Moody downgrades Nokia

Nokia stock should be avoided, Moody's Investors Service claims. Reuters reports that the firm has changed its rating of Nokia shares from stable to negative, mainly as a result of the cellphone maker's first-quarter financial results. Figures have "confirmed a double-digit rate of decline for the mobile phone market in units and a one third year over year revenue reduction for Nokia in this segment," notes Moody analyst Eric de Bodard.

The results also included Nokia's first-ever pretax loss, and a forecast of a 10 percent decline in cellphone market volumes during 2009. Gross margins were only 5.5 percent overall, well below Moody's prediction of 10 percent; the company did however maintain margins in terms of devices. More troubling may be a new admission from Nokia itself, which says it could be too early to tell if cellphone demand has reached the lowest point in the recession.

Moody warns that Nokia could be suffering not just from a recession economy, but also market saturation, in which most of the people in a position to buy the company's phones are already satisfied. Nokia may never be able to return to rapidly accelerating growth, Bodard suggests.

By Electronista Staff