Moody's rating agency pointed out that Nokia's steep decline in the Q1 of this year justifies a serious downgrade. Consequently, Nokia Corp.'s long-term rating is now at Baa3, which means a warning for investors to stay away.

The situation was caused by Nokia's fall in revenue by 35 per cent. Meanwhile, Nokia's shares fell by 20 per cent, after the agency last week issued a profit warning.

This critical situation for the Finnish smartphone maker could potentially get even worse if Nokia does not show signs of recovery in the following months.

Nokia could get a junk status rating if its new line of smartphones does not perform well on the market, and the rating agency notices the negative outlook continuing.

"While volatility by quarters is not uncommon, Moody's believes that the structural challenges facing Nokia's mobile phones segment may not be easy to address," says the report.

Nokia officials lead by Chief Financial Officer Timo Ihamuotila responded assuring that the company is "quickly taking action" to address the financial issues.

"Nokia will continue to increase its focus on lowering the company's cost structure, improving cash flow and maintaining a strong financial position," detailed Timo Ihamuotila.

Source: Moody's