SAN FRANCISCO: Motorola Inc had its credit rating lowered to junk status by Standard & Poor’s because its declining handset business is eating into profitability.
The rating was cut two levels to BB+, one notch below investment grade, S&P said today in a statement. On Dec 2, Moody’s Investors Service said it may downgrade Motorola’s debt, currently rated Baa2, or two levels above non-investment grade.
Co-Chief Executive Officer Sanjay Jha is trying to turn around the phone business using Google Inc’s Android software to build more advanced phones. He’s going up against Apple Inc, Research In Motion Ltd and Samsung Electronics Co, while also facing the global economic slump. Motorola said in October it won’t meet a goal of splitting off the mobile-phone unit by the third quarter of 2009.
“Revenues and profits in the first part of the year will be challenged by a narrower, somewhat-dated product portfolio,” S&P’s Bruce Hyman said in the statement. “Standard & Poor’s also expects about 10 percent fewer handsets to be sold worldwide in 2009 at lower average prices than in 2008.”
Motorola’s handset business has lost about $2.8 billion in operating income since the start of 2007. The company’s other units, which include networking gear, “partly offset these difficulties,” Hyman wrote.
Market share
Motorola lost its top ranking in the US mobile-phone market, the world’s biggest, to Samsung last quarter. Motorola had a 21.1 per cent share, while Suwon, South Korea-based Samsung had 22.4 per cent, giving it the top spot for the first time, according to Newton, Massachusetts-based research firm Strategy Analytics.
Motorola’s 5.375 per cent notes maturing in November 2012 fell 0.3 cent on the dollar to 91.2 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The yield rose to 8.02 per cent.
The cost of protecting Schaumburg, Illinois-based Motorola’s bonds from default has increased 65 per cent in the past month. Credit-default swaps on Motorola climbed to 520 basis points at 4 pm New York time, up from 314.2 on Nov 5, according to CMA DataVision.
Motorola shares rose 4 cents to $4.36 in New York Stock Exchange composite trading. They have dropped 73 per cent this year.
The rating was cut two levels to BB+, one notch below investment grade, S&P said today in a statement. On Dec 2, Moody’s Investors Service said it may downgrade Motorola’s debt, currently rated Baa2, or two levels above non-investment grade.
Co-Chief Executive Officer Sanjay Jha is trying to turn around the phone business using Google Inc’s Android software to build more advanced phones. He’s going up against Apple Inc, Research In Motion Ltd and Samsung Electronics Co, while also facing the global economic slump. Motorola said in October it won’t meet a goal of splitting off the mobile-phone unit by the third quarter of 2009.
“Revenues and profits in the first part of the year will be challenged by a narrower, somewhat-dated product portfolio,” S&P’s Bruce Hyman said in the statement. “Standard & Poor’s also expects about 10 percent fewer handsets to be sold worldwide in 2009 at lower average prices than in 2008.”
Motorola’s handset business has lost about $2.8 billion in operating income since the start of 2007. The company’s other units, which include networking gear, “partly offset these difficulties,” Hyman wrote.
Market share
Motorola lost its top ranking in the US mobile-phone market, the world’s biggest, to Samsung last quarter. Motorola had a 21.1 per cent share, while Suwon, South Korea-based Samsung had 22.4 per cent, giving it the top spot for the first time, according to Newton, Massachusetts-based research firm Strategy Analytics.
Motorola’s 5.375 per cent notes maturing in November 2012 fell 0.3 cent on the dollar to 91.2 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The yield rose to 8.02 per cent.
The cost of protecting Schaumburg, Illinois-based Motorola’s bonds from default has increased 65 per cent in the past month. Credit-default swaps on Motorola climbed to 520 basis points at 4 pm New York time, up from 314.2 on Nov 5, according to CMA DataVision.
Motorola shares rose 4 cents to $4.36 in New York Stock Exchange composite trading. They have dropped 73 per cent this year.
Courtesy: Times of India
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