Nokia's Credit Rating Further Downgraded, Buying Siemens Shares Discouraged
SGV claims that Nokia is in no position to buy Siemens shares. It is a futile strategy that is very expensive. In the long run, this would also affect Nokia's financial position as a result.
Upon hearing Nokia's plans to buy 50% of of Siemens share, the credit rating of Nokia was downgraded from BB- to B+.
With Nokia unable to compete effectively in the Smartphones businesses, using increasingly limited money for buying shares is not a wise decision. The rating agency foresees that this would only lead to a more precarious financial position for the already ailing Finnish phone company.
On the other hand, another credit rating agency, Fitch, claims that acquisition can make strategic sense. Fitch however agrees that Nokia should do more to increase visibility in the Smartphone's industry.
Nokia defends itself by saying it has additional cash from an undrawn credit facility and that its financial position is secure.