Moody's Investors Service has downgraded the long-term senior unsecured ratings of Nokia Oyj (NOK) to Ba1 from Baa3 and its short-term senior unsecured ratings to Not-Prime from Prime-3.
Concurrently, Moody's has assigned a Ba1 corporate family rating and a probability of default rating to the company. The outlook on all ratings remains 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," said Wolfgang Draack, a Moody's Senior Vice President and lead analyst for Nokia.
Despite today's downgrade, Moody's regards Nokia's commitment to decisive restructuring as positive and necessary to return the group to profitability. A return to profitability also depends on Nokia successfully transitioning its range of smartphones to the new Windows operating system and stabilising its feature phone business.
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