Nokia's negative outlook may be a harbinger of a tough few years to come

Uh oh, Nokia. After seeing its net profit plummet 90% last week, credit rating agency Moody's have delivered a grim outlook of the Finnish mobile giant, downgrading its debt outlook from stable to negative.

Why? Well, it's not just because the recession has stopped people from buying new phones, it's also stopped people from buying Nokia's relatively antiquated devices. Think about it - when you think exciting, hot new phones, you think of the iPhone or the BlackBerry. When Nokia comes to mind, you'd likely get an image of a five-year old candybar model than its latest N96 smartphone. Moody's explains:

Moody's is concerned that the currently depressed mobile phone market may not only be a result of transitory, cyclical factors, but may also reflect a degree of market saturation in most regions, so that the fast revenue growth of the past years in which Nokia had benefited from superior scale and efficiency might not be restored and a slow growth environment may not allow Nokia to return to credit metrics sustainable at a level that meets Moody's expectations for a A1 rating with regard to profitability and free cash flow generation in 2009 and beyond.

Nokia still remains the global mobile phone leader, according to Gartner, but it's dominance is set to be short lived. With profit margins shrinking to the single figures, the company will find it rather tough to manoever if it wants to spend oodles of marketing money to push its latest product line and its very own application store while competiting in the shadow of rising players such as Apple, Research In Motion or even Samsung.

How Nokia will actually fare in the next couple of years is anyone's guess, but the company needs to hit a home run - and soon - if it wants to cast aside any doubts it's still a major force in the mobile market.