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Nokia worries analysts with cash burn rate

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Nokia is burning through its cash reserves at a rate that is unsustainable, causing heightened worries among industry analysts over the embattled company's ability to stay afloat.

Over the past five quarters, according to Reuters, Nokia has eaten into its cash pile by €2.1 billion--a rate that would see its entire reserves of €4.9 billion disappear in a couple years.

But, according to a poll conducted by Reuters of 30 banks and brokerages, the common view is that Nokia will burn through almost €2 billion more in just three quarters. The most bearish see the company's €4.9 billion net cash buffer completely gone by next year.

"In our opinion, the company's ability to repay even its shorter-term 2014 bond could be an issue,"  Societe Generale credit analyst Juliano Torii told Reuters.

Nokia has two bonds issues outstanding--both now rated by Fitch and S&P as junk--for €1.25 billion maturing in 2014 and €500 million due in 2019.

Societe Generale analysts last week downgraded Nokia stock to "sell" and cautioned that the company's operating losses and restructuring costs could accelerate.

"Such an additional fall could be enough to burn through most of Nokia's existing cash pile and even bring into question Nokia's very survival,"  Societe Generale analyst Andy Perkins wrote in an investor note.

Nancy Utterback, credit strategist at Aviva Investors, added to the negative sentiment claiming that Nokia's Lumia smartphones were "too little, too late."

"The company is in a negative spiral that will be hard to reverse," Utterback told Reuters.

Not all industry watchers were quite so gloomy. Jens Vanbrabant, lead portfolio manager at European Credit Management, said: "The group appears to have sufficient liquidity, even under some reasonably onerous operating assumptions."

For more:
- see this Reuters article

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