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Sony debt rating lowered near junk

By Brendan Sinclair

Sony debt rating lowered near junk

Fri 09 Nov 2012 3:31pm GMT / 10:31am EST / 7:31am PST

Moody's drops long-term bond rating to lowest investment-grade class; TV losses and declining game sales cited

Sony's quarterly report last week showed some signs of improvement for the company, but that turnaround isn't happening fast enough for some. Moody's Investors Service today downgraded its issuer and long-term senior unsecured bond rating of Sony from Baa2 to Baa3, its lowest investment-grade rating.

Moody's explained its reasons for pushing Sony's rating to the brink of junk status, pointing to "an increasingly rapid deterioration in demand in the digital AV market." The flat-panel TV market has largely matured, the service said, and the explosive growth of smartphones is cannibalizing demand for Sony products like cameras and the PlayStation Vita.

The service noted that operating profits from Sony's digital imaging and games offerings were down 60 percent for the first half of the fiscal year, and it only expects that decline to worsen. Likewise, Sony is expected to continue losing money on TVs in light of stiff competition and weak sales expected for the coming year.

"The continued negative ratings outlook reflects Moody's view that without robust restructuring in the coming 12-18 months, Sony's non-financial services businesses will at best achieve roughly break-even, and are also at risk of remaining unprofitable," the investment service said.

This is the second downgrade in a month for Sony's long-term bond rating, and the third this year. Moody's kicked it from A3 to Baa1 in January, and then to Baa2 just last month.

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This is what worries me most about Sony. If they can't turn things around quickly and the debt bites- it could really be game over for them. Unlike Nintendo Microsoft and Apple Sony don't have a big stockpile of cash and have a large amount of debt. We all know how damaging this can be in today's financial environment.

Posted:3 years ago

Sony seems to be in the sights of a number of Asian Tiger corporations – the future could be a LG acquisition?

But from a gaming perspective the interest is that certain board investors are using the promotion of the recent entertainment division chief executive to curtail his ambitions to release new hardware just yet. Literally hold back the advance plans of Gen-8 (PS4) to the depths of Q-3 2013 hoping that by that time investment or acquisition will remove the burden from their investment.

We could see Nintendo win by default in 2013, as MS suffers from problems with Win / tablet / phone and online issues and has to restructure to address their whole premise regarding owning the living room; and Sony just crumbles under debt and investment problems. That would kind of hand the Gen-8/9 to the PC sector and would decimate the traditional consumer game scene.

The loss of Sony’s marketing infrastructure has already left a trail of devastation with the media that depended on their spoon feeding and investment (paid for advertorials) – what would the loss of the Sony development infrastructure and distribution network mean, (just look what closing down the Liverpool studio did in the UK trade).

Posted:3 years ago


Bruce Everiss Marketing Consultant

1,692 595 0.4
Here is some research I found:

Apple vs Sony

Apple $631b market cap - grown since 2002 126x

Sony $12b market cap - shrank since 2002 to 1/3rd value

Apple now 52 x bigger than Sony, in 2002 Sony was seven times bigger than Apple

Posted:3 years ago


Fran Mulhern , Recruit3D

863 708 0.8
Well, we all know how accurate ratings agencies are.

Sony aren't going anywhere.

Posted:3 years ago


Justin Biddle Software Developer

190 539 2.8
And there in lies the problem.

Posted:3 years ago


Fran Mulhern , Recruit3D

863 708 0.8

Posted:3 years ago

The thing to figure is how firewalled are Sony development studios vs the entire entertainment/manufacturing division....

Posted:3 years ago


John Donnelly Quality Assurance

313 38 0.1
Actually Fran this is a problem for Sony that could cause them major problems.

Most investment banks wont trade securities with junk status this drives down the share price and lowers the value of the company. This in turn makes it more expensive to borrow money which means they have to pay back more or take on a larger debt profile which will impact their books again lowering the share price, investor confidence and again this snowballs in to a major problem for the company.

Rating agencies are not perfect but their ratings are taking seriously.

Posted:3 years ago


Tony Johns

520 12 0.0
Sad times for SONY.

Considering they were the only company to allow Multi Region consoles and handhelds in the current market of this Generation (besides from the earlier versions of the Nintendo DS) I would see the way that SONY have fallen to be a sad time for the import gamer market.

If SONY falls on bankruptcy like SEGA almost did in the demise of the Dreamcast, then it would mean that the opportunity for PAL gamers like me to get games from Japan as well as from America will deminish and I would have to rely on boot disks and buying the same console or handheld but from a different region just to play games that don't come out into PAL region.

Sadly with online downloads of games, those would be region locked too because looking at the way that Microsoft, Nintendo and SONY make their digital market places different from region to region, it makes it all the more harder for gamers in the know to be committed and more likely to take the download at pirate sites more possible.

Seriously either SONY goes down and we all get screwed or Microsoft and Nintendo need to abandon Region Locking practices in order to give us all a fair go.

Posted:3 years ago


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