Fitch Ratings has downgraded Nokia’s (NYSE:NOK) long term rating to BBB-, which is the lowest investment grade and the outlook is still negative. This means that Fitch thinks the company is on the brink of being considered a speculative investment.
This is very bad news for the company as pension funds and other low risk institutional investors are forbidden to invest in companies that are not investment grade, and this also means that the company will pay more when issuing bonds.
Fitcher’s analyst Stuart Reid said in the statement that the delay in establishing a Windows Phone range “places an uncomfortably long phase of pressure on the existing handset business and raises the spectre of further cash flow deterioration and increased leverage metrics beyond the end of 2011,’’
While Nokia is done for in the high end, it is in the emerging markets that the situation seems to be worsening at a faster pace and this is what investors see now. ZTE, Huwaei, Miramax and tons of nameless phone manufacturers and investors are eating Nokia market share and margins.
Nokia lost more than 90% of its market value since 2007 and the bottom is nowhere to be seen. While the company has a significant market share, investors are worried about how fast the company market share will dwindle and how good phones running Windows Phone will be.
There are rumors in the market about a Take Over, and at current prices it would look feasible. The problem is that not even the company can provide a reliable forecast of its future.S|A