Nokia's (NYSE:NOK) fortunes took another tumble, as Moody's cut the handset maker's credit rating, citing the company's deteriorating market position and uncertainty over its transition to Microsoft's (NASDAQ:MSFT) Windows Phone 7 as its primary smartphone platform. Meanwhile, Taiwanese smartphone maker HTC surpassed Nokia in terms of market capitalization.
Moody's cut its rating on Nokia's senior debt to A3 from A2. The ratings agency also slashed the company's short-term debt ratings to Prime-2 from Prime-1, and said the outlook on the ratings was negative. "The rating downgrade primarily reflects Nokia's weakened market position in its core business, mobile devices, which has reduced the company's margins and funds from operations," Wolfgang Draak, Moody's senior vice president and lead analyst for Nokia, wrote in a note.
The ratings cut comes a week after Standard & Poor's also cut its rating on Nokia's debt for the first time.
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 will grow faster than the market and its operating margin will be 10 percent or more.
Meanwhile, HTC, which has risen to prominence on the back of Google's (NASDAQ:GOOG) Android platform as well as via its partnership with Microsoft, passed Nokia in terms of market capitalization. HTC's shares gained 5.3 percent in trading in Taiwan, pushing its market value to $33.8 billion--slightly ahead of Nokia's $33.6 billion market capitalization. That being said, Nokia still remains the world's largest handset maker in terms of both market share and shipments.
- see this Reuters article
- see this Bloomberg article
- see this AllThingsD article
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