Nokia's reported sales for its Devices&Services segment in the second quarter of 2011 were lower than we expected. Although we continue to believe that the strategic partnership between Nokia and Microsoft could help Nokia improve the currently weak competitive position of its smartphone portfolio, we expect low operating margins and further market share losses in the transition period. We are lowering our long-term rating on Nokia to 'BBB' from 'BBB+' and affirming our 'A-2' short-term rating. At the same time, we are removing all the ratings on Nokia from CreditWatch negative. The negative outlook reflects the possibility of a further downgrade if we see no scope for the operating margins of Nokia's Devices&Services segment to recover
