Standard & Poor's cut its long-term credit rating on
to junk territory Friday, blaming weakness in the company's mobile-device manufacturing unit.
S&P cut Motorola's rating by two notches, to BB+ from BBB, with a stable outlook and withdrew its short-term ratings on the company.
"The current rating action reflects continual operational challenges in the mobile devices unit, which are not likely to be reversed over the intermediate term, leading to depressed profitability and returns, adjusted debt leverage over 4x, and substantially diminished free cash flows," wrote S&P credit analyst Bruce Hyman, in a research report.
Motorola, which recently released its glitzy and expensive
, is expected to show persistent "subpar profitability" given the weak economy and the struggles of redefining the company's mobile unit, S&P said.
Motorola announced third-quarter revenue of $7.5 billion, 15% lower than revenue for the same quarter in 2007, reflecting a 31% year-on-year decline in its mobile-devices business.
According to tech analyst firm Gartner, things
for Motorola, along with rival phone makers
Research In Motion
, as the recession deepens and consumers cut back on tech spending.
This article was written by a staff member of TheStreet.com.