Disqus
It’s been a long time coming, but Motorola’s struggling mobile phone manufacturing business has finally caught up with its finances. Citing Motorola’s “operational challenges” that are not expected to fix themselves in the intermediate term, the Standards & Poor’s (S&P) Ratings Services has cut its long-term credit rating on Motorola to junk status.
Motorola’s credit rating rating dropped ‘BB+’ from ‘BBB,’ reflecting the S&P’s expectation that Motorola’s handset business would lead to higher debt-to-earnings ratios, lower profit, and diminish free cash flow. The S&P gave Motorola a recovery rating of ’3,’ indicating the credit rating company’s confidence of meaningful debt recovery (50-70%) should Motorola default on payments. The debt downgrade comes amidst a slowdown in mobile phone sales that is likely to result in profit losses for the coming quarters.
Moody’s Investors Services previously announced that it had placed Motorola under review for a possible rating downgrade. Moody’s currently has Motorola just two notches above junk status, mirroring Motorola’s previous S&P rating.
The overall cellphone market is expected to decline next year, which will likely only make it harder for Motorola to compete.
[Via: WSJ]
About The Author
Will Park
Will hails from The City of Angels - Los Angeles, California. He spends his time playing with his numerous gadgets and looking forward to seeing what future holds for mobile technology. An avid promoter of a fully "digital" life, he promotes the widespread adoption of truly mobile, paper-less living. He dreams of the day when he can go completely digital. No more snail mail, paper receipts, bound books, notepads/spiral notebooks, credit cards, hard currency. He's a digital warrior - fighting for the converged life. He is an idealist and a realist - he has a perfect view of what the world should be but knows that the world is not perfect. Can we ever hope to see Will's dream become reality? We'll see...
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Ram
