The wreck of Nokia (NYSE: NOK) is no longer the slow motion one which began when current CEO Stephen Elop, formerly of Microsoft (NASDAQ: MSFT), took the helm over a year ago. He must wish he had remained in semi-retirement. A few months after he joined what was then the world’s largest handset company, Microsoft set a joint venture to put Windows Mobile OS on most Nokia phones. Microsoft’s R&D and marketing prowess gave Nokia a long shot, but a shot.
Nokia has now fallen apart. In the last several days, it announced that it flagship Lumia 900 had a software bug and that it would not make forecast earnings. The stock sold down to a 10 year low.
Today shares reached a 15-year low after Moody’s cut Nokia’s ratings to one level above junk.
Moody’s Investors Service has today downgraded the senior debt ratings of Nokia Oyj to Baa3 from Baa2 and its short-term debt ratings to Prime-3 from Prime-2. All ratings continue to have a negative outlook.
The one-notch rating downgrade was triggered by Nokia’s announcement on 11 April that a severe decline had been recorded in its Q1 2012 mobile phone unit sales (-16% from Q1, 2011) driving Mobile Phone segment revenues down 35% compared with Q1 2011. While volatility by quarters is not uncommon, Moody’s believes that the structural challenges facing Nokia’s Mobile Phones segment may not be easy to address, such as the market share gains recorded by makers of very low-end phones or new phone promotions by Chinese carriers. This precipitous decline is of particular concern considering that Nokia’s Mobile Phones segment was still the core income generator for the Nokia group in 2011, when it contributed EUR1.5 billion to the group’s operating profit of EUR1.8 billion.