After failing to meet analysts’ expectations last week, Fitch Ratings downgraded Nokia’s debt status to junk on Tuesday, April 24, 2012.
Fitch Ratings lowered the company to a BB+ rating; the lowest rating is a BBB-. The agency also gave Nokia a “negative” long-term outlook, which means the company could have its debt rating lowered again.
In addition to Nokia’s disappointing numbers last week, Fitch also downgraded the company based on the following:
- The company’s decreasing number of devices and services.
- Fitch cited concerns that Nokia would post bigger operating losses the next quarter. To avoid further downgrade, Nokia must show “substantial improvements” in Q3 and Q4 2012 and during 2013, including keeping sales consistent and earning profits on smartphones like the Lumia 900.
Concluding Thoughts
Nokia’s fate will come down to the Lumia line. The company has increased its advertising and will have to convince consumers that the Windows-based smartphone provides a solid alternative to Android or iPhone devices. While Nokia certainly faces hurdles, I am not ready to call Nokia the Finnish Research in Motion (RIM).
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