Nokia Brushes Off Moody’s Downgrade

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After reporting a worse-than-expected second-quarter loss last week, Nokia (NYSE:NOK), which was once the world’s leading cell-phone maker, saw its credit rating cut two more notches by Moody’s Investors Service.

Nokia officials, who must be getting used to bad news by now, brushed off the downgrade, calling its effect on the company “limited,” Bloomberg reported. They said it would continue to focus on cutting costs and boosting cash flow.

Shares of Nokia rose fractionally in Monday morning trading in New York, with its share price well below $2.

Moody’s explained the cut by pointing out that Nokia’s effort to compete in the smartphone market, which is currently dominated by Samsung and Apple (NASDAQ:AAPL), will lead to even greater operating losses than earlier forecasts has suggested.

The struggling Finnish handset maker saw its rating slashed from Ba3 to Ba1. Nokia’s debt was already at junk status prior to the downgrade, but is now three full notches short of investment grade.

Nokia currently has $6.3 billion in debt. The yield on its bonds that mature in 2014 hit a record high of 11% late last month and were at 8.84% after Moody’s latest downgrade.

The company has partnered with Microsoft (NASDAQ:MSFT) to develope smartphones using the Windows operating system. It scored a modest hit with its Lumia 900 smartphone, which debuted earlier this year. However, Microsoft recently announced that the phone wouldn’t be eligible for its Windows 8 upgrade, and Nokia lowered its price (with a two-year contract) by half.


Article printed from InvestorPlace Media, https://investorplace.com/2012/07/nokia-brushes-off-moodys-downgrade/.

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