S&P downgrades Nokia's credit rating

(AP) HELSINKI - Standard and Poor's on Friday downgraded Nokia's (NOK) credit rating by one notch and warned that it may reduce it again unless the company's performance improves.

The rating agency said it was lowering the Finnish company's long-term corporate credit rating to BB+ from BBB- and its short-term corporate credit rating to B from A-3.

The downgrade came after Nokia Corp. posted huge first-quarter losses and a 30 percent drop in sales and a report earlier Friday estimated Samsung Electronics Co. had overtaken it as the world's largest maker of mobile phones.

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"We now expect Nokia to report significantly lower margins and cash flows in 2012 than we had previously expected," S&P said. "The outlook is negative, reflecting the possibility of a further downgrade if Nokia fails to stabilize revenues and margins and significantly cut its cash losses."

Nokia CFO Timo Ihamuotila said the company was in transition, a year after it teamed up with Microsoft Corp. to incorporate Windows software in its new handsets.

"Nokia is in the middle of a transformation program which encompasses every aspect of our business," Ihamuotila said, adding that the company was "implementing a decisive action plan" to improve growth.

"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," he said, but gave no details.

Nokia's share price was almost unchanged at 2.77 euro ($3.66) in afternoon trading in Helsinki.

Last week, Nokia announced one of its worst quarterly results ever, blaming tough competition for a 929 million euro ($1.2 billion) net loss as sales plunged, especially in the smartphone market. It said it expects no improvement in the second quarter.

The cellphone maker is fighting fierce competition in the top-end from Apple Inc.'s iPhone and other makers using Google Inc.'s popular Android software, including Samsung and HTC of Taiwan. It is also being squeezed in the low-end by Asian manufacturers making cheaper phones, such as China's ZTE.

Boston-based Strategy Analytics said Friday that Samsung surpassed Nokia as the world's largest seller of cellphones by volume, grabbing a 25 percent global market share against Nokia's 22 percent.

The agency's report also said that Samsung had overtaken Apple as the largest maker of smartphones selling 44.5 million units against Apple's 35 million. Nokia dropped to third place with under 12 million sold in the quarter, Strategy Analytics said.

Fitch ratings agency downgraded Nokia to junk status in recent days, while Moody's cut it to near junk status.