Moody's drops Motorola

Moody's Investors Service said it downgraded Motorola's ratings to Baa3 from Baa2 and its short-term rating to Prime-3 from Prime-2.

The downgrade was driven by the continued decline in the performance of the handset business and the enormous challenges the company faces in turning around this business while the economic environment continues to deteriorate, Moody's added.

The outlook is negative.

"The enormous cash drain from the mobile phone business and the uncertainty over when and if the cash drain can be stemmed has pushed the rating to the low end of the Baa spectrum," said Moody's senior analyst, Matthew Jones.

The agency said that the Baa3 rating continues to reflect the strength and diversity of the non-handset businesses as well as the company's significant cash balances.

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