Sony’s credit rating crash lands to junk status

Can Sony’s Xperia ZL break out of the pack?
Andrew Cunningham

In November 2012, Moody’s downgraded Sony’s long-term debt rating from Baa2 to Baa3, one notch above junk status. That marked the second time in a month Sony was hit with a downgrade. On Monday, however, Moody’s pushed Sony’s rating over the edge to Ba1—aka junk status.

In a statement, the ratings agency explained its rationale this way:

The rating actions reflect Moody’s view that while Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilize its overall profitability and, in the near term, to achieve a profile that Moody’s views as consistent with an investment grade rating.

Of primary concern are the challenges facing the company’s TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence.

Sony’s profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses—such as TVs, mobile, digital cameras, and personal computers—to continue to face significant downward earnings pressure.

. . .

Profitability in the Games segment is expected to improve with the successful launch of PlayStation IV but not to the extent seen with the profitability level in 2010.

Sony is expected to announce its latest quarterly financials in early February 2014. However, in its second quarter (July 1 2013 to September 30 2013), the company lost $197 million.

Read 1 remaining paragraphs | Comments

via Ars Technica


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