S&P downgrades Nokia over dwindling smartphone share

HELSINKI March 2, 2012 Standard and Poor's downgraded mobile phone giant Nokia's rating by a notch, blaming especially the Finnish company's difficulties in defending its smartphone market share.

Nokias President and CEO Stephen Elop gives a press conference to present Nokias new mobile phones in Barcelona on February 27, 2012 on the opening day of the Mobile World Congress. The 2012 Mobile World Congress, the worlds biggest mobile fair, will be held from February 27 to March 1 in Barcelona. AFP PHOTOLLUIS GENE

S&P cut Nokia's long-term corporate credit rating to BBB- from BBB, with a negative outlook "reflecting the possibility of a further downgrade in the next two years," if the companies margins remain too weak and its cash holdings decrease too much, the ratings agency said in a statement.

"The rating action reflects limited earnings visibility in Nokia's smartphone sub-division," S&P said, adding that this in turn had led it to revise down its assessment of the company's profitability and cashflow in 2012.

The news did not appear to scare off investors: Nokia's share price was trading up 0.36 percent in afternoon trading on a Helsinki stock exchange down 0.05 percent.

In 2011, the world's biggest mobile phone company posted a net loss of 1.2 billion euros ($1.5 billion), with a full 1.07 billion of that booked in the final quarter, compared to a net profit of 1.8 billion euros for all of 2010 and a profit of 745 in the fourth quarter of that year.

The dramatic fall came as the company was undergoing a major restructuring, phasing out its Symbian line of smartphones in favour of a partnership with Microsoft that has produced a first line of Lumia smartphones.

Nokia is depending heavily on the new phones to help maintain its ranking as the world's largest mobile phone maker as it operates in a rapidly changing landscape with RiM's Blackberry, Apple's iPhone and handsets running Google's Android platform take growing bites out of its market share.

S&P said on Friday it believed Nokia's partnership with Microsoft could help it improve its competitive position, but added: "we are uncertain about the extent to which revenue growth from higher-priced Lumia smartphones can offset a potentially rapid decline in revenues from smartphones based on the Symbian operating system." "As a result, we believe Nokia's market share could further decline from 12.6 percent in the fourth quarter of 2011 following a decline from 28.1 percent in the fourth quarter of 2010," the ratings agency cautioned.