Nokia credit rating cut for first time by S&P
Nokia's (NYSE:NOK) credit rating was slashed for the first time by Standard & Poor's Ratings Service, which cut the debt rating based on projections of declining market share and weaker operating margins. The ratings service indicated in early February that it might cut Nokia's rating.
S&P said it lowered Nokia's long-term rating to "A-" with a stable outlook. Nokia had maintained an "A" credit rating with the S&P, the sixth-highest of 10 ratings, since 1998.
"The downgrade reflects the revision of our business risk profile assessment on Nokia to 'satisfactory' from 'strong,' primarily because we expect that Nokia's smartphone portfolio will make further significant market share losses during 2011 and 2012 until it has completed its adoption of Microsoft's (NASDAQ:MSFT) Windows Phone software as its new primary software platform for smartphones," S&P said in its report.
Nokia's smartphone market share dipped to 31 percent in the fourth quarter, down from 40 percent in the fourth quarter of 2009. Nokia estimated that its overall global handset market share dropped to 31 percent, down from 35 percent in the year-ago quarter.
When Nokia announced its partnership with Microsoft in February to switch to Windows Phone 7, it provided general financial targets for the transition. The company said both 2011 and 2012 will be transition years, but that after the transition its Devices and Services net sales would grow faster than the market and its operating margin would be 10 percent or more.
Nokia expects to start shipping Windows Phone devices in large volumes in 2012. Research firm IDC predicted in a report Tuesday that by 2015 Google's (NASDAQ:GOOG) Android platform will command 45.4 percent of the smartphone market in 2015, with Windows Phone commanding 20.9 percent. This forecast assumes, however, that a great deal of the current Symbian market will be transferred to Windows Phone.
- see this Bloomberg article
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