MOUNTAIN VIEW, Calif.--Another quarter of disastrous financial results for Nokia last week, with a quarterly loss of $1.7 billion, has led to the Finnish phone maker’s debt being downgraded to “negative” and even “junk” by major financial consultants.
Both Moody’s and Standard & Poor's pushed Nokia down to “negative status” after the firm announced its revenue was down a significant 30 percent from the same period last year, with spending reaching $2.6 billion in the last six months alone. The Fitch ratings agency went a step further, downgrading Nokia to “junk” status, with a negative outlook for the firm’s future.
Though Nokia CEO Stephen Elop said on the company’s earnings call last week that the firm had “implemented a series of strategic changes and embarked on a major transformation,” those changes don’t seem to have made enough of an impact on investors.
The departure of Nokia's sales chief, Colin Giles, with no planned successor has also played its part to rattle financial commentators.
Nokia only managed to sell 11.9 million smart phones in the first quarter, a figure representing less than half of the 24.9 million smart phone sales the company achieved in the same time period of 2011. Though much of this can be blamed on the phasing out of Symbian handsets, sales of the Nokia Lumia totaled only 2 million in the first quarter, by no means enough to offset the steep decline.
“Nokia’s low end volume business is falling off faster than the firm can build up its high end smartphone business, which is not a good sign,” said analyst Jack Gold, adding that additional competitive pressure was coming from Chinese firms like Huawei, ZTE and Pantech, attacking the low-end.
Gold pointed out that the Lumia was also doing poorly in the UK, a “bad sign” seeing as Europe is a cornerstone market for Nokia.
Despite this, however, Nokia continues to receive support from partner Microsoft in the form of go-to-market and R&D cooperation that, according to Elop, would total $1 billion in 2012 alone.
“I’d say Nokia has at least a couple more quarters where it’s going to be tough going,” said Gold, adding that if WindowsPhone didn’t “kick into high gear” soon, the firm would have an even tougher time surviving.
On Tuesday (April 24), the price of Nokia sharesdropped to a 15-year low of 2.654 euros (about $3.50).
Responding to the downgrades and slump in share price, Nokia CFO Timo Ihamuotila told Reuters the company was “quickly taking action,” and would continue to focus in on “lowering the company's cost structure, improving cash flow and maintaining a strong financial position."