to prove that it can stay in the game with Apple and Google, not just rest on its laurels from the PC market. Sure, Microsoft is the dominant player in the PC market right now, but the consumer industry is changing rapidly towards iOS and Android-like interfaces and designs, and portable devices in general, and Microsoft needs to stay relevant, starting with Windows 8.

posted on Apr 27, 2012, 7:09 PM 3

26. snowgator

Posts: 3630; Member since: Jan 19, 2011

Dead right, commentator. Excellent post. And this is the reason why Microsoft will HAPPILY help keep Nokia afloat. They need them to create a complete ecosystem.

posted on Apr 27, 2012, 9:45 PM 2

13. Sleepy

Posts: 13; Member since: Apr 26, 2012

Sad that Nokia has turned out like this. Hope WP8 can give them another chance.

posted on Apr 27, 2012, 12:30 PM 3

10. allen83

Posts: 107; Member since: Mar 01, 2012

They should not tell that symbian was a burning platform instead they should tell they would be adopting another platform. Then there they would not sink to the bottom immediately. Stephen elop is such a junk!

posted on Apr 27, 2012, 10:34 AM 6

9. joex2

Posts: 22; Member since: Nov 23, 2011

Journalists complain that the WP7 has few apps. And there are still idiots want Symbian back. Pathetic.

posted on Apr 27, 2012, 10:27 AM 2

8. steelicon

Posts: 318; Member since: Apr 02, 2011

Woohoo! Go Elop, go Elop go! Go Elop, go Elop go! Go Elop, go Elop go! Nokia ain't sunk yet, so you need to really sink it more! What an achievement, what a success story! What an illustrious legacy you have left! /s Your FAMILY NAME will certainly go down in HISTORY! You will be remembered forever, along with OSBORNE and RATNER!

posted on Apr 27, 2012, 10:00 AM 5

25. snowgator

Posts: 3630; Member since: Jan 19, 2011

Okay, I love WP and I am cheering for Nokia to shut everyone up, but... This post made me giggle. Harsh, but funny.....

posted on Apr 27, 2012, 9:42 PM 1

7. FoneAddict

Posts: 263; Member since: Jul 05, 2011

Whatever your opinion on credit rating agencies they do influence the investment markets, and this news will only scare off potential Nokia investors which will place Nokia in a vulnerable position for a possible takeover. Microsoft Windows Mobile is failing to woo customers, the longer this carries on the more likelihood Nokia will be taken over (most likely by Microsoft themselves)

posted on Apr 27, 2012, 9:55 AM 2

6. APPLE_ROYALLY

Posts: 25; Member since: Apr 24, 2012

We say this is bad news. We think it will take time to rise again. We ask u should try Android. We wish you good luck. We hope you come back. We like that.

posted on Apr 27, 2012, 9:54 AM 5

12. bbblader

Posts: 590; Member since: Oct 24, 2011

dafuq did I just read?

posted on Apr 27, 2012, 11:01 AM 5

17. EclipseGSX

Posts: 1778; Member since: Oct 18, 2011

A guy with some mental disorder who thinks he is some kind of spokesperson

posted on Apr 27, 2012, 3:34 PM 5

5. ivanko34

Posts: 617; Member since: Sep 04, 2011

This is the achievement of the new boss of nokia who comes from microsoft

posted on Apr 27, 2012, 9:47 AM 12

2. pongkie

Posts: 663; Member since: Aug 20, 2011

this makes me sad... anyways i still hate those credit rating companies because they can be bribed by competitors who happen to have allot of cash pile