S&P cuts Sony rating, warns it could face further downgrades

By Lee Kaelin on February 8, 2012, 6:30 PM

US credit ratings agency Standard and Poor’s cut the long term debt rating of Sony Corporation to BBB+ yesterday, issuing a stark warning that it could drop the Japanese electronics company a further notch within a year if it does not begin to show a significant turnaround in profits.

The lowering of their credit rating will heap further pressure on Sony’s new CEO Kazuo Hirai, due to take over from Sir Howard Stringer on April 1. He takes over the leadership role at a time when the firm’s TV division is heading for its eight consecutive year of loses. The main reason for its poor performance over the last few years, according to S&P, is "Sony's strategy to aggressively expand its global market share despite strong competition, a massive erosion of prices and its high cost structure compared with overseas competitors."

Last week the struggling Japanese firm forecasted a $2.9 billion annual loss for the financial year ending March 31. Sony also posted losses of $2.1 billion in the third quarter ending December 31 at the same time.

S&P estimates that Sony’s ratio of debt to capital is set to reach 40% by the end of March, up five percent from the same period a year earlier. Ratings agency Moody’s also downgraded the company last month, taking it from its A3 rating to a Baa1. Sony is not alone though, Panasonic has felt the impact as well with its credit rating also lowered by Moody’s after revising its annual net loss forecast to a monumental $10.2 billion.

It appears Sony is taking steps to rein in its high production costs though, pulling from an LCD joint venture with Samsung and consolidating online services. In emails received by PlayStation Network (PSN) users over the weekend, Sony announced a rebranding of the service and a new name, Sony Entertainment Network (SEN), which will also help the firm take steps towards distancing itself from last year's security disaster.

User Comments: 6

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I keep forgetting that Sony is a japanese company

I wonder if there might be significantly lower prices that will be benefiting Sony as well as the consumer :o

---agissi--- ---agissi---, TechSpot Paladin, said:

Gotta say too, the PS3 was a bit of a flop compared to the phenomenal success of the Playstation 1 & 2.

Aboutto said:

The only flop was when there lack of security and encryption was exposed

Guest said:

It figures, should I say karma, for all those bad DLP televisions they made in the early and mid 2000's. Ninety nine point nine percent of them suffer an optical block malfunction which leaves the screen with yellow and blue anomalies. Nonetheless, it do seem like they are offering customers of all affected models a few hundred dollars off the newer models. I guess some consolation is better than none, but spending two to four grand in planned obsolescence, ouch! My pocket still hurts.

Guest said:

And my message was deleted..

Like i said its going down, down down down

It was predicted since their fall against angry geeks jumping wild on their lawnyard.

spydercanopus spydercanopus said:

Sony should try to separate the Playstation brand from itself, like sending it out on a life-raft of the Titanic. Or like baby Moses being sent down the river to avoid execution.

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