For struggling cell-phone maker Nokia (NYSE:NOK), the hits just keep coming.
Fitch Ratings downgraded the company’s debt from BBB- to BB+ this morning. That means Nokia’s debt has now reached junk status.
In making the downgrade, Fitch noted that the company’s financial outlook shows no sign of improvement in the foreseeable future.
Nokia warned investors earlier this month that its first-quarter results would be weak and that the outlook for the second quarter wasn’t any better.
Sliding sales of the company’s smartphones and its diminished presence in the market made Nokia “no longer commensurate with an investment grade rating,” Fitch said.
Despite its market share losses, Nokia retains significant cash reserves — 9.8 billion euros of gross cash and 4.9 billion euros of net cash. But such reserves could dwindle quickly in the coming year by continuing losses and potential restructuring charges, Fitch said.
To forestall further ratings demotions, Nokia would have to show better financial results in the third and fourth quarter of this year and through next year, including improved revenue and operating profit margins.
However, there’s little confidence Nokia can meet that objective. “Given the potential headwinds facing the company, Fitch is currently not convinced that Nokia can attain this over the course of 18 months,” the ratings agency said.
The recent launch of its Microsoft (NASDAQ:MSFT) Windows-based Lumia 900 smartphone with AT&T (NYSE:T) offers a glimmer of hope. Still, with so many things going wrong at Nokia, Fitch expressed doubt as to whether a Lumia success would be enough to reverse the company’s fortunes.
Nokia shares, down more than 24% so far this year, fell slightly in early Tuesday trading.