Moody's Investors Service Downgrade Nokia Debt to Junk Status

Paul Lilly

Talk about kicking a fella when he's down but not yet out. Nokia has fallen on tough times, forcing the company to make some tough decisions, and while the Finnish handset maker tries to get back on its feet, Moody's Investors Service downgraded the company's debt rating from Baa3 to Ba1, otherwise known as junk status . Furthermore, Moody's said the outlook on this and other ratings (including Nokia's corporate family ratings and probability of default rating) all remain negative.

"Today's rating action reflects our view that Nokia's far-reaching restructuring plan -- which involves drastically downsizing its infrastructure by focusing its direct marketing on fewer markets, streamlining support functions and reducing investments in certain R&D projects in order to realize additional fixed cost savings of up to EUR1.3 billion by the end of 2013 -- delineates a scale of earnings pressure and cash consumption that is larger than we had previously assumed," says Wolfgang Draack , a Moody's Senior Vice President and lead analyst for Nokia.

In other words, Nokia has problems that a major restructuring effort aren't likely to solve, and may even contribute to, as far as Moody's analysis goes. Regardless of how things pan out, it's fair to say Nokia's future is very much in question. After going all-in with Microsoft's Windows Phone platform and pushing its Lumia smartphone line, Nokia yesterday announced plans to close three facilities and cut 10,000 jobs, news of which sent the investors scurrying to sell off the company's stock.

Original Image Credit: Flickr (marion Doss)

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