Nokia Debt Rating Cut for First Time by S&P on Smartphone Share
March 30, 2011, 6:04 AM EDTBy Diana ben-Aaron
March 30 (Bloomberg) -- Nokia Oyj, the world’s biggest maker of mobile phones, had its debt rating cut for the first time by Standard & Poor’s, which cited further market share losses and “weaker” operating margins at the Finnish company.
The long-term rating was lowered one step to A- with a stable outlook, S&P said in a statement today. S&P has since June 1998 ranked the debt A, the sixth-highest of 10 investment- grade ratings. Moody’s Investors Service has an equivalent A2 rating. Nokia had about 7.1 billion euros ($10 billion) in long- term debt as of the end of 2010.
“The downgrade reflects the revision of our business risk profile assessment on Nokia to ‘satisfactory’ from ‘strong,’ primarily because we expect that Nokia’s smartphone portfolio will make further significant market share losses during 2011 and 2012 until it has completed its adoption of Microsoft’s Windows Phone software as its new primary software platform for smartphones,” S&P said in today’s report.
Chief Executive Officer Stephen Elop announced on Feb. 11 that Nokia would adopt Microsoft Corp.’s Windows Phone 7 as its main operating system, tapering off product lines based on its Symbian software, the world’s best-selling smartphone system. The CEO now has to help Microsoft attract developers to Windows Phone 7 and at the same time try to keep them loyal to Symbian to keep up sales while it prepares models based on Microsoft system.
Rival Google Inc.’s Android will displace Symbian as the top selling smartphone system this year, while Microsoft will have a share of about 5.5 percent, International Data Corp. forecast yesterday. The researcher said Symbian’s share may fall to 0.2 percent in 2015 from 20.9 percent this year.
Nokia’s share of smartphone sales by volume has declined to 30.8 percent in the fourth quarter from 50.8 percent when Apple Inc. began shipping its iPhone in 2007, according to Gartner Inc. figures. Its overall share of the mobile market tumbled to about 27 percent from 36.7 percent in the same period.
S&P said Feb. 1 that it may lower Nokia’s debt rating, citing the company’s declining smartphone market share. Moody’s placed the debt on review for a possible downgrade on Jan. 28.
--Editors: Kenneth Wong, Simon Thiel
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net
