14 DAY TRIAL // Finnish mobile phone maker Nokia has started to gain market share with its Windows Phone-based Lumia devices, yet its growth is still a slow one, and analysts have lowered their credit rating on the company.
At the moment, Moody's rate on the handset vendor is at B1, based on concerns over the company’s cash flow. The firm also says that Nokia might need longer than originally expected to recover.
According to Roberto Pozzi, Moody’s vice president and lead analyst on Nokia, the phone giant faces major challenges in returning to profitability in the smartphone area, and might not “reach break-even on a cash flow basis before well into 2014, at the earliest.”
He also notes that Nokia has managed to reach strong double digit volume growth rates, but that it was still losing €14 ($19) for every €100 ($134) of sales during the second quarter of the year.
“The negative outlook on Nokia’s B1 reflects Moody’s view that it may take longer than 18-24 months for the company to return to sustainable profitability and cash flow generation,” Moody’s said, as WMPoweruser notes.
Nokia, on the other hand, claims that it is advancing as planned in the mobile market, and that it will soon prove that it can be profitable in this segment once again.
Furthermore, the company also notes that it has a strong net cash reserve, which was of €4.1 billion ($5.48 billion) before it concluded the Nokia Siemens Networks transaction.
At the moment, the company could be negatively impacted if it tried to speed up profitability growth, as it would result in an increase in smartphone prices, making them less competitive on the market.
“We are pleased that the strong cash position we have maintained throughout our transition has enabled us to take advantage of an opportunity to acquire full ownership of NSN, whose financial performance has strengthened markedly in recent quarters,” Timo Ihamuotila, Nokia's Executive Vice President and CFO, said.
“In Devices & Services, we are pleased with the Lumia volume growth we delivered in the first half of this year and are looking forward to driving further share gains for the ecosystem. With these efforts our target is to return our Devices & Services business to sustainable cash generation as soon as possible.”