Nokia chairman confident of 2012 turnaround amid downgrades

Nokia's outgoing chairman, Jorma Ollila, said he is confident that the company will show signs of a turnaround this year despite weak first-quarter results.


"I am totally convinced that a turnaround will come. There will be some signs this year as new products are being launched," Ollila told Finnish television channel MTV3, according to Reuters. Nokia has chosen board member Risto Siilasmaa to succeed Ollila as chairman later this year.

Of note, Ollila dismissed any idea that a merger would provide a solution to Nokia's ongoing problems. "Mergers are not a solution for high-tech players. The cultures are so different. There is great reluctance to bring cultures together," he said.

Nokia is trying to to gain traction in its planned smartphone turnaround using Microsoft's Windows Phone platform. However, the company's fortunes have been declining due to slowing sales of its feature phones and Symbian smartphones. Sales of Nokia's Lumia Windows Phone smartphones, which Nokia began selling in November, haven't yet compensated.

The reassurance from Ollila on Nokia's future came after ratings agency Fitch cut the company's credit rating to junk status. Fitch has now lowered Nokia to BB+ from BBB- and said this rating could be downgraded further unless the company's performance improved over the second half of 2012 and in 2013.

"In order to avoid further negative rating action, Nokia needs to demonstrate substantial improvements" through 2013, Fitch analyst Owen Fenton wrote in a report, according to Bloomberg. "Given the potential headwinds facing the company, Fitch is currently not convinced that Nokia can attain this over the course of 18 months." TheFitch downgrade came shortly after Moody's Investors Service also downgraded its rating Nokia.

While the cost of insuring against default on Nokia's debt has surged to a record, a recent note issued by research firm Bernstein said that the company's high cash burn rate in the first quarter does not put Nokia at risk in the near future, but is "likely to weigh on sentiment."

In response, Nokia CFO Timo Ihamuotila said that the company remained financially strong and was taking prompt action to lower its cost structure, improve cash flow and maintain a strong financial position. Ihamuotila said last week that the company is looking into the possibility of selling off some of its non-core assets and highlighted parts of its large patent portfolio as a potential area.

For more:
- see this Reuters article
- see this Bloomberg article
- see this Dow Jones Newswire article

Related Articles:
Nokia wobbles as brokers turn against struggling vendor
Nokia must take radical steps to stop its continued decline
Nokia's Q1 sales plunge as company posts $1.2B loss
Nokia: Lumia 900 sold out online but we're making more
Rumor Mill: European carriers slam Nokia's Lumia Windows Phones