Moody's Downgrades Nokia Ratings

Rating change due to 'weakened market position in its core business, mobile devices, which has reduced the company's margins and funds from operations'

Due to its weakened market position in mobile devices, ratings agency Moody's said on April 7 that it had downgraded the long- and short-term debt ratings for the world's leading mobile phone maker.

Moody's cut the company's senior ratings to A3 from A2 and its short-term debt ratings to Prime-2 from Prime-1, with a negative outlook.

"The rating downgrade primarily reflects Nokia's weakened market position in its core business, mobile devices, which has reduced the company's margins and funds from operations," Moody's Nokia analyst Wolfgang Draack said.

The announcement followed a Moody's review action on January 28, one day after Nokia posted a 21% drop in fourth-quarter profits.

Nokia played down the downgrade and stressed Moody's also "noted the strength of Nokias Mobile Phones business unit as well as, to some extent, our strong financial profile and robust liquidity position."

"Moody's rating action is not expected to affect Nokia's financial position or financing costs," Nokia spokesman James Etheridge said.

Moody's said Nokia's new strategy to phase out its smartphone platform Symbian in favor of a tie-up with Microsoft's Phone would, in the long run, provide Nokia "a good opportunity to gradually re-build market share."

However, the transition period would hold a significant degree of uncertainty for Nokia, as it struggles to fight off rivals Apple, RIM, and Google in the smartphone market.

Today's announcement comes shortly after Standard & Poor's took a similar line on Nokia on expectations it would post weaker results over the next two years.

Copyright Agence France-Presse, 2011

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