Moody's cuts Nokia to "junk" on fears of cash burn
(Reuters) - Moody's slashed Nokia's credit rating to "junk" on Friday after the Finnish cellphone maker cut 10,000 more jobs and forecast a wider-than-expected loss, citing worries about its cash position and slow sales of new Windows phones.
Equities analysts also cut their price targets on Nokia stock on fears the company would continue losing market share to Apple, Google and Samsung Electronics.
Moody's is the third ratings agency to relegate Nokia to non-investment grade status, which means many institutional investors such as pension funds will not buy its bonds. S&P and Fitch made similar moves in April.
Nokia is placing its hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft software, but sales have been slow. Nokia ditched its own Symbian operating system and switched to Microsoft last year.
"Today's rating action reflects our view that Nokia's far-reaching restructuring plan... delineates a scale of earnings pressure and cash consumption that is larger than we had previously assumed," Moody's analyst Wolfgang Draack said in a note.
Moody's also said Nokia may also have to contribute more capital or funding to Nokia Siemens Networks, its joint venture with Siemens, if the restructuring costs start to exceed cash flow from operations.
At least ten brokerages slashed their price targets on Nokia's shares, which have fallen more than 50 percent since the start of the year. They were trading up 3.6 percent at 1.89 euros at 0946 EDT.
"Nokia's current profit warning worryingly reflects the company having to significantly discount its new Microsoft Lumia products in order for the eco-system to gain any traction with retailers, operators and consumers," UBS said.
Nokia's plan to cut more jobs and reduce operational costs are a step in the right direction, but the moves may be too late, said Wedbush Securities analysts, who cut their price target on the U.S.-listed shares to $2.50 from $3.25. Continued...