Hot on the heels of Fitch downgrading its outlook for ailing Nokia, Moody’s has become the second of the big 3 ratings agencies to scoff at Nokia’s Q2 2012 earnings report. Moody’s cited weak operational net revenue in Q2 as the main reason for its decision to downgrade Nokia, adding that the company’s strong cash flow for the quarter was boosted by one-time payments or from divisions that were going to struggle going forward due to large restructuring costs.
In all, Moody’s provided a grim outlook for Nokia similar to that offered by Fitch on Friday, suggesting that a strong recovery with the company’s upcoming Windows Phone 8 devices is not guaranteed, and that the company’s strategy of aggressive pricing will reduce Nokia’s much-needed cash flow.
“A return to profitability in the Devices & Services segment on the back of smartphones with the Windows Phone 8 mobile operating system is by no means assured. We estimate that funds from operations in the core business have not materially improved in Q2 and will deteriorate further due to aggressive pricing, cash cost of restructuring and launch cost for the new devices.” - Moody’s
Nokia is obviously hoping to paint a rosier picture for their future success, with CFO Timo Ihamuotila downplaying the impact of Moody’s and Fitch’s decisions to further downgrade the company’s outlook. Ihamuotila issuing the following statement in a response to the Moody’s report.
“While we are disappointed with Moody’s decision, its impact on the company is limited. We are quickly taking action to position Nokia for future growth and success.” - Timo Ihamuotila, CFO, Nokia
The move leaves Standard and Poor’s as the sole ratings agency yet to rule on Nokia’s outlook in light of their Q2 2012 earnings report. The S&P is largely expected to follow suit with Moody’s and Fitch, as all three companies downgraded Nokia after the Q1 report. Of course, these agencies are saying what everyone already knows; Nokia’s future successes rely heavily on the success of Windows Phone 8. With current Windows Phone market share at around 4%, the ratings agencies are understandably skeptical of Nokia being able to return to glory.
[via Mobile Business Briefing]