Analysts upgrade Nokia on cost-cutting plans
NEW YORK (AP) — Nokia shares partially recovered from a massive sell-off from a day earlier, with at least two Wall Street analysts upgrading the telecom after it said it would slash 10,000 jobs and close plants in an effort to turn around its business.
The company's upcoming Windows 8 phones will be a key turning point for the Finnish company, analysts say — in one direction or another.
However, Moody's ratings agency downgraded Nokia's debt grade to junk status Friday, citing greater than anticipated pressure on the struggling cellphone maker's earnings. It kept the outlook negative, meaning it could downgrade it again.
Nokia's U.S. shares added 13 cents, or 5.5 percent, to $2.48 in midday trading. On Thursday, the shares closed down 16 percent at $2.35.
Nokia's efforts to cut costs are aimed at saving $2 billion by the end of next year. Heavy competition from Apple Inc.'s iPhones and smartphones using Google Inc.'s Android operating system has hurt its sales. The company gave a grim outlook for most of the year.
Some improvement had been expected after Nokia joined forces with Microsoft Corp. in 2011, launching several Windows Phone 7 models. But the new phones have received mixed reviews and the company made no mention of the much-anticipated Windows 8 version.
Apple is also expected to release a new iPhone, which would compete with the Windows 8, said Wedbush analyst Scott Sutherland. And weaker smartphone demand in Europe, where several countries are in recession, will hurt Nokia. Europe accounts for nearly a third of the company's revenue.
Oppenheimer analyst Ittai Kidron upgraded the company to "Perform" from "Underperform," saying that the cuts will buy Nokia some time, but its long-term success will depend on new products like the Windows 8 phones — and he can't predict how that phone will fare. He said 2012 will be tough, but 2013 is an "unknown path."
Citi analyst Zahid Hussein also upgraded the company to "Neutral" from "Sell," calling the company's moves "painful but necessary." He said that if Nokia can successfully cut costs, it could return to break-even as early as the third quarter of 2012, quicker than expected.
Moody's lowered the company's long-term senior unsecured ratings to Ba1 from Baa3, saying that Nokia's restructuring plan involved "drastically downsizing its infrastructure," an indication its problems were greater than expected.