Nokia’s shrinking handset sales and widening losses have left a top ratings agency unconvinced of its rebound effort.
Fitch Ratings downgraded two Nokia ratings to BB- from BB+ today and issued a negative outlook on its long-term default rating.
Fitch had previously warned it would cut Nokia’s ratings if it did not stabilize declines in revenue and profits in its handset business.
“The release of Nokia’s [second quarter] results indicate that the company is currently not near this position and Fitch is not convinced that this can be attained anytime soon,” the ratings agency said in a statement published by Reuters.
Nokia is banking its business on its new Lumia smartphones running Microsoft’s Windows Phone operating system, but faces steep competition from the iPhone and Android devices. Just 4 million Lumia devices sold last quarter as Nokia’s legacy Symbian phones continued to outpace sales of the new Windows Phone handsets.
In North America, where Nokia has launched Lumia phones with AT&T and T-Mobile, it sold just 600,000 devices last quarter, supporting analyst estimates that Lumia sales numbered just 330,000.
Fitch expressed doubt about the success potential of Nokia’s Lumia phones, saying it “believes the company does not have products in its current portfolio that can stem the recent losses.”
“The degree of competition in the industry would suggest that it is going to be difficult to re-establish a significant presence in the smartphone market,” it said. The fact that Nokia’s current Lumia devices won’t be able to upgrade to Windows Phone 8 could put “additional pressures” on the company, Fitch said.
It warned of “significant risk” that Nokia will continue to deteriorate despite cost-slashing layoffs, plant closings and divestitures, and said further downgrades are likely.
For its part, Nokia said yesterday that the third quarter would be “challenging” for smartphone sales “due to product transitions,” but did not forecast worsening losses in its device business.
Nokia’s falling fortunes stand in stark contrast to competitors Apple and Samsung, whose financial results continue to post healthy increases on demand for their respective iOS and Android smartphones and tablets.
However, Nokia is not the only handset maker that’s struggling. HTC has taken hits in recent quarters as consumers have favored phones from other manufacturers, and Motorola Mobility has long struggled to attain profitability.
Filed Under: Devices
