In a statement, S&P said that “the action reflects a downward revision of our expectations for revenues from Nokia’s Devices and Services division in 2012 and a subsequent revision of our profitability and cash flow assumptions.”
While the agency was broadly positive about revenue growth from Nokia’s Lumia smartphone line, the growth of this is not offsetting the decline of its Symbian OS business. It suggested that “smartphone revenues in absolute terms could start rising by the end of 2012, contributing to a stabilisation of revenues in the Devices and Services division toward the end of 2012 or the beginning of 2013.”
Weakness in Nokia’s mass-market Mobile Phones business was also noted. “We understand that Nokia intends to launch new devices to close the gap in this segment but we expect competition from manufacturers of low-price devices to intensify and we have slightly revised our volumes and price assumptions for the mobile phone operations,” it said.
S&P lowered its long-term credit rating of Nokia to “BBB-” from “BB+,” and its short-term credit rating to “B” from “A-3.”
Nokia responded by stating: “As we have detailed in recent announcements, Nokia is in the middle of a transformation program which encompasses every aspect of our business. We are implementing a decisive action plan to position our company for future growth and success. The main focus of these actions is on lowering the company's costs, improving cash flow and maintaining a strong financial position, while bringing attractive new products to market."
Separately, the Financial Times reported that Nokia is in “advanced talks” with venture capital firm Permira about the sale of its Vertu premium handset business, which may raise EUR200 million.
The paper said that Vertu would complement Permira’s existing luxury brand holdings, which include Hugo Boss and Valentino. Another European private equity company, EQT, is reported to have eyed Vertu, although not at such an advanced stage.
Nokia said it is set for more cuts during its first quarter 2012 results release. A sale of Vertu has previously been mooted.