Standard & Poor's has slashed Motorola Inc.'s (NYSE: MOT) credit rating to junk status, saying that continued operational challenges will lead to weak cash flows.

"Revenues and profits in the first part of the year will be challenged by a narrower, somewhat-dated product portfolio," S&P's Bruce Hyman said in a statement. "Standard & Poor's also expects about 10 percent fewer handsets to be sold worldwide in 2009 at lower average prices than in 2008."

On December 1, BloggingStocks' Doug McIntyre wrote that "As hard as it would have been to imagine a year ago, Motorola may still have to dump its cell operation and perhaps put it into Chapter 11. Its fate is that grim. It needs to escape its employee and creditor obligations to make it."

The company's November 2012 notes are trading at a yield of 8.02% -- hardly a sign of a company in severe distress.

But everything the company needs to do to turn itself around will be made more difficult by a weak credit rating in an environment where it's tough for company's with good credit ratings to secure access to capital.

But the one thing we can see from this is that Carl Icahn's complaint that the company was under-leveraged may not have been the case.