Fitch cuts Nokia to junk, outlook negative
Fitch Ratings downgraded its credit rating on Nokia Oyj to junk status and said the outlook remained negative, as the Finnish handset maker's dwindling market share starts to strain its cash position.
Shares in Nokia, which were hit badly this month by a profit warning, fell 2 percent to a new 15-year low of 2.654 euros after the downgrade on Tuesday.
Fitch cut its rating on Nokia - already downgraded in recent weeks by Standard & Poor's and Moody's - to BB+ from BBB- and said this could be lowered further unless the company's business showed improvements over the second half of 2012 and in 2013.
"Given the potential headwinds facing the company, Fitch is currently not convinced that Nokia can attain this over the course of 18 months," it said in a statement.
Nokia defended its financial position in a separate statement, citing its net cash position of 4.9 billion euros ($6.4 billion) as of end-March.
"Nokia will continue to increase its focus on lowering the company's cost structure, improving cash flow and maintaining a strong financial position," Chief Financial Officer Timo Ihamuotila said.
Fitch, however, said Nokia's cash could be depleted over the next 18 months by substantial restructuring charges and potentially negative operating cash flow.
Nokia - which has issued two eurobonds worth in total 1.75 billion euros and two dollar bonds worth $1.5 billion in total - has struggled in recent years to keep up with Apple Inc and Google Inc in the smartphone business.
Its Chief Executive Stephen Elop bet last year the firm on the new range of Lumia smartphones, which are using Microsoft Corp software, but sales have so far been slow.
Last week Nokia reported a steep loss for the first quarter, dropped its sales chief and promised to slash more costs.
"The launch of the new Lumia phone with AT&T, and the potential launch of new Nokia products later in the year, could be positive for Nokia's credit profile," Fitch said, adding the company would need to show growth and profit to avoid further downgrades.
Moody's cut Nokia's rating to just one notch above junk earlier this month, while Standard & Poor's made a similar downgrade last month.
Some analysts have said Nokia shares look massively undervalued, considering its cash position and large patent portfolio. But they also caution against investing before signs of a recovery in sales.
(Editing by Ritsuko Ando and David Holmes)