Nokia's fourth-quarter loss of €1.07 billion underscores the uphill task the company has in competing with Apple and Samsung for smartphone prominence, according to a new report Fitch Ratings.
However, the credit ratings firm believes Nokia's robust cash position provides breathing space for the company to challenge the two leading suppliers as the Finnish company makes the transition to a new smartphone strategy based on its partnership with Microsoft's Windows Phone.
Of note, Nokia's poor fourth-quarter results failed to affect the company's credit rating which Fitch had already factored into a downgrade made in June 2011 from 'BBB-'/Negative from 'BBB+'/Negative.
While some analysts have registered their surprise at Nokia shipping over 1 million Lumia smartphones since the Windows Phone devices wen ton sale in November, Fitch has indicated that it will take several more quarters before the success of the Lumia range can be evaluated, especially given the high cost of marketing that is required to promote the new smartphones.
Fitch confirmed that any change to Nokia's rating was not likely until the company's situation becomes clearer, and is also dependent on the wider success of a broad product range of based upon the Windows Phone platform. Looking further into the future, Fitch said that it would judge a successful turnaround for Nokia once it could demonstrate an ongoing refresh of its smartphone products with new models, together with regaining market share in key markets, including sales traction in the United States.
Commenting on the Nokia's likely 2012 performance, CEO Stephen Elop said the company's operating margin would be around break-even in the first quarter, give or take 2 per cent. He also said that Nokia annual guidance targets had been dropped, claiming that 2012 would be a year of transition.
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