Standard and Poor's downgraded mobile phone giant Nokia's rating by a notch, blaming the Finnish company's difficulties in defending its smartphone market share.
S&P cut Nokia's long-term corporate credit rating to BBB- from BBB, with a negative outlook "reflecting the possibility of a further downgrade in the next two years," if the companies margins remain too weak and its cash holdings decrease too much, the ratings agency said in a statement.
"The rating action reflects limited earnings visibility in Nokia's smartphone sub-division," S&P said, adding that this in turn had led it to revise down its assessment of the company's profitability and cashflow in 2012.
In 2011, the world's biggest mobile phone company posted a net loss of €1.2 billion, with a full €1.07 billion of that booked in the final quarter, compared to a net profit of €1.8 billion for all of 2010 and a profit of €745m in the fourth quarter of that year.
The dramatic fall came as the company was undergoing a major restructuring, phasing out its Symbian line of smartphones in favour of a partnership with Microsoft that has produced a first line of Lumia smartphones.
Nokia is depending heavily on the new phones to help maintain its ranking as the world's largest mobile phone maker as it operates in a rapidly changing landscape with RiM's Blackberry, Apple's iPhone and handsets running Google's Android platform take growing bites out of its market share.
S&P said today it believed Nokia's partnership with Microsoft could help it improve its competitive position, but added: "we are uncertain about the extent to which revenue growth from higher-priced Lumia smartphones can offset a potentially rapid decline in revenues from smartphones based on the Symbian operating system."
"As a result, we believe Nokia's market share could further decline from 12.6% in the fourth quarter of 2011 following a decline from 28.1% in the fourth quarter of 2010," the ratings agency cautioned.
