By Vamien McKalin | Aug 16, 2012 01:54 PM EDT
Nokia, once the top dog in the mobile phone industry, faces a bleak future if the company fails to turn itself around. Recently, Nokia's credit rating was downgraded from BB+ to BB-. This means Nokia will find it more difficult to borrow cash, and the expense of doing so will likely be greater.
"The rating actions reflect a downward revision of our estimates of revenues and profitability for Nokia's smartphone operations in 2012 and 2013; we have subsequently also revised our cash flow assumptions, including the impact from Nokia's restructuring of its Devices and Services division. In line with our criteria, we have therefore revised our assessment of Nokia's business risk profile to 'weak' from 'fair' and that of the financial risk profile to 'significant' from 'intermediate," said Standard & Poor in a statement.
Standard & Poor's Ratings says that it believes a Nokia recovery would be very difficult to accomplish, estimating that the company has a 50-70 percent chance of recovering and paying off its debts. If Nokia fails to make good on its promises to investors, the company could soon find itself on the market.
The company might find a savior in Microsoft. Nokia is the premiere manufacturer of Windows Phone devices, so if it should one day go up for sale, Microsoft may choose to purchase Nokia to protect the popular Lumia line of Windows Phone devices rather than watch its top Windows Phone manufacturer be bought up by another company that might not have a long term interest in Windows Phone. Then again, with hardware partners making a fuss about Microsoft's Surface tablet, acquiring Nokia would give partners even greater cause for concern.
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