Sony Corp.'s credit rating from Moody's Investors Service dropped to "junk" Monday as the Japanese TV company sinks due to smartphone and tablet competition.
The credit rating fell to Ba1, which is a level under investment grade. Sony already carries a junk rating at Fitch Ratings and Standard & Poor placed the company almost at the bottom of investment grade.
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Sony is seeing low consumer demand for televisions and personal computers, although the company’s PlayStation 4 gaming system is selling well.
“Sony’s profitability is likely to remain weak and volatile,” said Moody’s statement, according to Bloomberg News.
“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.”
Personal computers are taking a hit as consumers switch to mobile devices like tablets and smart phones, Bloomberg noted. PC shipments dropped 10 percent in 2013.
“Moody’s downgrading Sony before its earnings result at this timing makes investors more worried about Sony,” credit analyst Mana Nakazora told Bloomberg. “Investors have thought Sony was moving toward recovery but the downgrade by Moody’s will make people think Sony is still struggling.”
The Wall Street Journal said that Moody’s decision to maintain Sony
at a stable outlook means experts don’t expect to see sales of Sony debt.
“We don't expect any financing problems with this latest downgrade,” Sony Spokeswoman Yumi Takahashi told the WSJ. A credit analyst at Moody’s agreed, telling WSJ that Sony has good relationships with lenders.
Sony’s CEO Kazuo Hirai is trying to turn the company around. Changes in the TV product line include reaching for the top-of-the-line market in ultra-high-definition sets that can sell for more than $20,000. He has cut $250 million from the company’s Hollywood film studio, which is dumping jobs to make that happen, Bloomberg said.
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