Ailing handset vendor Nokia defended its financial position following a downgrade from ratings agency Moody’s Investors Service, with Timo Ihamuotila, its CFO (pictured), arguing that the company is “quickly taking action” to address its challenges.

Moody’s has downgraded Nokia’s rating to Baa3, its lowest rating still qualifying as investment grade, with its short-term debt rating reduced to Prime-3 from Prime-2, in both cases with a negative outlook.

In a research note, the agency said that the move had been prompted by last week’s announcement that Nokia is set to announce poor quarterly results this Thursday, with pressure on both its mass market handsets and its smartphone unit.

With regard to the main Mobile Phones unit, Moody’s said: “the structural challenges facing Nokia's Mobile Phones segment may not be easy to address, such as the market share gains recorded by makers of very low-end phones or new phone promotions by Chinese carriers.”

And for Smart Devices, it noted: “Nokia's transition in its Smart Devices from Symbian-based phones to the Windows-based Lumia devices is proving more challenging than expected given that sales of Symbian-based devices are falling off very quickly while Lumia sales are only ramping up slowly.”

Moody's also raised the possibility that Nokia will need to contribute additional funding to Nokia Siemens Networks, “if [NSN’s] restructuring costs starts to exceed cash flow from operations.”

In a statement, Nokia’s Ihamuotila said: “Nokia will continue to increase its focus on lowering the company’s cost structure, improving cash flow and maintaining a strong financial position.”

Moody’s did observe that: “Nokia has maintained a strong liquidity position and capital structure.”