Ratings agency Moody's has downgraded mobile phone producer Nokia in response to recently released poor sales figures. Nordic Nokia's new rating is Baa3, down one notch from Baa2, and, with the new rating on a negative outlook, a further downgrade is possible in the future.

“The one-notch rating downgrade was triggered by Nokia's announcement on 11 April that a severe decline had been recorded in its Q1 2012 mobile phone unit sales (-16 percent from Q1, 2011) driving Mobile Phone segment revenues down 35 percent compared with Q1 2011,” reads the Moody's statement. The poor mobile phone sales are particularly significant as they remain of paramount importance to Nokia.

In response, the company said cash conservation remains a priority in the current transition. "We are making progress with our previously announced targets to reduce non-IFRS operating expenses by more than EUR 1 billion in Devices & Services, and to reduce non-IFRS operating expenses and production overheads by EUR 1 billion in Nokia Siemens Networks," reads a company's statement.

"Nokia is quickly taking action. Nokia will continue to increase its focus on lowering the company's cost structure, improving cash flow and maintaining a strong financial position," said Timo Ihamuotila, Nokia' Executive Vice President and CFO.

Moody's also called attention to difficulties Nokia continues to face with smartphones. Nokia is currently attempting to phase out its old Symbian phones and replace them with the new Windows based 'Lumia' devices. According to Moody's, sales of Symbian system devices are falling off faster than the sales of Lumia phones are growing.

Nokia is a Finnish mobile phone producer and although its origins date back to the 19th century, the foundations of the modern company were laid in 1967 with the merger of three jointly owned companies to form the Nokia Corporation. The company was involved in cable production and telecommunications and was one of the pioneers of the modern mobile phone.

With the rise of mobile phones in the 90s, Nokia became a dominant force and until very recently produced the majority of the world's mobile phones. The last few years have been difficult for Nokia, with the arrival of smart phones, when the company's own models have struggled against fierce competition from Blackberry, Apple and Google Android devices.

Liam Lever, liam@romania-insider.com