Moody's Investors Services says Nokia Corp.'s second quarter earnings are credit negative, citing a continued drop in sales.
The ratings agency already has Nokia on review for downgrade, so Friday's warning suggests a move is more likely. The agency expects any downgrade to be limited to one notch.
It said it is particularly concerned about how quickly Nokia, which posted a 227 million euro loss for the quarter, is burning through cash.
It noted Nokia's net cash would likely fall to 1 billion euros after the purchase of Siemens' stake in Nokia Siemens Networks, a telecommunication systems venture. That would be below the 1.5 billion euros necessary to maintain the current Ba3 rating.
Once the world's largest maker of mobile phones, Nokia has struggled to compete in the smartphone segment.