Finnish cellphone maker Nokia has rebutted downgrade of its rating by Standard & Poor (S&P). Standard and Poor’s has downgraded Nokia’s long-term corporate credit rating to BB-, from BB+, citing the likelihood of the company’s deteriorating profitability. According to S&P, Nokia’s second-quarter results and outlook for the third quarter were weaker than expected. S&P also lowered the issue rating for the group’s unsecured debt also to a BB- from a previous BB+
Timo Ihamuotila, Nokia’s CFO, commented on today’s rating decision from Standard & Poor’s:
The impact of Standard & Poor’s decision on the company is limited. As we continue our transition, we are applying a strong focus on cash conservation while simultaneously reducing our operating costs and making our operating model stronger and more agile.
We ended the second quarter 2012 with gross and net cash both higher than a year earlier. With gross cash of EUR 9.4 billion and net cash of EUR 4.2 billion, we have a strong financial position and robust liquidity profile. We also have access to additional liquidity via a revolving credit facility of EUR 1.5 billion. This is entirely undrawn, available to us until March 2016, and comes without any financial covenants.
Struggling Nokia is facing cut-throat comepetition from Apple’s iPhone and Android smartphones of Samsung of Korea, HTC of Taiwan and of late emergence of LG smartphones with its Optimus range. Its Lumia range of smartphones on Windows platform have not received the kind of acceptance and response which the company expected and hence its dwindling sales. Before the launch of Lumia phones on Windows, it was said that Nokia and Windows OS would be lethal combination but unfortunately this marriage has not been proved successful and Nokia has not benefitted from this relation. Nokia is also facing acute and fierece competition for its features phones in emerging markets from Chinese manufacturers and in India from local manufacturers like Micromax and Karbonn etc.
Last month, Nokia reported a 19 per cent drop in sales and a net loss of (euro) 1.4 billion for the second quarter. But only good news for today for Nokia was that despite the downgrade Nokia’s share price was up 4 per cent at (euro) 2.08 ($2.57) in afternoon trading in Helsinki. Hope once market leader Nokia regains its lost position with some dramatic and out of box decisions.