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Sony's credit rating cut to "Junk"

PS4 performance not enough to convince Moody's that Sony stock is worth investment

Moody's Investors Service has cut Sony's credit rating to "junk" over its continuing struggles to make money in a number of its business units.

Sony's rating has been lowered from Baa3 to Ba1, which is one level below investment grade. While Moody's described its outlook for the company as "stable," the move will be discouraging for potential investors and may increase the cost of borrowing money.

"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," Moody's said in a statement released today.

"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."

Moody's did acknowledge the likelihood of an increase in profitability for Sony's games business, but, "not to the extent seen with the profitability level in 2010."

With so much attention focused on console sales, it is easy to forget that both Sony and Microsoft have extensive businesses outside of the games market. This is still an issue for Sony in particular, because as well as the PlayStation 4 has performed, it may not be enough to counterbalance the longstanding problems elsewhere.

In October last year, partial gains in Sony's games division were subsumed by the bigger picture, the company cutting its net profit forecast for the year by 40 per cent.

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Latest comments (8)

Ruben Monteiro Engineer 2 years ago
What I'd like to see is Moody's itself in the junk, along with the rest of the rating agency scourge...
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Steve Wetz Reviewer/Assistant Editor, Gamer's Glance2 years ago
We're talking about the same agency that had sub-prime housing loan notes rated at AAA (which is basically golden) right before the housing crash, right?

You're fine, Sony.
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Obviously someone has paid a. Great amount to influence Moody's moody outlook :)
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Show all comments (8)
Frank Trottier Analyst programmer 2 years ago
What is a bit sad is that they are doing well over all looking at their numbers but the economic conjunctures/currency is not on their side. So the bad credit rating is more about what they cannot control. The world economic is based on the US dollard.
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Alfonso Sexto Lead Tester, Ubisoft Germany2 years ago
@Ruben Monteiro:

Fully disagree; I want to see them in jail. Every single one of them.
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I've worked at Sony and recognise how vast the company is. Whilst the games business and playstation is a shining light within and doing all the right things at the moment, the company has around 100,000 employees. SCEE during my time was around 2000 - 2500 employees. A tiny fraction of the workforce that in effect propped up many other areas of the business. They clearly have some way to go in convicing investors that the business outside of games is worthy of investment. Most people would be more than happy to invest in the Playstation brand and other successful nuggets in the organisation, but that still comes with a lot of baggage. If you feel differently and think they are wrong though, then its the perfect time to buy some shares!

Edited 1 times. Last edit by Sandy Lobban on 28th January 2014 12:45pm

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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.2 years ago
I think all of SCE is nearly 10,000. But that is small compared to the nearly 150,000 of the whole of Sony.
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@Christian. Yeah, true. Probably more a beacon of hope in that it has the most potential for growth.
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