Revenues from Nokia's smartphones could start rising by the end of this year and help bring stability to the company's key Devices and Services division, according to a review by ratings agency Standard & Poor's.
Nokia's Lumia 900
While the ratings firm believes that revenues from Nokia's devices division could decline in 2012 by the same extent as in 2011 (18 per cent), S&P expects increasing sales of the high-priced Lumia Windows Phone smartphones to help stabilise revenues, albeit not in the near term.
However, this upturn in Lumia revenues by the end of 2012 will not save Nokia's Devices and Services division from recording a slightly negative non-IFRS operating margin for 2012, compared with positive 7 per cent in 2011. This view takes into consideration S&P's understanding the Nokia could accelerate and widen the restructuring, or cost saving, within the division.
S&P also believes that Nokia's previously strong position in global handset sales could weaken further during 2012, especially in China and India, where demand has been significant for low-price smartphone-like devices. This weak outlook could lead to Nokia being downgraded further in the next 12 months if, according to S&P, the non-IFRS operating margin in the Devices and Services division remains at or below breakeven.
The firm also added that a downward revision to Nokia's credit rating could happen if revenues from Lumia smartphones do not rise significantly toward the end of 2012 as S&P currently expects, or if margins deteriorate further due to competitive pressure. However, S&P held out the possibility of upgrading Nokia to "stable" if revenues in the Devices and Services division stabilise, cash burn reduces considerably, and non-IFRS operating margins return to at least mid-single-digit percentage levels.
- see this Reuters article
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